Vol. 79/No. 26 July 27, 2015
Ukraine is not a member of the European Union and has its own currency, the hryvnia. But the capitalists from wealthier nations continue to bleed poorer ones no matter what currency or trade bloc or common market they are in.
Unlike Greece, where European government institutions and the IMF bought up the debt in 2014, in Ukraine most of the debt is owed to private speculators. U.S.-based hedge fund Franklin Templeton Investments is the largest single holder of Ukraine’s sovereign debt, with some $8.9 billion of bonds, which it bought before pro-Moscow President Viktor Yanukovych was overthrown in February 2014. About $3 billion is owed to Moscow.
Franklin Templeton saw high interest rates and dollar signs in Ukraine’s turmoil. “We do look for situations that are out of favor,” bond buyer Michael Hasenstab said in a video the company released in April 2014.
Ukrainian President Petro Poroshenko has been aggressively carrying out IMF “free-market” measures that line the pockets of local and foreign capitalists. In addition to slashing pensions, he has raised taxes, laid off government workers and eliminated fuel subsidies, nearly tripling household gas prices and increasing electricity prices by 50 percent. The government plans to privatize government-owned businesses that employ 1.3 million people.
Real wages fell 24 percent over the last year and official unemployment is at 10 percent, the highest in 15 years. Under the impact of the worldwide capitalist economic crisis and the Moscow-backed war in eastern Ukraine, the gross domestic product is expected to shrink 9 percent this year.
In May former Treasury Secretary Lawrence Summers wrote that if U.S. hedge funds refuse to write down Kiev’s debt, there’s no chance that Moscow or Russian capitalists will either. “Why not set a precedent that if you lend money at a high spread to a country that is then invaded, you should not expect the world’s taxpayers to ensure that you are paid back in full,” Summers wrote.
A $120 million payment is due July 24. In June the parliament approved a law allowing the government to declare a moratorium on payments.
— SETH GALINSKY