January 14, 2015
Translated from German by Tom Winter
Angela Merkel has been able to let herself be convinced by Ukrainian Premier Arseny Yatsenyuk that Ukraine is on a good path. Since the development has no alternative, Merkel has released 1.8 billion Euros from EU tax money. Russia is pleased, since whatever helps Ukraine is good for Moscow: Ukraine thus can pay its debts to Russia. And speculators can relax, as the taxpayers will get sent to their rescue.
Angela Merkel, after a meeting with the Ukrainian Premier Arseny “Yats” Yatsenyuk, has released 1.8 billion Euros in new credit for Ukraine. Yatsenyuk presented a “persuasive plan” for reforms in Kiev, and so persuaded the Chancellor, FT (Financial Times) reports. Just the day before, Yatsenyuk got a line of credit at the level of 500 million Euros.
The plan has already got the Americans convinced, not least because former U.S. government official Natalia Jaresko now runs the Finance Ministry in Kiev, and has already set forth a thorough-going privatization program.
The new tax money will cause no rejoicing among the Ukrainians: they have to undergo a stark course of austerity, even more radical than the one in Greece: Yatsenyuk had proudly proclaimed that there would be severe cutbacks.
The Russians, though might be glad: their chances that Ukraine will be forthcoming about their debt service are enhanced — both to the Russian state and to the Energy Company Gazprom. Russia, for a New Years present, made electricity and gas available without prepayment. Now these deliveries could be paid for.
The Ukrainian army can also be glad: the record budget for the military can now be a reality. “Yats,” in keeping with the theme of the day, had proudly declared that when he got into office, he had no army, but now Ukraine would be able to defend the EU from Putin.
The decision could bring some relief also to the speculators, like George Soros: he had, chiming in with Yats’ visit to Berlin, requested payments at the level of 50 billion dollars out of EU tax money for Ukraine. Soros was afraid of suffering significant losses upon a Ukrainian bankruptcy. The bond markets were relieved since the probability rises that the speculators will get paid — by the EU taxpayers.
But it was just Tuesday that the regime in Ukraine admitted that $450,000,000 was missing from the military budget.
The EU taxpayers will not be glad, as they must pour into the next bottomless pit [“barrel without a bottom”]. The EU celebrates the new payments to Ukraine as a political milestone. European Voice quotes Jen-Claude Juncker, EU Commission President as saying: “Europe stands united behind Ukraine.” Actually, the EU Commission will make the payout dependent on the course of negotiations between Ukraine and the IMF, a formality. The IMF had been holding back credit and awaits the new payment from the EU.
“As always, solidarity goes hand-in-hand with a commitment for reform, which is starkly needed in Ukraine … We want to help the Ukraine regime put its reform agenda into practice” — Jean-Claude Juncker, as quoted in Financial Times. At December’s end, European political leaders had been resisting any credit to Ukraine without any further requirements. However, it is not clear whether the financing plan for the next twelve months can be created though the 17-billion-dollar credit from the IMF is dependent on it. Right now negotiators from the IMF are in Kiev to counsel with the Ukrainian regime about the groundwork for the IMF credits.
Already in 2014 the EU had loaned Ukraine a total of 1.6 million Euros in a pair of loan programs, and 1.36 billion of this has been delivered; a further 250 million Euros will be paid out come spring. In the past year, Kiev went to Brussels seeking a line of credit at the level of two billion Euros. A measure of the weakening situation is the Ukrainian budget deficit of $15 billion, and Kiev’s foreign reserves are in decline.
From all this, one can assume that these newly approved loans are just the beginning. The EU could finally end up with an indebtedness disaster that would make the Greek crisis seem just a marginal footnote in the history of the EU.