Ukraine risks unrest as ills worsen

[Joanne98]

By Stefan Wagstyl and Roman Olearchyk, Financial Times, 2 Mar 2009

Olexander Pavlenko, a young computer programmer, is one of tens of thousands of Ukrainians who cannot get their money out of the bank.

He stood in line in Kiev at Nadra Bank and Ukrprombank, two big troubled banks, planning to withdraw more than $10,000 (€7,950, £7,125). But like many others, he was told the cash was not available.

"I stood in line a couple times with other bank clients who were protesting, crying and screaming. But the bank told me: 'Sorry, we simply don't have the money now and can't help you.'"

With about nine banks now under the central bank's special control, Ukrainians are increasingly worried. Even those with their money in apparently solid banks, including those controlled by west European banking groups, are concerned because the central bank has banned the early redemption of term deposits, the most popular form of saving in Ukraine.

Altogether, hryvnia bank deposits have dropped 20 per cent since September and those in foreign currency 10 per cent.

"This is very serious," said Olexander Suhonyako, president of the Association of Ukrainian Banks.

The growing discontent among bank clients is matched by other signs of public anger at the impact of the global crisis – and at the seeming inability of the country's divided leaders to respond effectively.

Recent weeks have seen protests by truck drivers complaining about taxes and the dramatic decline of the hryvnia, which has complicated the repayment of foreign currency vehicle loans.

Meanwhile, the owners of street kiosks in Kiev successfully demonstrated against the city's plans to take over their stalls.

But with demonstrations drawing only up to 5,000 people, the authorities are confident there is no serious threat to stability.

They say Ukraine is remarkably calm given the country's economic problems. Gross domestic product growth is forecast to contract 5-10 per cent in 2009, while unemployment is rising and non-payment of wages is becoming more common.

But with political leaders focused on the forthcoming presidential elections due before the end of the year, some observers fear that the protests will become bigger.

Oleksiy Haran, a political science professor at Kiev's Mohyla University, says:

"If worsens, if more banks run into trouble, and if more layoffs pile up, then I would expect large crowds to materialise. This will be dangerous for a country that is struggling already to deal with the economic crisis."

There seems to be no end to the disputes between Viktor Yushchenko, president, and Yulia Tymoshenko, his prime minister.

http://money.ninemsn.com.au/article.aspx?id=759389