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Ukraine’s interim Prime Minister, Arseniy Yatsenuk, called on the nation’s parliament to enact  sweeping economic reforms yesterday. His speech coincided with an IMF statement announcing $27 billion in international support for Ukraine.

Yatsenyuk detailed Ukraine’s  numerous financial problems and he offered the members of parliament a choice: accept the international assistance with economic reform or the alternative, debt default and its catastrophic consequences to the economy.

Introducing a set of proposed legislation, Yatsenyuk said:

“The Government considers it necessary to actually tax the rich.”
Referring to the country’s highest paid elite, Yatsenuk said 300,000 Ukrainians earn  60% of the income.
Therefore, these  1.7% of Ukrainians, the rich, should pay taxes for the other 98%, as a matter of social justice for the future.
A transcript of the speech in Ukrainian appears on the government website and a number of articles about the speech, including quotes, in English, were also posted there. Here's a link to one of them. The speech wasn't noticed much by the press, however, the Russian news agency, Tass, gave a straightforward and accurate report on it.

Yatsenyuk proposed eliminating the flat-income tax currently in effect, and replacing it with a progressive scale of marginal rates like most Western countries use. Under the current system, which favors the rich, Ukraine’s nine billionaires pay the same 15% income tax as an average worker who makes only $5,000 to $8,000 a year.

The IMF was offering $27 billion over the next two years, an amount equal to the shortfall of 289 billion Ukrainian hryvnia  Yatsenyuk detailed in his speech. The IMF would cover $14-18 billion of the assistance program, with the remainder to come from the broader international community.

The magnitude of fiscal mismanagement, fraud, corruption and misappropriation as reported by Yatsenyuk is remarkable. The former government had stolen the country’s future, Yatsenyuk said. More than $6 billion in public funds had been transferred out of the country.

The Wall Street Journal reported that Switzerland was addressing the matter..

Switzerland has already halted negotiations on a free trade agreement with Russia, as well as the former Soviet republics of Belarus and Kazakhstan, because of the crisis in Ukraine. Switzerland also froze assets held by Mr. Yanukovych and roughly 30 members of his entourage that are held in the country.
Switzerland isn't a member of the European Union and acts on its own. It also announced further sanctions today.
Moscow said on Friday Switzerland had imposed restrictions on military exports to Russia over events in Ukraine which were counterproductive and not in line with the country's policy of neutrality. The restrictions imposed by Bern on a number of spheres of cooperation are unjustified and counterproductive. the Russian Foreign Ministry said in a statement.
Yatsensuk also noted in his speech that Ukraine’s state-owned companies, including the railway and construction enterprises, were operating at a loss. He spoke about the complex of problems around Naftogaz, the state-owned energy company that imports natural gas from Gazprom in Russia.

A week ago, Naftogaz’s  Chairman, Yevhen Bakulin, was arrested in connection with  an investigation of major corruption schemes in the gas industry. An appeals court refused to release him today, and Interior Minister Arsen Avakov confirmed that bail would be maintained at $135 million.

Yatsenyuk’s reform proposals include the elimination of Ukraine’s natural gas subsidies. Under the program, the state was paying $400 per 1000 cubic meters of natural gas imported from Russia and selling it to households for $90 per 1000 cu meters.  In the last three years, Ukraine bought $50 billion worth of natural gas from Russia. Half of it was delivered to consumers for household use resulting in a $19 billion loss which is carried by the state.  The losses were baked into the budget deficit and they are now  part of the public debt.  In effect, the natural gas subsidy program  isn't really a subsidy at all. It’s just a mechanism that defers payment until the public debt’s maturity (or due) date.

What makes the scheme even more ridiculous is that benefits are applied evenly to the public, like the flat tax, so that the wealthy elite who use the most gas to heat their extravagant homes, get the largest subsidies. Yatsenyuk proposed a new program that would benefit citizens according to financial need.  Those who are quick to criticize will label the gas subsidy’s elimination as austerity without knowing the details.Eliminating a program that functions as ‘welfare for the rich’ isn't austerity.

