Deadbeat Ukraine

As we warned at the time, Ukraine took out hefty loans to keep itself afloat without any serious thought of how to pay them back. Misappropriation became a national sport among the political class. Now the West and international financial institutions are getting serious about being paid back. While we all have hopes in new Prime Minister Viktor Yushchenko’s serious desires for reform, nobody should take seriously the pie-in-the-sky budget approved by Verkhovna Rada. Everybody knows that the revenues it anticipates will not be obtained, and that means the expenditures appropriated will not be funded. After all, no state budget in the history of independent Ukraine has been fulfilled over 70%. This so-called balanced budget will probably not come close to even that figure. And all talk about new sources of revenue is just so much blather. The very existence of a shadow economy as a massive phenomenon (which everyone agrees Ukraine has) simply means that the agents of economic activity cannot tolerate the demands made upon them in taxes and regulations by the state and for that reason business flees the state into the so-called shadows. Under such circumstances, all talk about new revenue sources is illusory: more demands by the state on the economy will simply push the economy further into the shadows. Reform here means cutting expenditures to the point where the economy can operate in the light of day, which means that President Kuchma’s statement that everybody on the state payroll will be “taken care of” is so disturbing. If jobs for them can be found in the private sector, good and fine, if in the public sector, this is simply not reform.