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Archive for May, 2009
Friday, May 29th, 2009
As if the process were not confusing, time consuming and expensive enough…the Ukrainian Government just keeps piling it on. New work rules for non-Ukrainians have been published, but they do not alleviate or mitigate the need to obtain other documents or permission to work in Ukraine.
Stay tuned…
Ukraine toughens rules for employment for non-citizens
Pursuant to Ukrainian law, a Ukraine-based company may employ non-citizens only after obtaining a work permit (with some exceptions), Moldova.org reported, referring to Ukraine Legal Alert. On April 8, 2009 the Ukrainian government adopted a new procedure for obtaining work permits for non-citizens, replacing the procedure originally adopted in 1999. The new procedure is effective May 15, 2009.
The new procedure does not change the process for obtaining work permits in principle, but makes it more complicated, more expensive and less predictable. In particular:
The new procedure increases the number of documents to be filed with the Centers of Employment of the Ministry of Labor of Ukraine. In addition to the documents filed pursuant to the old procedure, a company must now also submit:
(a) two color photos of the potential employee;
(b) a certificate from the Center of Employment confirming that a company is not in debt to the Compulsory State Social Unemployment Insurance Fund;
(c) if the potential employee resides within Ukraine, a certificate of conviction (or absence thereof) issued by the Ministry of Internal Affairs of Ukraine;
(d) if the potential employee resides outside Ukraine, a certificate confirming that the potential employee is not serving a sentence or is not under
criminal investigation, issued by authorized bodies of the country of origin or residence; and
(e) copies of all pages of the potential employee`s passport with identification data.
The new procedure changes the terms of work permits issued for specific categories of employees, for example, secondees or intra-corporate transferees. Under the old procedure, a work permit was granted for the term of hire, but pursuant to the new procedure work permits are obtained for a term up to three years, with term extensions of two years.
The new procedure increases the application fee 15 fold, from US$21 to US$300.
The revised procedure introduces new grounds for the Centers of Employment to refuse issuance and extension of a work permit: (a) the potential employee is serving a sentence or is under criminal investigation; (b) an employer failed to timely file the documents for extension of a work permit; and (c) state or regional labor markets changed making it unnecessary to use non-Ukraine workers.
The new procedure provides that if a non-citizen works for a company on terms other than described in a work permit, that permit must be cancelled.
If a work permit is cancelled or the non-citizen has not started work without a legitimate reason, the non-citizen may be deported from Ukraine. The company that invited the non-citizen to work must reimburse the state for the expenses of the deportation.
Work permits issued according to the old procedure remain valid until the expiration of their terms.
Moldova.org
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Monday, May 25th, 2009
This poll indicates that Ukrainians have accepted the current condition and are dealing with it. Ukrainians got hit very hard by the global economic downturn and are still feeling the effects.
As this article indicates, the poverty rate is quite high here, and the crisis pushed many more into poverty. Ukraine-like many other other former Soviet states-had started to develop a middle class before the crisis, along with some of the values and aspirations associated with it. As in the developed world, the number of people in the middle class has also decreased. However, the impact in countries like Ukraine is more profound.
The political situation is the real key to moving Ukraine forward. Presently, it is stalemated and that is often the real reason behind the pessimism expressed by many Ukrainians.
Ukrainians Do Not Pay Attention To Crisis Any More-Poll
Ukrainians do not pay attention to the crisis any more. These are the results of a poll carried out by Gorshenin Institute during May 14-18 of the current year.
According to the information of the institute, the poll was carried out within a regular stage of Pulse of Crisis all-Ukrainian research.
In particular, some 84.3% of those polled said they suffered from the financial-economic crisis. However, the level of anxiety of Ukrainians due to the crisis has not grown. To the contrary, compared with the results of a poll carried out in October of 2008, the population got calmer. In October of 2008, only some 0.8% of respondents said that the economic situation in the country improved, compared to some 10.7% in May of 2009. The number of those who believe that the situation in the country is stable has also increased (some 9.1% in October of 2008 compared to some 22.4% in May of 2009). The number of respondents who believe that the economic situation worsened has reduced from some 87.1% in October of 2008 to some 63.1% in May of 2008.
