Katya Malofeeva of Renaissance Capital -

Early Sunday morning, the leaders of the key political forces of Ukraine announced that they had reached an agreement to hold early parliamentary elections on September 30.

The announcement was very welcome, after a number of disturbing events on Friday and Saturday. President Viktor Yushchenko placed the Interior Forces under his command and brought regional governors into the National Security and Defence Council, which were taken as signs the president was contemplating the introduction of direct presidential rule in the country.

Back from the brink

The announcement was made by President Yushchenko, Prime Minister Viktor Yanukovych and Head of the Parliament Oleksandr Moroz. The agreement was also supported by Yulia Timoshenko, and Vyacheslav Kirilenko (leader of the Our Ukraine Party). Most importantly, the political leaders agreed that elections will take place on September 30 regardless of the Constitutional Court of Ukraine’s decision regarding the constitutionality of the president’s decree dismissing parliament and cross-appeals submitted by the majority in the parliament.

The Communist Party of Ukraine, headed by Petro Simonenko, was the only major party that did not support the agreement.

The parliament is due to adopt all legislation necessary to conduct early elections Tuesday or Wednesday. Monday is a public holiday in Ukraine. Yanukovych's Party of the Regions has already announced it will ask its supporters to end the demonstrations in Kyiv protesting against the president’s decree dismissing parliament.

No guarantees

With important pieces of legislation still missing, there is no guarantee elections will take place as scheduled. However, we are encouraged by the fact that all major political parties have agreed on the date and the procedure to be followed by the parliament to adopt necessary legislation.

With elections scheduled take place on September 30, the new government in Ukraine will be appointed in late October at earliest, which creates a rather long period of uncertainty. Still, we believe the impact of that uncertainty on the economy will be muted. The growth momentum existing in the economy is very strong, and with the resolution of the political crisis in sight we do not expect any politics-driven dips in economic activity.

Current popularity ratings suggest that if elections were held today, the composition of the parliament would not be dramatically different from what we see today, and no party would be able to form the government single-handedly. In our view, this is not likely to change by the end of September, and we expect the new government in Ukraine to be a coalition government again.

Katya Malofeeva is an analyst with Renaissance Capital

Send comments to The Editor