In Yatsenyuk’s proposals, the austerity measures that could put Ukrainians in jeopardy are:

  • 10% of the 249,000 government employees will see their jobs eliminated.
  • The minimum wage will be frozen for one year.
  • Government spending will be reduced by 1.6%. For context, when austerity was implemented in Greece, government spending was reduced by 3.9% in 2010, 6.1% in 2011, 7.1% in 2012, and 5.3% in 2013.

Does it make sense to compare Ukraine with Greece? Is austerity the right way to describe the reforms Ukraine needs? I don't think so but I'll compare them anyway to show how the situations of the two countries are totally dissimilar.

I’ve already written about the anger and frustration of voters in France who soundly rejected neo-liberal economics at the polls in 2012, only to find the European Commission insisting on its one-size-fits-all austerity measures, anyway.

What’s at stake is the strong social safety net that has become a fundamental part of French identity. Spending cuts have a tangible effect on citizens and they fight back to retain their standard of living.

In Greece, austerity hit public sector workers. In 2010, there were 835,000 people in government jobs, a high number for a country of 11 million. With four times as many people, Ukraine has only 249,000 government employees.  Government spending was reduced in Greece by eliminating 150,000 jobs. The effect rippled out into the general population. Today, the unemployment rate is still around 25%.

Greece proves the failure of austerity. But Ukraine isn't Greece and the comparison isn't meaningful.

Average Personal Income in Greece and Ukraine
The chart shows that Ukraine hasn't enjoyed prosperity for 20 years. Average income increased 48%. In Greece, the average income is much higher and increased 71%, even after austerity.
Since 2005, Ukraine’s government budgets show spending that paced the levels in Greece, but the public hasn't benefited from the public spending with employment in  government jobs or a strong social safety net. Ukraine's  communal approach to natural gas distribution costs around 7% of GDP and it's not a wise investment. The country would benefit from common sense energy conservation measures like better insulation and double-paned windows. As the price of natural gas increased in recent years, so did Ukraine's deficits and debt.
Comparison between deficits and debts of Greece and Ukraine.
The chart's upper portion shows the relative size of Greece's debt compared to Ukraine's. The lower portion shows how Ukraine's deficit ballooned in the last year.
In April 2002, a US Treasury Dept Advisory stated that Ukraine was identified as a haven for money laundering by the Financial Action Task Force (FATF), an international organization of law enforcement and financial authorities.

It wasn’t until November 2011 that FATF removed Ukraine from the list of problematic jurisdictions. A lot of money can be laundered in 10 years. Greece had its share of corruption too, but it was never a FATF-designated country left wide-open for money laundering. This is indicative of the nature of organized crime in Ukraine.

The vast sums of money spent by Ukraine's government for two decades didn't benefit the public in any meaningful way. It was embezzled, misappropriated. If the public had enjoyed some benefit from it and was asked now to do without, it would be austerity for them. But the public has been doing without all along. If Ukraine's interim government is able to begin a process of genuine reform, it will be austerity for oligarchs and thieves. Ukraine could use a story with a happy ending.  

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Comment Preferences

  •  Ukraine is in (1+ / 0-)
    Recommended by:
    fcvaguy

    need of economic liberalization.

    Says the Economist.

    http://www.economist.com/...

  •  Superb diary! Well done. (8+ / 0-)

    From the beginning, I thought Yatsuniuk would do well for his country. He's a technocrat and thats probably the type of leadership Ukraine needs right now. And, he puts forward a vision that IMF loans don't necessarily equate to draconian austerity.

    His approach to taxing the rich is spot on. Today, the Ukrainian oligarchs (and Russians also) don't just sit on their money, they take out of the country. They buy whole streets of $5M houses in places like London. I see it the Russian and Ukrainian wealth every time I'm there. Its brash and arrogant like nothing I've ever seen in my life.

