Uncertainty mounts in Ukraine as Yushchenko calls all change

By bne IntelliNews October 9, 2008

Graham Stack in Berlin -

Ukrainian President Viktor Yushchenko has set snap parliamentary elections for December 7 after parties failed to form a new coalition within one month of the break-up of the last one in September. But given the global financial crisis is starting to seriously affect key parts of the Ukrainian economy, the last thing this country needs is more political uncertainty.

In a televised address broadcast late Wednesday, October 8, Yushchenko blamed the coalition's collapse on Prime Minister Yulia Tymoshenko. "I am convinced, deeply convinced, that the democratic coalition was ruined by one thing alone - human ambition. The ambition of one person," he said, adding that Tymoshenko had exhibited an unrelenting "thirst for power."

Tymoshenko's eponymous party immediately said it would consider challenging the constitutionality of the dissolution of parliament. Andriy Portnov, a deputy leader of Bloc Yulia Tymoshenko (BYuT), was quoted by Interfax as saying, "We deem this step anti-constitutional and senseless. What has happened was certainly provoked by the president. It is he who stands behind the coalition's break-up." He added that his party wouldn't vote for any bill aimed at legitimating what he claimed were anti-constitutional steps by the president.

The constitution states that the president has the formal authority to dissolve the legislature if no majority coalition has been formed within 30 days after the collapse of its predecessor. However, lawmakers still have to adopt changes to the current legislation in order for early elections to be held legitimately, as some clauses of the existing law are impossible to implement by December 7. The legislature must also allocate money for holding elections out of the state budget for 2008.

A further potential legal quibble arises from the date of Yushchenko's decree, according to Renaissance Capital. On September 3, the president announced he would use his constitutional right to dissolve the Rada if a new coalition was not formed in the next 30 days. However, the break-up of the ruling coalition was actually officially announced in the Rada on September 16, meaning that Yushchenko's decree dissolving the Rada and calling new elections could be ruled premature.

All this means that there is likely to be continued political uncertainty in the coming weeks about how and when elections are going to take place. "Tymoshenko seems intent on derailing or at least delaying the upcoming vote to take advantage of widespread disapproval of new snap elections among voters," says Dragon Capital's Viktor Luhovyk.

Ukrainian roulette

Beyond the legal disputes, the outcome of the elections themselves, whenever they take place, is equally uncertain, due to floating voters, electoral fatigue, a plethora of small parties and a low threshold of only 3%. "Voting day comes 14 months after the last elections," says Galt & Taggart's Danylo Spolsky, "and with Ukraine's population suffering election fatigue, the president is risking a very low turnout on elections."

Polls show a drift away from established parties to smaller parties, making the outcome in terms of a governing coalition even more open, according to analysts. So after the elections, coalition negotiations are likely to be even more protracted than was the case last year.

According to recent polls, BYuT is supported by 18-24% of the electorate (vs 30.7% at the previous elections), the opposition Party of Regions has 20-26% (vs 34.4%) and the president's Our Ukraine/People's Self-Defence 4-10% (vs 14.2%). Support for smaller parties is on the increase, with the Lytvyn Bloc possibly getting 5-7% (vs 4.0%) of votes and the Communist Party 4-6% (vs 5.4%).

"Looking at current poll numbers, both the Party of Regions and Tymoshenko blocs have good chances of increasing their seats in parliament - while the pro-presidential Our Ukraine party risks not breaking the 3% threshold to get in," says Concorde's Volodymyr Verbyany. "A number of smaller parties will again stand in the election, and considering voter's distain for current political personalities, they could very well make the cut."

Galt & Taggart's Spolsky comments: "With several parties fracturing internally - some quite severely - the political landscape could see some changes, especially with a few better-known politicians set to change allegiances, establish new parties, or make the jump from municipal to federal politics."

Yushchenko vs. Tymoshenko

A number of analysts argue that Yushchenko's move is aimed at removing Tymoshenko from government in the run-up to next year's presidential election campaign, and that the president is ready to re-establish the coalition with the current opposition Party of Regions, with current defence minister Yury Yekhanurov as prime minister, that fell apart in spring 2007. "The opposition Party of Regions, which lost power after last year's elections, has tacitly taken Yushchenko's side and is eagerly awaiting a new vote to return to government office, possibly by forming a majority coalition with the president's party in the next parliament," says Dragon's Luhovyk.

Foyil's Ismail Safaraliyev argues that although Tymoshenko's eponymous bloc will remain a force to be reckoned with, he expects Regions of Ukraine to win more seats in Parliament than it now controls, with Ukraine's Communists returning as allies to create a bloc of MPs that would be enough to build a stable ruling coalition. "In this scenario, which we find the likeliest, Regions would nominate its leader and former PM Victor Yanukovych as prime minister, with Mrs. Tymoshenko going into opposition to both President Yuschhenko and Mr. Yanukovych."

G&T's Spolsky argues that Yushchenko's main goal in the month-long political turmoil was the end of Tymoshenko's premiership. "Both Tymoshenko and Yushchenko have their sights firmly set on the battle for president in early 2010, and President Yushchenko deemed it necessary to remove Tymoshenko from her post in an effort to discredit her and reap the public opinion benefits. The president chose elections, and it is widely believed that no matter the outcome, Tymoshenko will not find herself in the prime minister's chair come the new year."

Yushchenko's move to dissolve the Rada and break the political deadlock thus can hardly be seen as a move to some new stability, but as exacerbating instability, just as the effects of the global financial crisis start to bite deeper into the Ukraine economy. "From the political view, the Rada's dissolution could be a logical attempt at resolving the deadlock that has paralyzed Ukraine's parliament. But from the economic point of view, amid the current account deficit concerns and exchange rate volatility, and particularly considering the population's staunch opposition to new elections, the call to dissolve parliament is a very risky move," says Concorde's Verbyany.

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