By Stefan Wagstyl and Roman Olearchyk Published: March 2 2009 19:16 | Last updated: March 2 2009 19:16 Olexander Pavlenko, a young computer programmer, is one of tens of thousands of Ukrainians who cannot get their money out of the bank. He stood in line in Kiev at Nadra Bank and Ukrprombank, two big troubled banks, planning to withdraw more than $10,000 (€7,950, £7,125). But like many others, he was told the cash was not available. “I stood in line a couple times with other bank clients who were protesting, crying and screaming. But the bank told me: ‘Sorry, we simply don’t have the money now and can’t help you.’” With about nine banks now under the central bank’s special control, Ukrainians are increasingly worried. Even those with their money in apparently solid banks, including those controlled by west European banking groups, are concerned because the central bank has banned the early redemption of term deposits, the most popular form of saving in Ukraine. Altogether, hryvnia bank deposits have dropped 20 per cent since September and those in foreign currency 10 per cent. “This is very serious,” said Olexander Suhonyako, president of the Association of Ukrainian Banks. The growing discontent among bank clients is matched by other signs of public anger at the impact of the global crisis – and at the seeming inability of the country’s divided leaders to respond effectively. Recent weeks have seen protests by truck drivers complaining about taxes and the dramatic decline of the hryvnia, which has complicated the repayment of foreign currency vehicle loans. Journey that brings tales of woe: The overnight train ride from Kiev to Mariupol, a steel town of 500,000 on the Azov Sea in south-east Ukraine, is not an uplifting journey,writes Roman Olearchyk in Mariupol. Travellers exchange accounts of how they, or their friends, have lost their jobs in the country’s economic crisis. In Mariupol itself, Volodymyr Boyko, general director of Ilyich Metallurgical Plant, one of the city’s two giant steel mills, is equally blunt: “The crisis started in America and spread to us. The bubble burst. People took loans that they couldn’t pay. It exploded. Only God knows how long it will last.” The recession is eating at Ilyich’s revenues. The 100,000 workers are increasingly worried about their jobs, as the national total of unemployed has almost doubled to 1m since the autumn and could double again this year. Mr Boyko is desperate to keep the workforce busy and paid at the mill and at related businesses, including Soviet-style farms and fisheries. Asked if layoffs could spark uncontrollable protests, Mr Boyko said: “God forbid, everything would fall apart.” Global steel prices have plummeted two-thirds since last year’s peak to about $400-per-tonne levels. Ilyich is afloat for now, working at 60 per cent of its 6m tonne per annum capacity. But for how long? “Ilyich is not driven by profits, but to support our working collective,” the Soviet-style director says. A rare exhibit of socialism in capitalistic Ukraine, the Soviet-built mill was named in honour of Vladimir Lenin, who carried the patronymic Iliyich. Owned by workers yet tightly controlled by Mr Boyko, it stands apart from Ukraine’s other mills, owned by billionaires that have borrowed heavily from abroad in recent years to expand and modernise. Meanwhile, the owners of street kiosks in Kiev successfully demonstrated against the city’s plans to take over their stalls. But with demonstrations drawing only up to 5,000 people, the authorities are confident there is no serious threat to stability. They say Ukraine is remarkably calm given the country’s economic problems. Gross domestic product growth is forecast to contract 5-10 per cent in 2009, while unemployment is rising and non-payment of wages is becoming more common. But with political leaders focused on the forthcoming presidential elections due before the end of the year, some observers fear that the protests will become bigger. Oleksiy Haran, a political science professor at Kiev’s Mohyla University, says: “If [the economic situation] worsens, if more banks run into trouble, and if more layoffs pile up, then I would expect large crowds to materialise. This will be dangerous for a country that is struggling already to deal with the economic crisis.” There seems to be no end to the disputes between Viktor Yushchenko, president, and Yulia Tymoshenko, his prime minister. Much now depends on the implementation of the $16.5bn package assembled by the International Monetary Fund, including money for bank refinancing. After disbursing $4.5bn last autumn, the IMF suspended further loans after a policy disagreement with Kiev. But Mr Yushchenko and Ms Tymoshenko pledged at the weekend to co-operate with each other and the IMF on implementing reforms. Meanwhile, the IMF agreed to relax its desired deficit target from less than 1 per cent of GDP to about 3 per cent, in the light of the deepening recession. Co-operating with the IMF will allow Ukraine not only to secure loans but also support from other international institutions including the World Bank and multinational banks, which have pledged to back their local subsidiaries. On Monday, Austria’s Raiffeisen Internationalpromised to support Aval, its Ukrainian affiliate. Hryhoriy Nemyria, deputy prime minister, insists Ukraine “is not a basket case”. Ceyla Pazabasioglu, the IMF’s Ukraine mission chief, agrees, saying the country’s difficulties are not “insurmountable”. But investors are not so sure. Ukraine’s credit default swap rate – a risk measure – stands at around 3,700, compared with about 1,000 for Latvia and 560 for Hungary, two other east European states on IMF support. Every week seems to bring a new crisis – the next could come this weekend, when Kiev is due to pay a $400m bill to Gazprom, the Russian gas monopoly. ................................. Road from the Orange revolution Jan 2005 Viktor Yushchenko sweeps to power in the Orange Revolution Sept 2005 Mr Yushchenko sacks Yulia Tymoshenko, his prime minister, after repeated disputes March 2006 Parliamentary elections and appointment of Viktor Yanukovich as prime minister 2007 Efforts by Mr Yushchenko and Mr Yanukovich to co-operate collapse and new elections are called. Ms Tymoshenko returns to power 2003-2007 Strong growth, with GDP rising at an annual average of 8 per cent 2008 GDP growth slows to 2 per cent. Gloom spreads into property and banking March 2009 Economy worsens, with a decline of at least 6 per cent in growth predicted this year Copyright The Financial Times Limited 2009Ukraine risks unrest as ills worsen
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