    I had seen one estimate that Yanukovich alone stole more than $4B from Ukraine. The $6B you cite in your diary probably includes some of Yanukovich's friends and probably only represents the stolen money frozen in accounts in Switzerland. There is probably more to found in other havens such as Cyprus, the Carribean and Iceland. Corruption in Ukraine is beyond anything we've ever seen when we talk of government corruption.

    Yatsuniuk shows promise and hope for Ukraine and the Ukrainian people. I hope he's successful in setting his country on the right path. And I hope those here who have shown empathy for Putin and his actions will reconsider their views. We should be supporting those who genuinely want to help the Ukrainian people.

    I hope someone can find a better translation of Yatsuniuk's speech. The translation is pretty bad. Its an excellent speech and worth a read.

    KOS: "Mocking partisans focusing on elections? Even less reason to be on Daily Kos."

    by fcvaguy on Fri Mar 28, 2014 at 08:01:47 PM PDT

  •  Wait, are you talking about Ukraine (3+ / 0-)
    Recommended by:
    Mark Lippman, bear83, dfarrah

    or the USA?

    "So listen, oh, Don't wait." Vampire Weekend.

    by Publius2008 on Fri Mar 28, 2014 at 08:03:19 PM PDT

  •  Yats is off script (1+ / 0-)
    Recommended by:
    dfarrah

    Nuland is planning a contra coup as we speak.  

  •  Fantastic diary! (3+ / 0-)
    Recommended by:
    Mark Lippman, Lawrence, bear83

    I hadn't even the numbers but if the crooks can be kept out and transparency and enforcement beefed up (which the EU would have insisted on) Ukraine might have a decent future.

    Thanks.  Between this diary and eternal hope's latest I am much more optimistic

  •  I've heard the claim that any IMF (2+ / 0-)
    Recommended by:
    tardis10, katiec

    money given will in fact be appropriated either by the Ukrainian oligarchs or taken by Russia under some claims it has made, and never reach the economy of ordinary Ukrainians.  Now, I don't know if that's true, but if it were it would seem that these promised IMF $billions  will simply represent more money not benefiting the public.

    "Trust me... I've been right before." ~ Tea party patriot

    by Calvino Partigiani on Fri Mar 28, 2014 at 08:54:22 PM PDT

  •  How much of the $27 billion IMF loan will be used (5+ / 0-)
    Recommended by:
    tardis10, Chi, katiec, AoT, Calvino Partigiani

    to service foreign debt?

    The total foreign debt of the Ukraine is now over $140 billion of which $65 billion is short term. Foreign exchange reserves are about $10 billion.

    The Ukraine needs at least $25 billion this year to cover the current-account deficit and to pay foreign creditors.

    Yats has promised there would be no "haircuts" for the foreign creditors, no defaults on Eurobonds (of course) but a possible restructuring of other debts.

    BTW, part of the foreign debt is $30 billion in previous IMF loans in 2005 and 2010. The IMF loan-shark - each successive loan goes to pay interest and principle on the previous loan. Some countries in South America, where this game had been perfected, ended up paying 10 times of the amount of the original loan.

    •  Your trollish comments aren't welcome in my diary. (0+ / 0-)

      I wish I could speak more respectfully to you. Your 17 disagreeable comments here prove nothing but your determination to disrupt.

      You seem knowledgeable but you're a deliberate and persistent liar. Your comments depart from the facts. You show no regard for basic progressive ideals and principles. I have to conclude that you're here for some other reason. That's why you're not welcome.

      I have no reason to let you waste my time with bullshit like the $140 billion in gross foreign debt. The number includes public and private obligations. Foreigners who deposit funds in a Ukrainian bank are included, for example. If citizens and businesses domiciled in the Russian Federation withdrew their funds all at once, it would be the bank's obligation if it couldn't pay out, not the state's. Interbank obligations are also included. The state-owned businesses are filed under other sectors because they're entities separate from the state. There are far more details in that $140 billion than I care about. Being a crepe-hanger for Ukraine isn't my job. It's yours. Here's two links you can use to sort it all out and thrill yourself if you find any signs that the sky is falling.

      http://www.jedh.org/...
      http://www.ukrstat.gov.ua/...

