11bn euro loan to Ukraine – will mean savage cuts

0
1210

THE European Commission has offered Ukraine 11 billion euros, falling well short of the $35 billion needed to service immediate debt repayments and avoid default and national bankruptcy.

Jose Barroso, president of the European Commission, announced that its offer is mainly sourced from the International Monetary Fund and the World Bank.

Accepting IMF money will require many sacrifices, including wholesale privatisation of public utilities and services, increased gas bills, frozen government salaries and all-round budget cuts.

On Tuesday, US Secretary of State Kerry said the Obama administration is offering $1 billion in loan guarantees.

But Ukraine’s acting Finance Minister Yuriy Kolobov said Ukraine needs $35 billion to service outstanding debts, including those to Russia’s Gazprom, to which it owes $2 billion.

Ukraine’s parliament has signed off on the terms of an earlier 610 million euro EU aid package – but that money won’t be paid until Ukraine seals a bailout deal with the IMF.

Kerry, while in Kiev yesterday, announced $1 billion in energy aid to Ukraine to help finance Ukraine’s ‘four most pressing needs’ – economic reforms, holding elections, fighting corruption, and protecting against ‘politically motivated trade actions by Russia’, according to a White House statement.

The loans come after Moscow announced it will no longer offer its neighbour discounted gas prices.

Ukraine, which has massive debts and a nearly empty treasury, is due to pay off more than $60 billion in debt this year, or about a third of the country’s GDP

l The offer by Kiev’s new self-proclaimed government to swap economic aid for the placement of a US missile defence shield is an attempt to sour relations between the West and Russia, according to Russian Foreign Minister Sergey Lavrov.

Ukraine’s ambassador to Belarus, Mikhail Ezhal has confirmed that such a proposal is in the works.

When asked about this, Lavrov said: ‘if it is true, then we have another example wherein, completely unhindered by our Western partners, those who have taken over the Rada (Ukrainian parliament) are trying to gamble on the relationship between Russia and the West, and are trying to cause frictions in this relationship with their attempts at fishing in murky waters.’

Lavrov made a number of other observations on how the Ukrainian crisis has unfolded: ‘The protests were carried out by armed men and accompanied with grossly illegal violations.

‘The international community praised those protests. In essence, it was an armed coup.’