Billionaire George Soros continued to express his frustration on how Europe, debtors, and the US have treated Ukraine’s debt issue. In 2015, Ukrainian foreign debt stood at $19 Billion. Pressed against a hard breathing space and a sinking ship, Ukraine is seriously contemplating defaulting on its debt. The implications may be grievous. Bondholders are playing hardball in the negotiation and George Soros believes that they are partly to blame for the impasse.
The country is coming from a war against Russian-sponsored militants. Russia continues to meddle with the independence and the integrity of the Ukrainian government. Although the war has ceased, the Minsk II Agreement, the agreement to end ceasefire, is expensive and ambiguous to implement.
Ukraine is calling out for a sovereign debt restructuring. George Soros Ukraine believes that all parties should consider debt restructuring. He argues that all over the world, companies have the option to restructure debt. A company forced to pay all its debt at once is likely to go bankrupt, but if allowed to repay its debt systematically, it has a future.
However, Ukraine is not finding any joy in the negotiations. The Negotiations are painfully slow and disingenuous. Bondholders have taken the Greek stance. The risk of default is high and repercussions dire both in short and in the long run. The European Union is contemplating debt relief, but the process is not straightforward. Reference: http://www.nybooks.com/articles/2015/10/08/ukraine-europe-what-should-be-done/
George Soros had developed what he called a winning strategy for Ukraine debt relief. He argued that the only way to make good use of the optimism and solidarity of the new Ukraine is to ensure that the country gets enough funds to overcome severe budget shortfalls. He argued that, if the EU were to exercise its discretion and purpose to bail in Ukraine, it would be the start of a much effective way of dealing with the Russian aggression.
Ukraine is committed to meaningful reform notably rooting out corruption and judicial reforms. Regarding new credit, the new environment will be friendly to public service. George Soros’ further argued that unlike in the past when the oligarchs determined public policy, their role continues to diminish in the new dispensation. Although still worrying is the trend to use non-legal application of policies, but the upbeat population seems to support the progress.
Europe’s best interests lie in a safe and growing Ukraine. Another Greek tragedy in Ukraine is likely to have more than economic repercussions. Financial hardships would most certainly weigh in on the volatility in the country. A possibility of civil strife is imminent, and Europe could have to deal with 40 Million Ukrainian refugees.
If support for Ukraine comes at this hour of need, the country can transform its fortunes. Such support will set the country on a path of recovery. They will be capable of fulfilling their financial obligations to debtors. Unfortunately, as it stands, the IMF backed assistance program offers too little. Soros challenges the EU to do whatever it takes, including activating Macro-Financial Assistance mechanism (MFA), to help Ukraine.
Read the articles about George Soros and Ukraine on NY Books