      There is no existence without doubt.

      by Mark Lippman on Sat Mar 29, 2014 at 05:06:37 PM PDT

      [ Parent ]

  •  Will the Ukrainian people accept these reforms? (2+ / 0-)
    Recommended by:
    AoT, whizdom

    Or will a new round of violent protests break out.

    How's the following for a gross display of Western hypocrisy?

    Brussels, 28 March 2014
    140328/04

    S T A T E M E N T

    by EU High Representative Catherine Ashton on recent events around the Parliament of Ukraine

    The High Representative of the European Union for Foreign Affairs and Security Policy and Vice President of the Commission, issued the following statement today:

    "I strongly condemn the pressure by activists of the Right Sector who have surrounded the building of the Verkhovna Rada of Ukraine. Such an intimidation of the parliament is against the democratic principles and rule of law.

    I call on the Right Sector and other parties in Ukraine to refrain from the use or threat of violence. They need to hand over any unauthorised arms to the authorities immediately.

    An impartial and credible investigation into the circumstances of the death of Oleksandr Muzychko during a detention attempt by the police is needed. I welcome the setting up of an ad-hoc investigation committee in the Verkhovna Rada today."

  •  With a 15% flat tax, it's no wonder they're broke (4+ / 0-)
    Recommended by:
    Mark Lippman, Chi, TFinSF, bear83

    They obviously need progressive taxation.  It's ironic that a change in govt. that is described by some as a "neoliberal coup" is going to lead to fairer taxation.

    Sounds like Ukraine is taking steps towards the model of a modern European social democracy, which can only be a good thing

    Ukraine could make a huge leap forward over the next 10 years.  If Putin lets them, that is.

    Excellent diary.

    Tipped and recced.

    "A candle loses nothing by lighting another candle" - Mohammed Nabbous, R.I.P.

    by Lawrence on Sat Mar 29, 2014 at 01:01:58 AM PDT

    •  Thank you. I should say that Ukraine has other (1+ / 0-)
      Recommended by:
      Lawrence

      sources of revenue like the transit fees for natural gas that goes through its pipelines from Russia to Eastern Europe. Its fiscal matters are unique to say the least.

      There's a lot of irony with the tale of the neo-con coup.

      There is no existence without doubt.

      by Mark Lippman on Sat Mar 29, 2014 at 03:35:04 AM PDT

      [ Parent ]

    •  No, it won't lead to that (3+ / 0-)

      Just as in Spain when the socialists won, the IMF will force austerity on Ukraine and all this economic progressivism will go out the window. See also: every country bailed out by the IMF.

      If knowledge is power and power corrupts, does that mean that knowledge corrupts?

      by AoT on Sat Mar 29, 2014 at 07:38:46 AM PDT

      [ Parent ]

      •  Spain doesn't have its own currency . . . (2+ / 0-)
        Recommended by:
        AoT, Lawrence

        Needless to say I think this sounds like a knee-jerk reaction.  What I'd like to know is your alternative for Ukraine.  If the IMF deal is unacceptable, what do you propose that would produce a more satisfactory result.

        What have ya got?

        There is no existence without doubt.

        by Mark Lippman on Sat Mar 29, 2014 at 08:11:14 AM PDT

        [ Parent ]

        •  Let's see (3+ / 0-)
          Recommended by:
          katiec, Claudius Bombarnac, dfarrah

          we could flood the country with billions of  poorly accounted for US taxpayer dollars, suppress the Russian minority, plan huge infrastructure projects with Bechtel and Halliburton as prime contractors,  build up their Army and Internal Security organs, secure the gas fields, frack the shit out of the place, build the biggest embassy in the world, fight a nasty internal proxy driven civil war, put a wall around it, then watch with stunned incomprehension as  the country align with our adversaries against our interests.

           

          •  It must suck being so unimaginative and (0+ / 0-)

            you think that's going to be preferable.

            There is no existence without doubt.

            by Mark Lippman on Sat Mar 29, 2014 at 09:01:50 AM PDT

            [ Parent ]

            •  The have to admit that the IMF and US have a (4+ / 0-)

              pretty miserable track record.

