Ukraine Live Day 315: New Austerity Budget and Non-Aligned Status Become Reality

December 29, 2014
Ukrainian Prime Minister Arseniy Yatsenyuk, right, shows the draft of the 2015 state budget at the parliament in Kiev on Monday, December 29. Picture: EPA/Business Day

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Non-Aligned Status Officially Dropped As New Budget Is Passed

Ukraine’s President Petro Poroshenko signed a bill today which officially drops Ukraine’s nonaligned status, opening the way for Ukraine to join permanent alliances.

Ukraine joining NATO soon? That’s not likely, since NATO has signaled that it is not interested in taking in a new ally which is already essentially engaged in combat with a foreign superpower.

But the bill is important, regardless, because it sends a strong message to Russia that Ukraine is choosing the West over the East. Prior to the Euromaidan protests and Russia’s annexation of Crimea, however, it’s not even clear whether such a choice would have been necessary since building closer economic ties with Europe is not a mutually-exclusive option which would have required moving away from Russia, Ukraine’s largest trading partner and a neighbor with strong cultural connections. Since the war in the Donbass, however, the rift between Russia and Ukraine is palpable and growing.

Poroshenko initially resisted the move to drop the nonaligned status, since it will anger Russia further and is unlikely to result in NATO membership. Since he faced significant political opposition on this issue, however, Poroshenko is now speaking about the bill as if it is another sign of Ukraine’s government adopting European standards. AP reports:

Poroshenko said he is working to reform the Ukrainian economy and its military forces to meet European Union and NATO standards, but he will leave it up to Ukrainian citizens to decide in a popular vote whether to join NATO or not.

“When we are able to conform to these criteria, the people of Ukraine will make up their mind about the membership,” Poroshenko said and added that this will likely happen in the next five to six years.

Ukraine Adopts Austerity Budget, Nonaligned Status Officially Dropped

After an all-night debate (and a visit from Ukrainian President Petro Poroshenko), Kiev’s parliament has passed an austerity budget in a 233-27 vote. The budget, which significantly cuts government spending in order to conform with Ukraine’s loan from the International Monetary Fund (IMF). The bill does this while simultaneously raising defense spending.

And it’s not popular at all. Yesterday there were large protests outside the Rada, as common people and business owners feel like they are being excessively taxed at the same time that government benefits are being cut.

In fact, it’s not clear who actually likes the bill, not even the lawmakers who had to piece together a bill that meets several divergent and competing goals.

Business Day provides more details of how the bill was cobbled together:

The financial blueprint was passed only after Prime Minister Arseniy Yatsenyuk promised deputies a chance on February 15 to soften some of its more unpopular points should these revisions be backed by a visiting IMF team. An IMF official said on Monday a mission would visit Ukraine on January 8 and stay until the end of the month.

But many legislators harshly criticised the government for failing to provide them with all the details of the budget before the vote.

“After voting for laws that radically changed the revenues and expenditures parts, we do not have the draft budget in our hands,” said former prime minister and current ruling coalition member Yulia Tymoshenko.

Mr Poroshenko’s advisers hailed the plan as an overdue measure that will cause short-term pain in order to help Ukraine funnel resources better into lagging economic sectors and the army.

“Two pieces of news. One good and one bad,” presidential administration member Valeriy Chaly wrote in a Facebook post. “The first is that my salary — along with that of all the other leaders — has been rather seriously cut,” Mr Chaly wrote. “And the second: the budget was adopted, and this means 90-billion hryvnias ($5.7bn, €4.7bn) for defence.”

Yatsenyuk seemed nearly apologetic for passing the bill, calling it far from perfect and stressing the need to work with the IMF to modify their loan agreement. UPI reports:

“It will be difficult to collect revenues in modern Ukrainian economy – we have lost 20 percent of the state’s economy,” he said in his statement to lawmakers. “The year of 2015 will be very difficult in terms of economic stabilization.”

Yatsenyuk said a mandatory budget review is set for Feb. 15. The Ukrainian government, however, has fulfilled, and will continue to fulfill, its external debt obligations, he said.

“We will adjust it depending on the outcome of negotiations with international financial institutions,” the prime minister said.

James Miller