When Arseny Yatsenyuk took the reins in Kiev after months of unrest toppled the pro-Russian government of Viktor Yanukovich, the former Minister of the Economy knew a politically costly overhaul of his country’s budget was needed to save the economy from imminent collapse and a projected ten percent contraction by year’s end.
“The treasury is empty. We will do everything not to default,” Yatsenyuk said. “I’m going to be the most unpopular prime minister in the history of my country … but it is the only solution.” A month later, Yatsenyuk agreed to an $18 billion loan from the International Monetary Fund that mandated far-reaching austerity measures he called “very unpopular, very complex, hard reforms.”
The austerity measures, which include an end to costly gas subsidies and a freeze on the minimum wage, have yet to be implemented. But many analysts predict the stark economic pragmatism of the new, pro-European leaders in Kiev and their Western backers in the IMF could further enflame Ukraine’s volatile political landscape, which has featured rising calls for separatism in the Russian-speaking east matched by a Kremlin push for the federalization of Ukraine.