              One of the problems is that the neoliberals and neocons have already been fucking with these countries for many years. This is one of the reasons they got to be in as bad shape as they are in the first place.

              The US has spent $5 billion trying to manipulate the Ukraine political system, overtly and covertly, since 1991 and that has directly led up to what is currently happening.

              The one thing that these countries need is to be able to develop their democracies as they see fit. Unfortunately, the one huge superpower has managed to conflate democracy with capitalism and personal freedom with market freedom in the minds of it's citizens.

        •  IMF or Russia: Either way, it's going to be (3+ / 0-)

          tough.

          I don't understand the Ukrainian economy well enough, it's strengths and weaknesses, etc....  beyond knowing 3 things:  It's greatest strength is in the eastern manufacturing sector, which will be rapidly stripped under IMF reforms (but not under Russia),  I don't see how it gets rid of it's oligarchs under either the IMF or Russia, and I don't see how it gets out under it's capital flight without capital controls, which is an IMF no, no  --  and not something that Russia will help with I don;t think, considering it allows a bunch of capital flight itself.

        •  I got nothing (1+ / 0-)
          Recommended by:
          Claudius Bombarnac

          And even the loans from the IMF aren't going to make much of a dent in the 140 billion Ukraine owes. They are in the unfortunate position of being shit on by both sides.

          If they swung back toward Russia I imagine they could get a better deal, but that's unlikely now.

          If knowledge is power and power corrupts, does that mean that knowledge corrupts?

          by AoT on Sat Mar 29, 2014 at 08:37:44 AM PDT

          [ Parent ]

          •  I don't think you have your number straight./ (0+ / 0-)

            There is no existence without doubt.

            by Mark Lippman on Sat Mar 29, 2014 at 09:03:34 AM PDT

            [ Parent ]

            •  140M is the aggregate external debt (1+ / 0-)
              Recommended by:
              Claudius Bombarnac

              Not just the government debt. National debt is around 40 billion. Either way, the IMF isn't going to fix the problem, just impose austerity and make it worse.

              If knowledge is power and power corrupts, does that mean that knowledge corrupts?

              by AoT on Sat Mar 29, 2014 at 09:07:01 AM PDT

              [ Parent ]

              •  You have no idea what's in that number. Sheesh./ (0+ / 0-)

                There is no existence without doubt.

                by Mark Lippman on Sat Mar 29, 2014 at 09:40:12 AM PDT

                [ Parent ]

                •  Neither do you. (0+ / 0-)

                  Nor do you have any relevant numbers available.

                  But in every article I've seen that is the relevant information given when they're talking about Ukraine's debt. So that's what I went with.

                  If knowledge is power and power corrupts, does that mean that knowledge corrupts?

                  by AoT on Sat Mar 29, 2014 at 09:45:03 AM PDT

                  [ Parent ]

                  •  Who knew the liberals and progressives here would (1+ / 0-)
                    Recommended by:
                    Lawrence

                    have a hostile reaction to a diary about a foreign leader speaking up against income inequality?  HA!

                    There is no existence without doubt.

                    by Mark Lippman on Sat Mar 29, 2014 at 10:07:14 AM PDT

                    [ Parent ]

                    •  I'm not hostile to the diary (4+ / 0-)

                      I'm just noting that the IMF is going to fuck over Ukraine and this tax plan isn't going to happen. I'd love it if it did, but the chances are zero that it will.

                      If knowledge is power and power corrupts, does that mean that knowledge corrupts?

                      by AoT on Sat Mar 29, 2014 at 10:08:23 AM PDT

                      [ Parent ]

                    •  who knew (0+ / 0-)

                      the guardians of the counter narrative would be so desperate?

                    •  Don't let it get to you. (1+ / 0-)
                      Recommended by:
                      Mark Lippman

                      Quite a few people here aren't progressives/liberals, but belong to some kind of semi-authoritarian old left that isn't exactly progressive and sometimes even seems reactionary.  And some of them rag on the msm while their news sources are fringe "news" sites or even news/propaganda outlets openly financed by dictatorial regimes like Russia.

