Will the weight of debt crush economy?
Prime Minister Mykola Azarov announced the repayment of Hr 10.5 billion ($1.3 billion) of external debts in March – more than the total healthcare budget for the year or the annual development funds for the Euro 2012 soccer tournament. The government is expected to repay a further Hr 19 billion ($2.38 billion) to foreign creditors in July, which is more than annual education expenditures.
The debt interest for January and February alone is set to cost the state Hr 7.32 billion ($0.92 billion). The total debt repayments scheduled up between 2011- 2014 amount to $29.9 billion. Azarov largely attributes the mammoth debt to loans taken out by the previous government with interest rates as high as 30 percent.
The National Bank of Ukraine has observed a debt increase of 13.5 percent ($13.947 billion) in 2010 bringing the total up to $117.343 billion – 85.7 percent of GDP. Yet in 2010, Azarov’s government took out eurobonds for $2.5 billion, borrowed $2 billion from the International Monetary Fund and $2 billion in a short-term loan from the Russian bank VTB, the supervisory committee of which is headed by Putin. Despite two years of heavy borrowing, a new president and a new government, Ukraine continues to take loans. If the situation worsens further, the issue of survival may supersede the issue of democratic freedom.
People First Comment: Using investment capital to service debt is a classic recipe for disaster. Remember the MMM pyramid scandal? This is exact what they did. They took in cash by offering to pay high interest rates and then used the cash to pay the interest on previous debts. Bernard Madoff tried the same thing in the United States. His Ponzi or ‘pyramid’ scheme, as they are termed, collapsed owing billions and now he will spend the next 150 years in jail. What this and successive governments have done looks worryingly similar. As any self-respecting housewife will tell you, borrowing money is easy, paying it back is not and yet the government continues to borrow.
Lack of national economic performance ensures that the cake gets smaller every year. The Ukrainian model is further complicated by government tolerance of rampant corruption and highly questionable financial management systems.
The results are all too obvious. Ukrainian gross domestic product in real terms is today around 20 percent lower than it was 20 years ago. In fact, Ukraine has not grown at all, while Slovakia, which started from a similar level but uses the Western approach now has a per-capita gross domestic product of almost $19,000 and from a lot fewer resources. Perhaps somebody ought to remind the government that the Soviet system went bankrupt before they do the same to Ukraine.
Ukraine, a European high-risk zone
Ukraine’s position in two recent global rankings should ring alarm bells for the governing authorities that drastic reform is required in many different spheres. Ukraine is 22nd out of 85 countries in the protesting disposition rating of The Wall Street Journal. This rating pits Ukraine as less volatile than Libya, Uzbekistan, Egypt, Bolivia, Georgia, Turkmenistan, Dominican Republic and Tunis but more unstable than Bosnia and Herzegovina, Iran and Belarus. The risk of revolution is high in Ukraine, making the improvement of dialogue between the people and authorities all the more important.
According to another American publication, Business Insider, Ukraine is among 18 countries under serious threat of default. Experts attribute Ukraine’s 6th place to the amount of national debt, financial and political stability. The first five countries are Venezuela, Greece, Argentina, Ireland and Portugal. The list shows Ukraine as in a worse situation than Libya, Egypt, Bahrain, Spain, Bulgaria. The powder keg of revolutionary attitude and the serious economic pressures requires the authorities to tread carefully when it comes to respect for human rights and democratic principles.
People First Comment: There is a misguided belief that the Ukrainian people, when faced with adversity, will simply go to their dachas and pickle more vegetables. While this may have been true up to the turn of the century, the world has changed to such a degree that no self-respecting politician should take this position for granted. The reason for the change is simple. We now live in the communications age where information flows around the planet in seconds. There are now two mobile telephones for every man, woman and child and some 14 million now have the ability to go online.
Newspaper and magazine sales are falling not as many claim because of the economic situation, although this has had an effect, but because people will no longer spend hard earned money on manipulated news and other peoples disguised advertising. Through the Internet, they now have a point of comparison and are no longer restricted to the party or government line. Ukrainians are today more aware of alternative realities than at any time in history. Couple this with rising poverty and regional disquiet and it is little wonder that Ukraine is so high on the international “worry” lists.
The authorities would do well to note that it only takes one small spark to cause a repressed society to explode… and Ukraine is repressed. In Tunisia, for example, it was one man’s protest suicide that bought hundreds of thousands onto the streets who then bought down a government and ended a 20 year old system. What is even more interesting is that the new government, in conjunction with the international community, is now seizing plundered assets hidden in Western banks. In such a crisis money buys you no protection at all.
