By Vivienne Walt
FORTUNE -- As Western officials try to salvage Ukraine's near-bankrupt economy they might want to visit the country's Ministry of Agrarian and Food Policy to take stock of how difficult their task might be.
Inside the Soviet-era building off Kiev's Independence Square on Wednesday night, the lobby was piled high with grimy mattresses, shoes, and clothes stuffed into garbage bags. They belong to protesters who have set up camp inside Kiev's government buildings for months, sheltering through a freezing winter of violent battle on the square. The uprising drove Ukraine's president Viktor Yanukovych into exile two weeks ago, and brought Russian tanks and troops rolling over the border into the Crimean peninsula, about 400 miles South of the capital, on the Black Sea.
Now, Kiev feels like a city in uneasy limbo. Like the agrarian-policy ministry, much of its government is barely functioning. For many of the city's 2.7 million residents, there is little evidence that their country could descend into catastrophic warfare at any moment. Hundreds of protesters still huddle through the night in tents erected months ago on the square, known as the Maidan in Ukraine. Barricades of tires, scrap wood, and metal still block the area, and thousands of bouquets of carnations and candles line the square, in commemoration of the dozens of protesters shot dead by government snipers, during Yanukovych's last-ditch attempt to crush the uprising last month.
But rather than panic about a Russian military invasion, for most people, the more urgent concern is how to make ends meet -- reflecting the perilous state of Ukraine's economy. "I'm a doctor, with a Ph.D. and an M.D., and I earn 1,500 hryvnia [about $150] a month," Lidiya Butskaya said on Wednesday night, sitting in a makeshift clinic inside the state-run radio and television building near Independence Square, which treats wounded and sick protesters; Butskaya's volunteer doctors have set up two surgical operating tables in an administrative office.
Like most doctors here, Butskaya juggles various jobs, boosting her income with hours at private facilities and classes for medical students. But she says one intense fear is that Ukrainians might be forced to pay more for their household gas, as part of the rescue packages their interim leaders are negotiating, with the U.S., EU, and the IMF.
For years, IMF officials have demanded from a succession of Ukrainian leaders that they cut the heavy subsidies on gas, which cost the government billions of dollars a year. The IMF froze two previous arrangements, in 2008 and 2010, after Ukraine refused to implement the deeply unpopular austerity measures. To Ukrainians, higher prices for utilities -- in a country with months of sub-zero temperatures -- seem unthinkable. "Of course we cannot afford it," Butskaya says.
On Thursday in Brussels, the EU is set to confirm a package of loans and grants to Ukraine, amounting to about 11 billion euros (about $15.1 billion) over the next few years, according to European Commission President Jose Manuel Barroso. That is in addition to $1 billion in loans from the U.S., announced on Tuesday. Most of the new EU money -- about 8 billion euros -- will be in the form of credit from financial institutions, however, further increasing Ukraine's debt.
Nonetheless, the EU package is far more than what Europe offered Ukraine last year as part of an "association agreement." Ukraine's ousted president refused to sign the deal, instead accepting a $15-billion aid package from Vladimir Putin -- the exact sum the EU is now offering. Yanukovych's decision to opt for Russian patronage rather than closer ties to Europe proved fatal for his rule, bringing hundreds of thousands of people pouring into Independence Square, and sending the president fleeing for his life.
With Ukraine now in a tug of war between the West and Russia, the billions in grants and loans are the surest way to win over Kiev. But that, say analysts, is a measure of how corrupt Ukrainian leaders have mismanaged the country for two decades. "The effectiveness of economic coercion is no credit to Russia's strength," wrote the International Institute of Strategic Studies' regional analyst Samuel Charap in a blog post this week. "Rather, it is a reflection of the utter failure of the Ukrainian elite to reform the country's economy."
Those old habits are not certain to end, despite closer Western economic ties. Elections are scheduled for May to choose Yanukovych's successor.
In the makeshift clinic near Kiev's Independence Square, the doctors say they have seen previous leaders since Ukraine won its independence from Russia in 1991, who have grown immensely wealthy in office, and are skeptical that the next lot will be drastically different. "All our previous government were useless," Butskaya says. Standing next to her, the center's management advisor Vsevolod Kashlyuk nods in agreement. "We have a joke in Ukraine," he says. "In order to make your second million, you have to steal your first one."