                      DailyKos has been really good about keeping the Faux News addicts out, but those who are addicted to other versions of Faux News, like Russia Today... not so much.

                      "A candle loses nothing by lighting another candle" - Mohammed Nabbous, R.I.P.

                      by Lawrence on Sat Mar 29, 2014 at 12:13:36 PM PDT

                      [ Parent ]

                      •  So, what's your big beef with Thom Hartmann? (0+ / 0-)

                        Other than he has a show on RT?

                        And granted that RT is a propaganda machine....

                        Personally, I don't see Hartmann as a mouth piece.  I'm sure he can't criticize Russia much.

                        But I also don't see him praising Russia.

                        do you?  If so, link please :)

                        •  You mean what is my beef with him other than (0+ / 0-)

                          that he legitimizes and carries water for the propaganda channel of a quasi-fascist, totalitarian state?

                          He can't be an objective journalist on a channel like that.  RT is as bad as FauxNews, at best, and even more asinine propaganda, at worst.

                          This is Hartmann's boss:

                          Putin appoints notorious anti-gay news anchor to head Russian news agency

                          LAURA MILLS | Associated Press
                          Monday, December 9, 2013 42 Comments ↓

                          MOSCOW — President Vladimir Putin on Monday appointed a controversial news anchor to head a restructured state news agency, a move signaling the Kremlin’s intention to tighten control over the media and use it increasingly for propaganda of ultraconservative views.

                          Dmitry Kiselyov, who spent much of his weekly news program on state Rossiya television maligning homosexuality and speculating about Western-led conspiracies, was put in charge of all the resources of the former RIA Novosti, which was renamed Rossiya Segodnya (Russia Today).

                          http://www.lgbtqnation.com/...

                          "A candle loses nothing by lighting another candle" - Mohammed Nabbous, R.I.P.

                          by Lawrence on Sat Mar 29, 2014 at 01:01:39 PM PDT

                          [ Parent ]

                          •  All corp media is propaganda. Pick your color, (0+ / 0-)

                            but I'm pretty sure independent journalism barely exists today.

                          •  That's a far too simplistic take on media. (0+ / 0-)

                            Even corporate media has widely varying levels of editorial and journalistic freedom, as does state-funded media.  

                            Russia Today is far worse than corporate media or state-funded media in democratic nations, though, as it is a thinly but cleverly veiled propaganda arm of a state that has slipped into quasi-fascism.  Faux News is the only major U.S. media outlet that is even close to being as propagandistic as Russia Today.  And you'd probably have to go back to the period of the run-up to the Iraq War to show true equivalency with the current Russia Today.

                            If you don't see a problem with a progressive being on a channel like that, without anyone even having to point it out to you, then I can't help it.

                            "A candle loses nothing by lighting another candle" - Mohammed Nabbous, R.I.P.

                            by Lawrence on Sat Mar 29, 2014 at 01:18:41 PM PDT

                            [ Parent ]

                          •  I find this a problem: I don't watch RT, or any (1+ / 0-)
                            Recommended by:
                            whizdom

                            other news outlet as a matter of course.  Or any other news outlet.  I don't watch much  --  of anything.

                            I do, however, periodically check up on people I find interesting, Michael Hudson being one of them.

                            He happened to go onto Thom's show.  So I watched.

                            I think knee jerk policing of people's voices is a problem, whether done by Russia, or some blogger on DKos.

                            If Hudson had accepted an invite to Fox, I'd watch.

                            I don't relish watching either RT or Fox, however.

                          •  The DK narrative police (2+ / 0-)
                            Recommended by:
                            katiec, protectspice

                            will tell us what sources are reliable, and 'splain the complicated stuff to us.  No need to worry your self about it.  

                          •  Here's some reports by RT of gays (0+ / 0-)

                            http://rt.com/...

                            Here's reports on OWS:

                            http://rt.com/...

