bne IntelliNews -
George Soros, the 84-year old financier and philanthropist, has called for the EU to pump $50bn into Ukraine, while predicting a Russian default. “Europe needs to wake up and recognise that it is under attack from Russia. Assisting Ukraine should also be considered as a defense expenditure by the EU countries. Framed this way, the amounts currently contemplated shrink into insignificance,” Soros argues in a new article in the New York Review of Books, published on January 7.
The financial markets veteran, credited with forcing sterling to devalue in 1992, says that Russia is on the verge of default as a result of Western sanctions and a 50% drop in the price of oil. According to Soros, Russia's current crisis is “comparable to the crisis of 1998". “It would not be surprising if, before it runs its course, this crisis ends up in a default by Russia,” Soros believes.
Soros argues that the EU should now step in to bankroll Ukraine to the tune of $50bn, to seal a Western victory over Russia, while at the same time boosting the recession-struck Eurozone economy.
“By enabling Ukraine to defend itself, Europe would be indirectly also defending itself. Moreover, an injection of financial assistance to Ukraine would help stabilise its economy and indirectly also provide a much-needed stimulus to the European economy by encouraging exports and investment in Ukraine,” Soros writes. “Hopefully Russia’s troubles and Ukraine’s progress would persuade President Vladimir Putin to give up as a lost cause his attempts to destabilise Ukraine,” Soros concludes.
According to Soros, Ukraine needs not only the $15bn figure mooted in the international press, - which is in addition to an already agreed $27bn standby loan agreement with the IMF, stalled due to Ukraine's slowness to reform - but all of $50bn in order to put the country on the right track.
The money, says Soros, is needed not just to save Ukraine from imminent default but to secure the victory of reform forces in Ukraine against domestic opposition from corrupt bureaucrats and oligarchs that still run the show behind the scenes. “The old Ukraine is far from dead” Soros says. “It dominates the civil service and the judiciary, and remains very present in the private - oligarchic and kleptocratic - sectors of the economy.”
Only a massive infusion of Western cash will give the “cream of civil society” returned from foreign universities abroad, and receiving Western grants, the upper hand over the forces of reaction.
Where can the EU find the cash at short notice? According to Soros, the EU's Balance of Payments Assistance facility used to prop up Hungary and Romania during their financial crisis in 2008-2009 has unspent funds totalling $47.5bn. The European Financial Stability Mechanism – which propped up Portugal and Ireland during the 2008-2009 crisis, has about $15.8bn. European Investment Bank project bonds could yield over €10bn or more, while the World Bank and European Bank for Reconstruction and Development could fork out another $5bn, Soros calculates.
“Perhaps not all these sources could be mobilised in full but where there is a political will, there is a way,” Soros says in the article, arguing that the final decision rests with German Chancellor Angela Merkel, whom he regards as the informal leader of the EU.
Soros' arguement that Ukraine should get funds the EU as part of Europe's self-defence against Russian aggression, mirror those of the Ukraine government itself. In an interview on German TV on January 7, Ukrainian prime minister Arseny Yatsenyuk reminded viewers that Germany had also experienced the results of a Russian invasion comparable to that which Ukraine was now experiencing. “Ukraine is defending Europe,” he said, appealing to Germany for financial assistance to stave off default.
Former Kremlin adviser turned fierce Kremlin critic, Andrei Illarianov, on January 6 predicted a Ukrainian default by the end of January if no additional funds are found to prop up the conflict-stricken country.
A team from the International Monetary Fund is due to return to Kyiv on January 8 to discuss further disbursement of funds, following Ukraine's last minute passing of its budget for 2015 at the end of December at an all-night parliamentary sitting. Apart from Ukraine failing to deliver on conditions such as eliminating energy subsidies, the IMF has been reported in the international press as believing that Ukraine's financial position is untenable, preventing it from disbursing further funds under the current agreeement.
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