March 31, 2014
Ukraine is bankrupt. It has wavered on the cusp for some time. However, it is about to suffer the cruelest indignity: discovering that Western politicians who promised prosperity have been encouraging the IMF to deliver a leveraged poisoned chalice.
Maidan dreams are turning abruptly into a nightmare as coup gives way to penury. Siren voices from the West have lured the Ukrainian economic ship on to the rocks with the IMF about to launch a lifeboat – replete with economic subjugation as bondholders get paid and citizens suffer.
Western promises from the barricades of immediate milk and honey were always palpably false. Ukraine is on the cusp of economic trauma, forced to account for 20 years of negligent democracy and decades of Communist economic cancer, all in one short, sharp, shock…or what may prove an IMF-induced coma.
With Crimea returning to Russia’s secure embrace, the IMF has dusted off the package elected government first refused in 2010. One interesting point: if the IMF lends to Ukraine that affirms Crimea’s status: the IMF says it cannot lend money to a state illegally partitioned. The West has blinked on its ‘invasion’ rhetoric.
Unsurprisingly, the bailout fell primarily to the IMF as the EU, unable to support its failing currency zone, couldn’t afford a bailout. The EU remains an empire with multiple competing Presidential Emperors, but no clothes for any of them. Elsewhere, President Obama has become confused about Kosovo and offers token support. Therefore, Ukraine has been economically abandoned to IMF austerity before it even has a new president.
Kiev is poised to become the Athens of Central Europe – but not for architectural or cultural reasons. Ukraine’s governments lived in la-la land for years. Property laws are weak, stifling the ability to build businesses from the ground up. Then there’s the massive weight of bureaucracy (and let’s not forget corruption). Thus Ukraine has reverted to a quasi-medieval feudal economy where various oligarchical barons wield power while politicians divide the assets of the nation. Economic growth is an afterthought.