More than 10,000 protesters gathered in Kiev to protest against measures being imposed on the Ukraine by the IMF. The police estimated the crowd at 8,000, but other estimates were as high as 20,000 and it is the second mass protest in as many weeks. The demonstrations came at the end of a tumultuous week. On Wednesday, an overwhelming majority in Ukraine’s Parliament voted to hold presidential elections on October 25. On Thursday, deputies from the pro-Russian Party of Regions swarmed the podium in the legislature, blocking the doors ahead of an important vote on measures demanded by the International Monetary Fund as a condition of further aid. In November, the IMF extended a $16.4 billion loan to the Ukraine. The IMF approved the loan package on November 6, 2008 but suspended the credit’s second tranche after disagreement over implementation of the programme over the size of the budget deficit. Ukraine has received the first $4.5 billion tranche but the IMF will not release any further funds until the Ukraine agrees to steep budget cuts that would affect.

Ukraine had boomed in recent years on the back of higher commodity prices and a liberalization of its property and financial sector as the country embraced neo-liberal free market reforms. Ukraine is among the countries hardest-hit in the global financial meltdown, which has depressed demand for the steel and chemicals that are crucial sources of its export income. Industrial output fell by nearly one-third in February, year-on-year, the national currency has shed nearly half its value against the U.S. dollar since September and the economy is expected to shrink by 6 percent this year. The IMF loan was suspended last month due to Prime Minister Tymoshenko’s reluctance to make the unpopular move of cutting social spending ahead of a presidential election expected late this year. The full story in the New York Times.

Hungary
The Hungarian government expressed fears its economy would shrink by 5-6 percent this year, nearly twice as much as earlier projections suggested. Hungarian Deputy Finance Minister Laszlo Keller said economic experts were certain the decline will be deeper than the government’s original prognosis of an annual drop of 3.5 percent in 2009, the Budapest Times online newspaper reported Friday.

The government of Prime Minister-nominee Gordon Bajnai, taking into consideration the new prognosis of up to 6 percent recession, should work out a new state budget for 2009, Keller said.

Bajnai already planned public spending cuts of up to $543 million in 2009 and any further decline in economy would produce a revenue loss of about $905 million and new spending cuts, Keller said.

Romania
In late March, the International Monetary Fund agreed to provide $27 billion in emergency loans to Romania to help it deal with the financial crisis. The loans include a two-year standby loan of 12.95 billion euros, $17.6 billion, from the monetary fund and 7 billion euros, $9.5 billion, from the European Union, the World Bank and the European Bank for Reconstruction and Development.

The Romanian economy has been weakened by a sharp decline in foreign investment, even as the government’s finances and the banking sector have been overwhelmed. The economy is expected to contract by as much as 4 percent in 2009, as domestic demand shrinks and exports slump.

Romania, with 22 million people, had a gross domestic product last year of about $214 billion, the monetary fund said. Its external debt at the end of January was 50.6 billion euros, the central bank said. Romania, one of Europe’s poorest countries, must reduce government spending as a condition of the emergency loans.

Serbia
The day after the Romanian loan was announced, the IMF reached a deal with Serbia to provide a 27-month, 3 billion euro loan to help the country address its vulnerability to the financial crisis.

The agreement for the loan of about $4 billion was announced at a news conference in Belgrade by Serbian government officials and Albert Jaeger, a fund representative. The deal, which still requires the approval of the monetary fund’s board in Washington, will force painful budget cuts on Serbia, the country’s finance minister, Diana Dragutinovic, told reporters.

The economy minister, Mladjan Dinkic, said on Wednesday in an interview with the daily Vecernje Novosti that the measures would fall mostly on the public sector, which employs 550,000 workers, versus 1.6 million in private sector. “We will reduce funds for cities and local administrations,” Mr. Dinkic told the newspaper.

The I.M.F. expects the Serbian economy to shrink by about 2 percent this year, Mr. Jaeger said, and to be stagnant next year. Many private sector economists expect the decline to be twice that size.

Estonia
According to a spring forecast from the Estonian Ministry of Finance, the economy in the smallest of the Baltic states will contract by 8.5 percent in 2009.

“Estonia is undoubtedly at a difficult time. At the same time this gives us a real opportunity to use the downturn to create a more efficient and more stable economy,” said Estonian Finance Minister Ivari Padar.

