Basis for compromise

On October 28, Ukraine’s President Viktor YUSHCHENKO made an unexpected sensational statement. He said that he would not veto the law on raising the subsistence level, wages and pensions, passed by the Verkhovna Rada on October 20. “Parliament has passed this law, and I agree with parliament,” the president said.

Meanwhile, since October 29 the law on social standards has been giving a sort of a double intrigue to the country. First, it is not clear whether this legal act will come into force. To do so, the law must be signed by the president. Even yesterday’s statement did not make things clear, because the president did not say whether he would sign the law as it is now. And he does not need to absolutely reject it. Taking into account the complicated economic and budgetary situation, he may adjust the standards a bit.

Vira Ulianchenko, head of the Presidential Secretariat, threw light on the sufferings experienced by the president concerning this matter in a TV program. “This law and the expenditures it entails for the country are being studied now. The president is working on this law,” she said.

Whereas trade unions mostly support the new social standards, the most businesses are against them. Members of certain associations and entrepreneur unions are asking the Ukrainian president to veto the law, saying that in this way he will rescue the country from unemployment. “It is reasonable to raise social standards only when the country’s economic situation improves,” Tetiana Zatserkovna, head of the Council of Entrepreneurs and Employers, said to a press conference in Kyiv on October 27.

However, Ulianchenko did her best to prevent her position from looking one-sided. She underlined that the president also has questions concerning the promises the prime minister gave in early 2009 about maintaining social standards, whereas the wages are, in fact, dropping. “So, we are taking away people’s money, and we have to respond to this question, too.”

The current president, who is now also one of the candidates for the forthcoming presidential elections, must have made up his mind on this law considering the fact that “people” by far outnumber entrepreneurs. Nonetheless, there is still a lack of clarity regarding his decision.

In making this decision he may have been influenced by the second part of the confrontation I am describing, which means that implementation of this debatable law may become an insurmountable barrier for the receipt of the fourth tranche from the IMF. Without it, the country may face a budget collapse. The IMF seems to be ready to ignore the rest of conditions, but it firmly insists on vetoing the social standards law.

In her interview, Ulianchenko closely linked these two parts. “The tranche is a serious problem. Signing a document on the next tranche, they should understand which IMF conditions have been fulfilled by the government and which have not. The state is undertaking serious commitments and is taking out huge loans. We may spend this money on food, use it for the populist promises of the elections campaign, or we can reform the economy,” the head of the Presidential Secretariat said as if giving Prime Minister Yulia Tymoshenko, who is demanding the president’s veto, to understand that the parliamentary-governmental coalition has been instrumental in the problematic standards: the draft law was submitted by Oleh Zarubinsky, a member of the Lytvyn bloc, which is part of the coalition, and his faction voted in favor this law.

So, the International Monetary Fund also takes part in this confrontation. Its representative in Ukraine, Max Alier, has met with the leadership of Ukrainian trade unions on October 27. The IMF press service reports that Alier explained to the trade functionaries that protection of the purchasing power of wages and pensions is the key element of the Fund’s program and underlined that a considerable part of the IMF resources given to Ukraine goes to the state budget to secure timely payment of pensions and wages. He also noted that according to the program, the payments will rise with the increase in the rate of inflation rate (expected to reach 10 percent). However, if these payments outpace inflation, this will become an unbearable burden for Ukraine’s state budget, he said.

The statement made by the Party of Regions says that this is what the situation is: “Precisely this kind of growth rates is stipulated by the law on social standards, passed by the Verkhovna Rada of Ukraine, which Tymoshenko called ‘a nuclear bomb’ and the IMF is demanding to be vetoed.” “It seems that the IMF gentlemen have become completely confused and embarrassed,” the PR members concluded.

I will dare to offer a different conclusion. It appears that the IMF has marked the basis for a compromise that every party can agree to without damaging either their reputation or the economy.