Prague, July 15 (CTK) – The attention of European politicians and bankers has recently been focusing on Greece, while the economic situation of Ukraine that is facing state bankruptcy as well is not closely followed by most in the European Union, Vladimir Divis writes in daily Pravo yesterday.
Europe apparently is not really worried about the negative impact of the Ukrainian financial crisis on the euro zone, the EU or NATO, unlike in the case of Greece, Divis writes.
He says common sense would expect that the state bankruptcy of Ukraine, which has four times more inhabitants than Greece, would harm other countries more seriously.
But Ukrainian Finance Minister Natalie Jaresko claims that the state default expected to come on July 24 is only a technical default that would not even harm most people in Ukraine, Divis writes.
In spite of all its well-known problems, the Greek economy is far more modern and better functioning than the Ukrainian economy. The huge Greek debt of 343 billion euros represents “only” 177 percent of the Greek gross domestic product, while the much lower Ukrainian debt of under 100 billion US dollars (ca 90 billion euros) equals 95 percent of Ukraine’s GDP, Divis writes.
However, the key factor here is the attitude of the international creditors (IMF, ECB, World Bank etc) to Athens and Kiev, he says.
The international creditors keep trusting the Ukrainian government, are ready to lend further money to it and even help persuade private creditors to write-off part of the debt, while they increase their pressure on the Greek government to introduce drastic austerity measures related to taxes, pensions, employment and other economic spheres, Divis writes.
He says the West seems to believe that Ukraine rather than Greece will be able to pay a great part of its debt in the foreseeable future.
But is this belief reasonable? Divis writes.
Greece accumulated the enormous debt first of all due to its excessive state bureaucracy, relatively very high pensions, bad tax collection and corruption. These are very serious systemic errors, but a responsible and courageous government could remove them sooner than similar deeply-rooted problems in Ukraine, Divis writes.
Ukraine’s outdated and clumsy economy, demanding lots of energy and newly burdened by high defence spending, will need a few decades to be able to get on the same level with Europe, Divis says.
Greece can save a lot of money by lowering salaries, welfare benefits and other spending, but no similar reductions are possible in Ukraine. Greek civil servants, pensioners and higher classes have still much to give up, but in Ukraine money can be taken away only from oligarchs, Divis writes.
After Maidan, Ukraine vehemently tried to integrate into the EU and NATO as soon as possible, including the adoption of the euro. Fortunately, Ukraine will not be “threatened” with any such integration for a long time. Paradoxically, this is its great advantage over Greece, Divis writes.
Western politicians and economists are strongly worried about the possibility of Greece leaving the euro zone and maybe even the EU and NATO, but they seem only lightly concerned about the forthcoming collapse of the economic policy of the pro-Western government in Kiev, Divis says.