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You're reading: Plowshares vs. sabers

The EuroMaidan victory in February has renewed hope for
democracy and economic prosperity in Ukraine, only to be put in jeopardy by
Russian threats. While these may be “only” saber-rattling for internal
consumption, the situation is serious and tense. It does not take a
crystal-ball to assume the U.S. and EU are highly unlikely to counter this by
rattling their own sabers, hence the question arises what can they do to help
Ukraine ensure its sovereignty and territorial integrity? I propose they can
instead of sabers put on the field a financial equivalent of plowshares. That
is, they can move very rapidly to provide the new Ukrainian Government with
short-term bridge financing to meet any external repayments in the next two-three
months, before a solid International Monetary Fund agreement and conventional
donor financing is put in place for the medium and long term. Two questions
arise. First, given Ukraine’s past record is this not incautious or even
foolhardy?  Second, what are the
instruments available for such amounts in such a short time?

There can be no doubt about the past record of Ukrainian
governments, even those considered more democratic. Reformist and monitoring
procedures are needed for a big medium-term package. But the most recent signs
from Ukraine strongly suggest the possibility of a true change in direction.  After the fall of ex-President Viktor Yanukovych’s
regime, a new coalition government has been put in place in an incredibly short
period of time with apparently little of the acrimony and conflicts within the
“opposition” that was the hallmark of previous efforts.  Further, the government put forth a
multi-point program of quite concrete measures including new presidential
elections, an immediate invitation to the IMF for a fact-finding mission, a
commitment to sign the EU Association Agreement and the Deep and Comprehensive Free
Trade Agreement at the earliest possible moment , a commitment to meet its
external debt-servicing obligations and several internal regularizing decisions.
The National Bank of Ukraine has immediately brought an end to the folly of
wasting limited reserves to halt the inevitable slide of the hryvnia and allow
its devaluation that experts have been urging to stimulate sorely lacking
growth. There is now a prospect of the “external anchor” of EU integration and
even eventual membership. But perhaps even more important in the short-run is
the internal anchor of a resolute Maidan, clearly intent on keeping its eyes on
government behavior and continuing the use of “the power of the people” that
led to this victory.  For the long-term,
“agora democracy” (perhaps the best translation of Maidan is in fact agora!)
may not be ideal, but in the very short-run it can be a force for transparency
and substantive action.

But is there not a problem with lending to a care-taker
government before Presidential and later parliamentary elections? At such a
time, international finance institutions and bilateral donors have usually
waited for new governments. Usually, but not always : Bulgaria in 1997, Brazil
a few years later provided precedents of negotiating an IMF program before
elections and asking the major contenders in the election to commit publicly to
a program agreed in advance. It does not stretch the imagination to expect that
presidential candidates such as Vitaliy Klitschko and Yulia Tymoshenko, with
their parties, would be prepared to do this.

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