Union threat to disrupt Ukraine-IMF deal

08/10/2010 | Simon Pirani

Ukraine’s largest trade union is urging that a public sector pay freeze and energy price rises for households – all key conditions of the IMF’s lending programme – be scrapped

Trade unions outside the IMF office in Kiev

Ukraine’s largest trade union federation is urging that a public sector pay freeze, energy price rises for households and an increase in the retirement age for women – all key conditions of the IMF’s lending programme – be scrapped.

Vasyl Khara, general secretary of the Trade Union Federation of Ukraine, said the demand to ditch the measures was put to the IMF and government in tripartite talks last month in Kiev.

Khara said he had put the unions’ demands in writing to the Fund, and is awaiting a response. There was no comment from the IMF.

If union demands are not heeded, “we will picket the IMF. We will tell the Ukrainian people that they have come here with evil intent,” Khara told Emerging Markets.

Khara, a parliamentary deputy for the ruling Party of Regions, led by president Viktor Yanukovich, has been criticised by other party members for his anti-IMF stance.

The public split shows how sensitive the party is to popular hostility to the austerity measures linked to the Fund’s $15 billion programme for Ukraine, approved in July, which followed and partly refinanced a $10.5 billion programme approved in October 2008.

“People have an extrem- ely negative view of the IMF”, Khara said. “The financial crisis struck a colossal blow to employment and living standards. One third of the industrial capacity has stood down or been closed. Now people are being asked to make more sacrifices.”

Analysts doubt that the IMF will soften its stance on austerity measures, but say that the Party of Regions’s resolve could be weakened.

Olga Pogarska, chief economist at the Sigma Bleyzer investment group in Kiev, said: “The market responded well to Ukrainian debt issuance in part because the government has demonstrated willingness to cooperate with the IMF. This cooperation will be essential for continued refinancing.

“The main thing that could affect the outlook is poor implementation of the measures, related, for example, to the local elections at the end of October.”

Critics of the fund programme fear that it could tip Ukraine back into recession. Mark Weisbrot, co-director of the Centre for Economic and Policy Research, said: “The last thing the Ukrainian economy needs is a fiscal tightening on this scale. This could be a big negative shock.”

Popular opposition to austerity packages is a wild card in countries across Europe with IMF loan programmes.

Latvia’s Unity alliance, led by conservative prime minister Valdis Dombrovskis, won a general election decisively at the weekend, taking 63 of 100 parliamentary seats in a result seen as an endorsement of austerity policies.

Public opposition to austerity measures may not unfold in eastern Europe as rapidly as in western Europe, Weisbrot pointed out.

“The eastern European countries have taken a beating, but civil society is weaker there than in the west”, he said. “In Spain, Portugal and elsewhere in western Europe governments have to reckon with a high level of opposition from civil society and the unions.”

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