Ukrainians speak no evil
Infringement of the right to privacy and property by the Ukrainian security services is on the rise. The mass media have reported a considerable increase in the number of cases of state ordered espionage inspiring the public disapproval of the Prosecutor General’s Office of Ukraine. Last year the number of audio interceptions (phone tapping), trespassing in citizens’ homes and secret retrieval of information increased substantially. This is shown quite clearly in the amount of criminal cases involving evidence collected through covert means, amounting to 12 percent of cases involving the Interior Ministry and 15 percent of cases involving the security services, while a year before it was 10 percent and 13 percent respectively.
These facts contradict the legislation of Ukraine, which demands that secret information retrieval may become evidence in court only in exceptional cases of serious crime investigation. Otherwise covert evidence may be only be used in court if it was obtained under officially approved conditions – both parties must be aware that their conversation is being recorded and court authorisation is required.
Asked to comment by on the issue, Valeriy Khoroshkovsky, head of the Security Service of Ukraine, stated his belief that indiscriminate phone tapping was not a problem. However, according to the opinion of the Prosecutor General’s Office, the secret obtaining of information is inappropriate for common legal cases and violates civil rights. The cdhairman of the Parliamentary Committee for Legislative Support for Law Enforcement Activity and Deputy Viktor Shvets highlighted that the information gathered through covert means is often used for private rather than official purposes.
People First Comment: We all understand that the Security Services in the course of their work sometimes have to sail very close to the absolute limits of the law but what defines a civilised society is that once the line is reached it is never crossed without there being a very strong and legally defensible reason of national security. To cross the line in support of some third parties commercial interests is legally and morally indefensible and a total violation of all human rights and dignities.
While some in the service may think that getting the prosecution is the ultimate objective in reality breaking law to achieve it may well enable the offenders to walk free. Breaches of the law are a national issue whilst breaches of human rights are an international issue under the auspices of the United Nations through the International Court of Human Rights in the Hague. Breaking the law to effect a prosecution in most cases will invalidate the prosecution letting the perpetrators walk free, in fact even a hint that the Security services have misused the law in the past will draw into question the validity of their evidence in the future.
This is a very slippery slope and one the security services would do well not to take as whilst at present they may be selling their services to the highest bidder they place themselves in a position of total vulnerability for the future after all if they cannot be trusted to uphold the law and use the law for personal enrichment then how can they be trusted by other security services in the future.
Criminalized Ukraine
Ukrainian society is turning away from democratic norms of living, resulting in a dramatic rise in crime. A recent mass media report released figures from the Prosecutor General’s Office of Ukraine that show the number of reported crimes last year increasing by 15.2 percent from 435,000 in 2009 to 501,000 in 2010. Much to public concern, the figures also demonstrate an increase in the amount of serious crimes by 14.8 percent to 167,000. But Interior Minister Anatoliy Mogyliov, remains in nonchalant denial of the crime wave saying that the increase is being observed only due to a growing number of thefts.
Ukrainian deputies from the opposition, including Gennadiy Moskal, reaffirm the argument of the Prosecutor’s General Office accusing the interior minister of spreading untruthful and misleading information.
According to them, the statistics prove that this January saw an increase, especially serious crimes by 26 percent, robberies – by 17.1 percent, thefts – by 33.2 percent and human trafficking – by 46.2 percent compared to January 2010. Children are suffering the worst from this rise in criminality, with the number of under-aged crime victims growing by 44 percent. Is this dramatic rise of criminal activity in Ukrainian society factored into the reforms and modernization of Ukraine planned by the president and government?
People First Comment: Desperate people do desperate thing in desperate times and with 35 million people in Ukraine living below the poverty line and a further 12 million living on less than $3 per day, times are very definitely desperate for the majority. These figures are a national disgrace, in any other country senior police officers and prosecutors would be hauled over hot coals until they could explain how and why this is being allowed to happen. In reality, it is just the next step in the moral and psychological decline of the nation that this government’s policies have stimulated.
The comments by the interior minister defy belief. In any normal democratic country, a minister presiding over a 15 percent increase in serious crime in one year would do the honorable thing and resign, sadly not in Ukraine, he just plays semantics with the figures. Increases in crime of this scale are alarming to say the least as soon this situation could easily run out of control as the thugs and bandits realize that they can act with impunity. Europe and in particular UEFA should be equally concerned. Euro 2012 is projected to bring 650,000 tourists to Ukraine. If the militia and the authorities cannot protect ordinary Ukrainians why will they bother to protect tourists who are in reality much easier pickings?
Quote of the week:
Any people anywhere, being inclined and having the power, have the right to rise up, and shake off the existing government, and form a new one that suits them better. This is a most valuable – a most sacred right – a right, which we hope and believe, is to liberate the world.
Abraham Lincoln, the 16th president of the United States (1861-1865)
Viktor Tkachuk is chief executive of the People First Foundation, a politically independent democracy foundation. He is a former deputy secretary of Ukraine’s National Security and Defense Council, a former senior adviser to three presidents and a former member of the Ukrainian parliament.