As a result, Estonia is asking for an adjustment of its budget deficit target to 7% of GDP from 5% of GDP as agreed earlier this year with the IMF when a $35 billion stand by credit agreement was reached.

IMF had noted in its initial recommendation that “ensuring balance between the expenditures and revenues of the budget and economic use of reserves should be the main duties of the government”. The IMF required Estonia to freeze salaries and to cut budgetary expenses in the public sector. Estonia has one of the largest public sectors in Europe.

Latvia
Of all the economies in Eastern Europe, Latvia is in the worst shape. In a somber report to Prime Minister Valdis Dombrovskis today from the Latvian Economics Ministry, the ministry noted that Latvian GDP would probably contract by more than the official 12 per cent forecast earlier this year. As a measure of how hard Latvia is falling, at the time of the IMF agreement last Fall, the contraction forecast was 3.5-3.9 percent for 2009.

“It is possible that, as a result of the global financial crisis, the decline in external demand will be much steeper than currently estimated … Further dramatic cuts in lending and public expenditure would result in a sharp decline in investment and private consumption,” the report said.

The new figures will add weight to Latvia’s current attempts to renegotiate the terms of a 10-billion-dollar economic assistance package brokered by the International Monetary Fund.

According to the current agreement, Latvia’s budget deficit must not exceed 5 per cent of GDP, but Prime Minister Dombrovskis is arguing that the worsening economic outlook makes such a target impossible and is asking for a 7 per cent cap instead. Unless the cap is renegotiated, Latvia will be forced to make deep cuts in pension support levels and undertake cuts in health and education programmes.

Just curious if you notice the pattern?

Below the fold, the IMF’s stabilization programmes since October 2008 through the end of March 2009. (more…)

Richard Haass, president of the Council on Foreign Relations, and Carla Robbins, deputy editorial page editor of The New York Times, join Martin Savidge to discuss the weeks top stories: The G-20 summit meeting, the meeting between President Obama and his Russian counterpart and whether Iran and the U.S. actually talked this week or not.

Return to Main

Najib Abdul Razak has been sworn in as the country’s sixth prime minister, after Abdullah Ahmad Badawi resigned to take responsibility for the ruling party’s worst election showing in four decades. But he faces a myriad of challenges, including an economy badly hit by the global downturn, racial divisions in the country and opposition allegations of corruption and links to a murder case.

Al Jazeera’s Tony Birtley reports from Kuala Lumpur. More from the Asia Sentinel:

Malaysia’s leading ethnic party names a scandal-ridden party hack as its head and the country’s leader. On Friday, Malaysia is scheduled to end months of waiting to announce its new prime minister, Najib Tun Razak, after the United Malays National Organisation, the country’s biggest ethnic party named him their leader during their annual convention.

Najib told the UMNO parley, held in Kuala Lumpur last week, that it is crucial that his party reform itself or it will lose its hold on the electorate. But Najib’s history, and that of the party itself, portends instead a return to the politics and practices that got the national ruling coalition into trouble in the first place, losing its historic two-thirds majority in the national parliament in national elections last year. Najib’s ascent to power more likely represents a clear preference by UMNO stalwarts to return to cronyism, money politics and corruption after an eight-year interregnum from the authoritarian reign of Prime Minister Mahathir Mohamad.

The new prime minister’s history may make it problematical whether the leaders of major countries are going to want to be seen with him. Concerns include hundreds of millions of dollars in questionable contracts steered to UMNO cronies and friends, not to mention continuing allegations of his involvement in the murder of the Mongolian translator Altantuya Shaariibuu following the controversial purchase of French submarines and, more recently, his role in sabotaging the opposition in the state of Perak and his shuttering newspapers and thwarting opposition candidates during his own party’s elections last week.

(more…)

Tomorrow marks the 60th anniversary of NATO — the North Atlantic Treaty Organization — was born with the signing of an agreement in Washington, D.C. As the war in Afghanistan intensifies, the leaders of NATO gathered today for an anniversary summit in Strasbourg, France, and across the border in the German town of Kehl.

Kimberly Marten, chair of the political science department at Barnard College, Columbia University, joins Martin Savidge to discuss NATOs 60th anniversary and the roles of American and other forces in the expanding war in Afghanistan.

Return to Main