December 22, 2008 / 3:48 PM / 12 years ago

WRAPUP1-Ukraine president deflects PM attack, guarantees gas

KIEV, Dec 22 (Reuters) - President Viktor Yushchenko dug in on Monday against attacks by Ukraine’s prime minister, rejecting blame for a deep economic slide and refusing to sack the central bank chief after the hryvnia currency sank to record lows.

Ukraine’s political elite has traded increasingly vicious barbs as the ex-Soviet state faces a winter gas supply cut from Russia over unpaid debts which Moscow warned might disrupt supplies to the European Union.

The country has been hit full-force by the financial crisis, with the economy shrinking 14.4 percent year-on-year in November, industrial output down by nearly a third and the hryvnia currency sinking last week to half its September level

As consumers repaying dollar-denominated loans counted the cost of the plunge, Prime Minister Yulia Tymoshenko demanded Yushchenko and Central Bank chief Volodymyr Stelmakh step down.

She accused the bank of colluding in speculation and the president of working at the expense of Ukrainians reeling from slowing economic growth, an uncertain currency and high prices.

“The president will never agree to replace V. Stelmakh, with whom he has worked for many years, including in times of crisis,” Yushchenko’s chief of staff, Viktor Baloga, said in a statement posted on the presidential Web site.

Only the president can sack the central bank chief, subject to parliament’s approval.

Presidential economic aide Oleksander Shlapak agreed. He also promised Ukraine would guarantee transit of Russian gas to Europe. About 20 percent of EU imports pass through the country.

Russia and Ukraine have periodically argued over debts and gas prices since the pro-Western “Orange Revolution” swept Yushchenko to power in 2004. One such row led to a supply cut to European consumers in early 2006.

“Ukraine is ready to give guarantees of uninterrupted gas supplies in 2009 to European gas consumers,” Shlapak, told a news conference.


Analysts say Russia is unlikely to want to tarnish its reputation as a reliable supplier after the 2006 cut-off caused the EU to consider alternative sources. They say the EU and Ukraine have far more reserves which would cushion any cut.

Shlapak said Ukraine still owed $814 million for gas, but Russian gas giant Gazprom puts that figure at $2 billion.

The hryvnia has fallen as the global financial crisis took hold of the region and investors, scared off by Russia’s war with Georgia, channeled investements into safer dollars.

The hryvnia touched 10/$ last week, though it has since pulled back to 8.1-8.3 after renewed central bank intervention.

Consumers are paying a high price - half of loans are in foreign currency, usually dollars, and repayments have soared.

A presidential aide said last week consumers may default on 60 percent of their debt.

There is little evidence so far of social upheaval.

But on Monday, dozens of protesters converged on Kiev city centre tooting horns and briefly snarling traffic in a “protest of the middle classes”, decrying a failure to tackle the crisis.

Trade unions planned a mass protest for Tuesday.

Political stability, jolted by four years of turmoil and falling governments, remains in doubt despite the revival of a ruling coalition of parties led by the president and premier.

The two leaders are engaged in new, bitter recriminations.

Yushchenko, in a weekend television interview, rejected any suggestion he was responsible for economic difficulties.

“The prime minister has clearly lost control of the situation,” he told Inter channel. “Who is responsible for 22 percent inflation? External crisis, what external crisis? The crisis lies the prime minister’s office.”

The government and president’s office have pressed the central bank to ease the hryvnia’s fall, but the bank’s hands are tied by a $17 billion IMF loan with conditions attached..

Presidential aide Shlapak said Yushchenko wanted the bank to call for a stronger hryvnia — no weaker than 8.0 by year-end. A government minister said its forecast for next year was 7-7.5. (Editing by Ralph Boulton) (Kiev bureau; tel: +380 44 244 9150; RM:

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