Another Icelandic meltdown may be coming. That would reignite investor fear, leading to yet another panic on the continent.
By Cyrus Sanati
FORTUNE -- The inevitable unmasking of Iceland's dubious economic recovery could have severe consequences for the rest of Europe. Since 2008, the small island nation has been able to avoid an all-out economic meltdown thanks largely to government-imposed capital controls that have kept its currency from imploding. At the MOREAug 12, 2013 7:05 AM ET
By saying it's officially OK to skirt debt ceilings, Europe is abandoning austerity and reigniting the risk of another sovereign debt crisis.
By Cyrus Sanati
FORTUNE -- Europe's largest economies shouldn't be able to skirt European Union debt ceilings rules just because it's "too hard" or "unpopular." To do so would not only be hypocritical, as they have insisted on crippling austerity measures in much smaller and more vulnerable EU member MOREJun 3, 2013 5:00 AM ET
European leaders have strong incentives to try and smooth over this 'crisis' by signaling that Cyprus is a unique and extreme case.
By Matthew Hedrick, Hedgeye
FORTUNE -- The market's reaction to Cyprus's bailout is overdone, and these 'crisis' conditions will be short-lived.
A quick update on the latest development is that parliament has delayed until Tuesday a scheduled vote on the proposed bailout, namely on the levying of a one-time tax MOREMar 18, 2013 1:43 PM ET
The EU has been acting like a dysfunctional family. Cultural unity could help solve the euro puzzle.
By Pankaj Ghemawat, contributor
FORTUNE -- EU policymakers recognize the importance of preserving a highly integrated European economy. They are, however, making the same mistake that led to the euro mess in the first place: pretending that Europe can be integrated through administrative measures alone. Remember that the euro was adopted despite worries that the MOREDec 7, 2011 5:00 AM ET
How lost was the past lost decade for the U.S. economy?
So lost that the United States, supposedly home of the globe's most innovative, flexible workplace, has created barely half as many jobs since 1999 as staid, hidebound Europe.
Jean-Claude Trichet, the president of the European Central Bank, notes the disparity in a speech Monday. Since the euro single currency was created a dozen years ago, Europe has created 14 million jobs MOREColin Barr - Jun 13, 2011 12:55 PM ET
In the latest example of a world gone mad, some strategists are now making the case that buying the dollar is a can't-miss bet.
It is time to buy the buck and sell the euro, its counterpart in the rich-world-ruination trade, says Janney Capital Markets analyst Guy LeBas. He cites the rising risk that Greece will blow up as policymakers wring their hands over how to prop up the debt-soaked state. MOREColin Barr - Jun 1, 2011 6:37 AM ET
Portugal is going down swinging.
After insisting for weeks that they wouldn't be forced into a bailout by an uppity bond market, Portuguese officials gave in to the inevitable Wednesday and said they would seek financial help from the European Union.
"The government decided today to ask the European Commission for financial help," prime minister Jose Socrates said in a nationally televised address.
But let no one say the Portuguese are going quietly. In throwing MOREColin Barr - Apr 6, 2011 4:04 PM ET
Troubled European governments are discovering that fasting is no cure for a giant debt hangover.
Just ask Ireland, which is on the verge of signing up for a big bailout from Europe – despite the fact that by belt-tightening standards Ireland has been one of Europe's rare success stories.
"Ireland has been doing 'all the right things' policy-wise," says Jan Randolph of IHS Global Insight.
The country has stopped spending beyond its means, MOREColin Barr - Nov 15, 2010 1:03 PM ET
The rest of Southern Europe has come down with a bad case of Greek disease. The euro fell to its lowest level against the dollar in a year Tuesday, and the price of insuring against the default on the sovereign debt of other troubled European debt issuers surged.
It now costs 189,000 euros to insure 10 million euros worth of Spanish five-year debt, according to CMA. That's up from 120,000 euros MOREColin Barr - May 4, 2010 10:52 AM ET
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