            •  Did you factor in debt of state owned corporations (0+ / 0-)
        •  Ukrain won't be able to utilize it's own currency (3+ / 0-)

          under IMF.

          It will have to adhere to a ridiculously low Public Deficit to GDP ratio.

          As though GDP is a good measure of the health of an economy, and as though public deficits are worse than private debt loads.

  •  A huge difference between Greece and Ukrain (2+ / 0-)
    Recommended by:
    AoT, Claudius Bombarnac

    is that Greece is not monetarily sovereign.

    Ukrain still is.

    Any analysis between the two really needs to talk about this little fact.

    And while Ukrain does not have as wide a policy space that larger, stronger, more healthy, monetary sovereigns have, they do have larger space than Greece, for instance.

    Greece can't create The Euro out of thin air.

    Ukrain creates it's own currency out of thin air.  The trick for Ukrain is 2 fold:  1)  Convincing other nations that it's currency has value, and 2) Earning and/or buying foreign currency reserves in order to buy things like oil and gas  --  enter Russia.

    Also, I don't see how Ukrain gets out of their predicament without implementing capital controls, an IMF no no.

  •  It seems to me early days (4+ / 0-)

    to proclaim the proposed reforms "not austerity" or "austerity". Is it austerity to have your low wages frozen while gas prices climb > 50%? Is it austerity to tax pensions over $900USD a month in a country where the average pension is lees than half that? Those losing their jobs might call Yats' reforms austere enough. All that said,here's hoping that real economic reform comes to Ukraine and that the average Dasha catches a break from the rampant oligarchy & corruption of the past.
    Good diary,I appreciate your efforts here very much.
     

    "George RR Martin is not your bitch" ~~ Neil Gaiman

    by tardis10 on Sat Mar 29, 2014 at 03:58:24 AM PDT

  •  "Public Debt" -- it would be nice to have the (2+ / 0-)
    Recommended by:
    Chi, whizdom

    phrase "Public Debt" defined for a monetary sovereign of a fiat currency.

    To whom is the public debt owed?

     What's on the other side of the accounting ledger  --  private assets, right?

    How do we know the public debt/private assets is too large?

    Just how much money does the private sector need to work at full capacity in the Ukrain?

    If gas prices are increased by 50%, how is this not going to feel like austerity to most of the people in Ukrain?

    Sounds to me like the proposal to increase taxes on the rich is to reduce the public deficit.

    Which leads us back to asking:  Is it a good thing or bad thing for Ukrain to reduce it's public deficits, considering it's a monetary sovereign of a fiat currency, who, however, needs to either earn or purchase foreign reserves  --  and will probably have to earn/purchase more foreign reserves once it moves West with IMF  loans.

    •  The gas pricing is a huge problem. (0+ / 0-)

      When the cost of importing from Russia is $400 /1000 cu meters and the state utility sells to households at $90 / 1000 cu meters, there will still be a loss if the price is raised 50% to $135 / 1000 cu meters. Last year, the cost of the subsidy was 7.5% of GDP. That would translate to $1.1 trillion dollars in the US economy, just to provide natural gas.

      There are details in the 50% increase so that it would be applied according to means. As much as 40% of the low end of the income scale may be exempt from the increase.

      A more fundamental problem infrastructure and modernization exists. Local utilities in Ukraine's cities provide hot water because household hot water heaters are a rarity. Or  maybe they're a rarity because utilities heat it instead. The utilities use a tremendous amount of gas to heat the water which is wasteful and inefficient. From what I understand, the term 'hot water' is something of a joke, even in hotels.

      Ukraine has a steel industry which also uses gas inefficiently. The pipeline itself hasn't been maintained. The price of natural gas is too expensive to be wasted, but nothing has been done about it.

      There is no existence without doubt.

      by Mark Lippman on Sat Mar 29, 2014 at 05:30:58 AM PDT

      [ Parent ]

  •  Michael Hudson on Ukrain on Hartmann: (1+ / 0-)
    Recommended by:
    BigAlinWashSt
  •  Farm land (3+ / 0-)
    Recommended by:
    Claudius Bombarnac, katiec, dfarrah

    In October 2013, Ukraine signed a 50 year lease with China for about 5% of Ukraine's arable farmland.    By law, the state can not sell farmland to foreign corporations.  

