Yushchenko sees Ukrainian default without policy change

Ukrainian President Viktor Yushchenko on Wednesday warned of a potential default and financial crash if the country's government continues "irresponsible populist policies."

Yushchenko, in an exclusive interview with Deutsche Presse-Agentur dpa, blamed Prime Minister Yulia Tymoshenko and her cabinet for failing to respond to the impact of the international financial crisis, placing Ukraine's economy on a road to disaster.

"If we (the Tymoshenko government) continue on the path that we are on, the end result cannot be good," Yushchenko said. "What is needed is responsible, strong, across-the-board anti-crisis legislation ... but clearly the prime minister is not focused on that."

Tymoshenko's "irresponsible" monetary and fiscal policies have left Ukraine in danger of losing funding from the International Monetary Fund (IMF) and unable to pay foreign obligations or meet the government budget, Yushchenko argued.

The Ukrainian leader avoided using the word "default," but his comments nonetheless were the most dire yet made in public by a senior Ukrainian official on the international financial crisis' impact on the former Soviet republic.

"It is not for a national leader to say 'default' or 'bankruptcy' ... but the situation is extremely serious," Yushchenko said. "If the government does not start acting responsibly ... things cannot end well."

Yushchenko and Tymoshenko have been at loggerheads for months in a dispute, both over division of powers within the Ukrainian government and over economic policy in the face of the worst economic slowdown in a decade.

A former national bank chairman, Yushchenko attacked the Tymoshenko government's policies in the face of financial crisis as "unprofessional, and not based on any market fundamentals."

Yushchenko singled out for criticism the Tymoshenko government's continued full funding of pensions and social benefits, subsidies to retail energy prices, and unwillingness to implement reforms demanded by the IMF as conditions for further loans, despite a 5-billion- dollar gap between government revenues and expenditures.

Ukraine's economy is expected to contract by at least 5 per cent in 2009, while leading industries like mettalurgy and chemicals could contract by as much as 40 per cent, according to independent observers.

The Ukrainian leader said the country's financial and monetary capacity to deal with the government deficit, and so avoid a default, remained generally sound, with the national bank controlling some 30 billion dollars in cash reserves and short-term foreign debt at relatively low levels.

"Is it a fatal situation? No it is not," Yushchenko said. "But everything depends on future policy ... we have to ask what we want to do, and if we have the will to do it."

Yushchenko accused Tymoshenko of having already begun a campaign to become Ukraine's next president, and of avoiding hard choices on dealing with Ukraine's economic crisis, so as to stay popular with voters.

"I find this extremely troubling," Yushchenko said. "We need to work together to deal with this crisis ... not look for personal political gain."

Yushchenko on Tuesday, at a meeting of the national security council, called Tymoshenko to account for what he called poor terms in a natural gas price deal struck with Russia next month.

Tymoshenko walked out of the meeting, technically the senior decision-making agency of Ukraine's executive branch, to rebut Yushchenko's accusations in an impomptu street press conference.

Yushchenko and Tymoshenko, allies during Ukraine's pro-democracy Orange Revolution, are widely predicted to run against one another in a presidential campaign ending in 2009. Currently Tymoshenko is ahead in opinion surveys, with polls giving her some 22 per cent popular support against 7 per cent for the incumbent Yushchenko.

Yushchenko, asked by dpa about his own campaign intentions, declined to say whether he intended to run for re-election, saying "Now is not the time to make an announcement ... when the time comes I will make my decision."

But he hinted broadly he was unwilling to continue in any future pro-West government influenced by Tymoshenko, saying "whatever I do, it will be in keeping with my political principles ... and I will not be a marionette."

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