Ukraine

A group of multilateral lenders on Friday unveiled a lending package of up to €24.5 billion ($31 billion) to help central and eastern Europe’s battered banking systems weather the financial crisis, the Financial Times reported. The World Bank, the European Bank for Reconstruction and Development and the European Investment Bank, which announced the package in London, hope the move will encourage the international banking groups that control most of the region’s banks to support their subsidiaries.

Bank analysts predict that Ukraine is heading for a historic default on its national debt, in a scenario that could complicate EU-Ukraine relations and have an impact on the recent Russia-Ukraine gas transit deal, BusinessWeek reported. "The market is pricing in a probability of sovereign default of almost 90 percent," Commerzbank analyst Ulrich Leuchtmann told EUobserver on Monday. "It could happen in the next couple of quarters." Ukrainian industrial production has plunged 26 percent compared to last year.

The International Monetary Fund is likely to suspend loan payments to Ukraine, a move that would further push the government toward Moscow for aid and exacerbate a feud between top leaders in Kiev, The Wall Street Journal reported. Ukraine is failing to meet the terms of its loan deal with the IMF, and likely won't get the next installment this month, according to a person close to talks between the fund and the government in Kiev. Ukraine Prime Minister Yulia Tymoshenko's government's 2009 budget is forecast to show a deficit of 3% of gross domestic product.

Ukraine's central bank has placed Bank Kiev, the country's 39th bank in terms of assets, into receivership, offering it protection from creditors, Reuters reported. "Bank Kiev has been placed in receivership, a moratorium (on withdrawals) has been introduced, as is the practice," a central bank official said on Monday. According to central bank data, Bank Kiev's assets stood at 4.9 billion hryvnias ($633 million) as of Jan. 1, its capital totalled 590 million. Individual deposits stood at 2.2 billion hryvnias and corporate deposits at 650 million.

Outbursts of civil unrest have occurred in recent weeks across the periphery of Europe, where the global financial crisis has buffeted smaller countries with fewer resources to defend their economies, The Washington Post reported. Especially in Eastern Europe, the turmoil reflects surging political discontent and threatens to topple shaky governments that have been the focus of popular resentment over corruption for years.

Russia's gas price dispute with Ukraine escalated Tuesday, disrupting deliveries to the European Union in the midst of a bitter cold spell, with a number of countries reporting that gas supplies had been suspended or reduced, and Germany predicting a possible shortage, the International Herald Tribune reported. Bulgaria, Romania, Croatia, Macedonia, Turkey, Greece, the Czech Republic and Austria reported that gas supplies had been suspended or reduced after Gazprom, the Russian gas monopoly, reduced gas shipments through Ukraine.

The quickening pace of Russia's rouble devaluation is piling pressure on the currencies of its neighbours and putting those without Moscow's sizeable reserves at risk of foreign debt default and further capital flight, Forbes reported. Investors are shying away from currencies such as Ukraine's hryvnia as the world economic slowdown crushes demand for its exports, global risk aversion shines a harsh light on Kiev's turbulent politics and Russia demonstrates its stranglehold on the country's energy supplies.

Ukrainian state energy company Naftogaz said on Tuesday it has published its 2007 audited accounts, allowing it to avoid technical default on a $500 million Eurobond, Reuters reported. Bondholders had agreed in November to extend the deadline for receiving the accounts--one of the conditions of the bond--until the end of this year after the financially ailing company missed a summer deadline.

The Financial Times reported that, as a symbol of the extraordinary boom of the past decade, the rise of the big emerging economies rivalled the soaring US housing market. China led the way, followed at a slower pace by the likes of India and Brazil. Though they tried to insulate themselves against the boom-bust cycle by building up foreign exchange reserves, no amount of inoculation could render them completely immune to the virulence of the financial contagion that swept the world in September and October.

Ukraine’s hryvnia pared a record two-day plunge after the central bank said a rate above 9 per dollar was “unacceptable,” Bloomberg reported. The currency fell 1.7 percent to 9.1000 per dollar by 6:28 p.m. in Kiev. It pared an earlier 18 percent two-day drop to a record 9.78 after the central bank sold reserves to support the currency. Petro Poroshenko, head of the central bank council, said at a press conference a weak hryvnia is a threat to the economy.