    This made US based ADM and Cargill very sad.  They are competing with China for purchase of farmland in South America.    ADM at about the same time had to settle on a foreign corrupt trading practice act for paying bribes in Ukraine.

    That's really the story here.   Farmland is the new oil as it relates to global conflict.  Water is next.

  •  The Ag sector (3+ / 0-)
    Recommended by:
    katiec, Claudius Bombarnac, dfarrah

    employs 1 in 4 Ukrainian workers.   It has become very inefficient and undercapitalized since the break up of the USSR, and thus manpower intensive.  

    One solution would be to make capital available for modernization and private land ownership  for the current land tenants and small holders.  

    That isn't the IMF way, or big Agribusiness way.  So we are gonna get a surge of rural unemployment, at the same time we are cutting social safety nets and energy subsidies which in turn will drive a flight to emigrate to the Ukranian cities and the rest of the EU of relatively unskilled labor.  
    Reminiscent of the Irish experience.  

    •  Do you have a link regarding how much land is (0+ / 0-)

      still in state hands?   Or can you recall if you've seen that stat?

      I've googled, can't find anything.

      How much state stuff in general is there?  A bunch?

      •  Here is one perspective (2+ / 0-)
        Recommended by:
        Claudius Bombarnac, katiec

        On the state of ag land ownership in Ukraine.   Ownership  is complicated because of land reforms in the 90's, smallholders can "own" land, but not the right to sell it, except back to the State.

        The next president, Poroshenko is getting into land ownership in a big way.

        http://www.osw.waw.pl/...

      •  Here is some more background (2+ / 0-)
        Recommended by:
        Claudius Bombarnac, katiec
        The Land Code (2001) provides for private ownership of land, facilitating the privatization of land for agricultural purposes, but also established a moratorium on agricultural land sales. Although the moratorium was set to expire in 2012, it has been extended through 2015. As a result, agricultural land sales are still not possible. The Land Code also prohibits foreign ownership of farmland. Since 2001 there have been a number of efforts to create a land market. The Government has adopted a Law “On Land Cadastre” (in force from January 1, 2013) and planned to allow land sales from that date. However, the current moratorium has been prolonged until January 1, 2016. Also, according to the legislation initiatives only physical persons who are citizens of Ukraine can own land. The legislation also limits the size of land plots owned by one person;
        http://www.state.gov/...
      •  Private vs Public (1+ / 0-)
        Recommended by:
        katiec

        I can't find too much about what percent of the economy is state owned, but all the utilitity companies are nationalized, as is the Antonov aircraft plants and a lot of media.  

        Under Ukrainian law, certain types of business activity may be pursued by state-owned enterprises only. These include some natural monopolies, the rocket industry, the production of bio-ethanol, and the printing of banknotes and blank securities forms. In addition, Ukrainian law authorizes the government to set limits on foreign participation in "strategically important areas," although the wording is vague and the law is rarely used in practice. Generally, these restrictions limit the maximum permissible percentage of foreign investment into Ukrainian firms in these sectors. For example, the share of foreign investors' participation in Ukrainian publishing houses is limited to 30%. Investments into the energy sector can also be problematic. A company's "strategic status" can be lifted by Parliament, on the recommendation of the Cabinet of Ministers, and foreign entities would then be allowed to participate. Although foreigners are prohibited from establishing TV or radio stations, they can invest into already established entities in this area. In addition, foreign entities cannot buy agricultural land.
        The last sentence is what is driving ADM and Cargill crazy, when the China 50 year lease deal went down in September, they went nuts.
  •  This is a great diary. (0+ / 0-)

    Thank you for commenting on my recent one.

    The Stars and Bars and the red swastika banner are both offerings to the same barbaric god.

    by amyzex on Fri Apr 04, 2014 at 05:59:09 PM PDT

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