The Verkhovna Rada adjourned on July 16 without passing anti-crisis legislation needed for more international loans, but will likely resume in special session later this summer.
Parliament closed its doors for the summer on July 16 without voting on crucial legislation. The end of the session means that an extraordinary session will have to be called to pass amendments to laws on bank recapitalization. The banking measure is part of an anti-crisis package of legislation required to receive a desperately needed $3.3 billion loan tranche from the International Monetary Fund.
After the Party of Regions stubbornly blocked parliament again this week, demanding an increase in the minimum wage, tensions spilled over. Parliamentarians engaged in physical confrontations that have become hallmarks of how they operate.
Scuffles broke out between lawmakers in Prime Minister Yulia Tymoshenko’s bloc and Regions deputies, who even turned off the parliament’s electronic system. As jostling lawmakers swarmed around the rostrum, parliamentary speaker Volodymyr Lytvyn shouted: “Why do we fight so hard for the people, and then spit on them from the heights of the rostrum?”
After lawmakers failed to agree to vote, Lytvyn sent parliament into recess until Sept. 1, although an extraordinary session could be called as early as next week.
Parliament’s inactivity has prevented important legislation from being passed. The unfinished business includes bank recapitalization, the law on presidential elections and Euro 2012 preparations, as well as ratification of a loan from the European Bank of Reconstruction and Development for road reconstruction.
The IMF called for political consensus when tentatively agreeing to disburse the next $3.3 billion tranche of a $16.4 billion standby credit on July 10. Ukraine has received $7.3 billion from the IMF thus far. Many experts warn that the nation’s economy – already deep in recession and expected to shrink by 14 percent or more this year – would sink further without additional loans.
Ceyla Pazarbasioglu, chief of the IMF mission to Ukraine, said that the release of the funds depended on “the completion of prior actions,” namely amendment of banking legislation. The IMF also stressed the need for fiscal responsibility in the run up to the presidential elections.
This clearly didn’t register with the Party of Regions, the largest faction in the Verkhovna Rada with 173 seats. The party is led by Victor Yanukovych, who is expected to clash with Tymoshenko, President Victor Yushchenko and many other candidates for the presidency in the Jan. 17 election.
“The Party of Regions will defend people’s social protection,” read a banner hung in parliament earlier this week. They have blocked parliament since June 25, demanding that the minimum wage be raised. Earlier this month, Tymoshenko – in rejecting the minimum-wage hike as unaffordable – called the opposition’s actions “financial terrorism.” Her eponymous bloc controls 156 seats of the 450 seats.
“This is an absolutely cynical act,” agreed Oleksandr Paskhaver, president of the Center for Economic Development in Kyiv. “From the point of view of politicians, they see it as humanitarian. But any economist looks at it as populist and unjustified in the current conditions.”
Paskhaver said that such a move didn’t make economic sense given the crisis, and that different measures are needed to stimulate demand and get the economy moving. “If you just give money to citizens they will use it in various ways. Only a small part will go on buying goods and services,” he said.
The Region’s skewed economic agenda as well as their attempts to disrupt the work of the parliament and the government are seen as an attempt to capitalize on the crisis ahead of the Jan. 17 presidential election. “Blocking the work of the coalition will allow them to talk about its ineffectiveness,” said Serhiy Taran, director of the International Democracy Institute in Kyiv. “They are going to build their campaign by criticizing the government. They are not interested in resolving the crisis.”
But the stubborn focus on elections could seriously damage Ukraine’s economy and international reputation, particularly if the legislation required by the IMF isn’t passed.
Oleksandr Yefremov, deputy head of the Party of Regions’ parliamentary fraction, told reporters on July 16 that an extraordinary session could take place next week or in August. But Yefremov stressed his party’s continued commitment to getting an agreement on increasing social payments.
“They could pass bank legislation at an extraordinary meeting,” Taran said. “But the Party of Regions will want something in return that’s beneficial to them.”
