Ukraine: on brink of civil war?

Newly elected Petro Poroshenko's first priority will be to end the fighting in eastern Ukraine.

Ukraine elected billionaire Petro Poroshenko as its new president last Sunday. He secured almost 60% of the vote.

An oligarch who made his fortune in chocolate, Poroshenko was a member of both the previous administration headed by pro-Russian Victor Yanukovych, and its pro-Western predecessor, led by Viktor Yushchenko.

Fighting in the Russian-speaking east of the country intensified this week after Kiev launched a military assault to recover an airport seized by pro-Russian separatists. The separatists prevented four million people, or 9% of the population, from voting.

What the commentators said

The threat of civil war is real, agreed The Wall Street Journal. Moscow has appeared to welcome Poroshenko's offer of talks, but President Vladimir Putin "continues to play the double game of publicly promising diplomacy while stirring up as much trouble as possible" inside Ukraine he wants another "authoritarian satrapy".Even without a "low-intensity war", the new president will have an economic crisis on his hands.

The economy has been in recession since 2012 and is set to shrink another 5% this year. In April, it would have gone bust, but for a $35bn bailout by the International Monetary Fund, the World Bank and the EU.

The price of support is an austerity programme, including higher gas prices gas subsidies have cost the government 7.5% of GDP each year and help explain why the budget deficit had blown out to an uncontrollable 12.5% of GDP, as Linda Yueh noted on BBC.co.uk.

To make matters worse, the slumping Ukrainian currency (the hryvnia) is stoking a rapid rise in import prices. Economic recovery in the near future looks out of the question, and social and economic hardship won't make avoiding civil war any easier.

The crisis in Ukraine, along with Western sanctions, has also sent Russia into recession. But there are still some bright spots in Eastern Europe.

Recommended

US inflation is rising – but it’s not enough to rattle markets yet
Inflation

US inflation is rising – but it’s not enough to rattle markets yet

The latest US inflation figures showed that consumer prices are rising more rapidly than expected. But markets shrugged. John Stepek asks why, and wha…
14 Apr 2021
What’s in Biden’s global corporation tax proposals?
Global Economy

What’s in Biden’s global corporation tax proposals?

US president Joe Biden’s administration recently proposed a universal model for taxing global companies. Saloni Sardana looks at what's involved.
13 Apr 2021
Why all eyes will be on US inflation data this week
Inflation

Why all eyes will be on US inflation data this week

As the world comes out of lockdown and demand for goods and services rises, attention will shift to inflation and what it means for interest rates. Th…
12 Apr 2021
What China’s new red dawn means for Hong Kong
Chinese economy

What China’s new red dawn means for Hong Kong

China has once again moved to tighten its control over the former British territory and global financial centre. What will remain of the old Hong Kong…
10 Apr 2021

Most Popular

The bitcoin bubble will burst: here’s how to play it
Bitcoin

The bitcoin bubble will burst: here’s how to play it

The cryptocurrency’s price has soared far beyond its fundamentals, says Matthew Partridge. Here, he looks at how to short bitcoin.
12 Apr 2021
Four investment trusts for income investors to buy now
Investment trusts

Four investment trusts for income investors to buy now

Some high-yielding listed lending funds have come through the crisis with flying colours. David Stevenson picks four of the best.
12 Apr 2021
Central banks are rushing to build digital currencies. What are they, and what do they mean for you?
Bitcoin

Central banks are rushing to build digital currencies. What are they, and what do they mean for you?

As bitcoin continues to soar in value, many of the world’s central banks are looking to emulate it by issuing their own digital currencies. But centra…
8 Apr 2021