According to the results of the poll, some 70% of the Ukrainian population live in poverty, some 24.8% have enough means of subsistence, but cannot afford valuables, and some 2.6% said they do not have any financial difficulties.
The poll was carried out by Gorshenin Institute during May 14-18, 2009 in all the regional centers of Ukraine, Kyiv, and Sevastopol. On the whole, 1000 respondents aged over 18 years old were polled. The error margin does not exceed 3.2%.
(from www.unian.net)
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Friday, May 22nd, 2009
Retirement no joy for most because of paltry pensions
Yuliya Popova, Kyiv Post Staff Writer
An average monthlypension of $100 might be enough tosurvive on, but certainly not enough to live well on.
Unlike their peers in most European countries, Ukrainian pensioners are too poor to enjoy retirement.
The MacDonalds of Scotland and the Zhornyaks of Ukraine are two retired couples. Both sets are highly educated, hard-working and looking forward to summer. But they lead vastly different lifestyles because of the retirement benefits each country offers.
While the MacDonalds hope for sunny weather so they can make a trip abroad and attend jazz festivals, the Zhornyaks want enough rain to produce a big harvest on their land plot. They will need the food to survive the winter.
Retirement is one of the many huge divides still separating richer Western nations from poorer Ukraine.
It’s not that Ukraine doesn’t spend a large share of its national wealth on pensioners, though. To the contrary, the nation spends a greater share of its gross domestic product than most nations. The problem is that the money just doesn’t amount to much. Moreover, a steady demographic decline is creating an even more onerous burden on working taxpayers just to maintain the tattered social safety net that exists.
The consequence is that retirement, considered part of a person’s “golden years” in more affluent nations, is a hardship for many of Ukraine’s 14 million pensioners, almost a third of the nation’s population. With average monthly pensions of roughly $100, they can afford only basic food and medicine.
“Before retirement, we lived like humans. We were able to afford summer holidays and pretty much anything we wanted,” said Nadia Zhornyak, 63, who worked as an engineer in central Ukraine’s Cherkasy. “But now we are beggars relying on potatoes and cabbage from the dacha.”
The MacDonalds, by contrast, relish retirement.
“My pension, combined with that of my wife’s, is adequate for our needs and is sufficient to allow some foreign travel. But we have to be careful how we spend it,” said James MacDonald, 73, who taught geology. The family’s income – combining various pensions and investments – is “more like 70 percent of my final wages,” MacDonald said.
In Ukraine, the Zhornyaks rely primarily on a state pension because they have little in the way of private savings or investments. They have enough to pay for one week of food and the monthly bills for their subsidized electricity, water, gas and heating.
But even these paltry sums may be endangered. The recession is biting hard at Ukraine’s economy and, in turn, budget and pension fund receipts. President Victor Yushchenko sounded the alarm bells in April, warning of a potential Hr 10 billion deficit in the Ukraine’s annual Hr 164 billion pension fund. In an attempt to keep citizens calm, Labor Minister Ludmyla Denysova insisted that there’s enough money to pay everyone in full and on time.
But independent experts side with the president’s bleaker assessment. Ludmyla Kotusenko, of the Case Ukraine Center of Socio-Economic Research, projected an Hr 8 billion “hole” in the pension fund this year.
The Zhornyaks get their monthly $200 on time for now. But as employment and wages are cut across Ukraine, and with as much as half of the economy off the legal radar, economists say the pension system is in deep trouble. The demographic trends – a shrinking and aging population – exacerbate the financial situation. “Each worker has to support one pensioner,” Kotusenko said. “And with the growing number of elderly, it will get worse.”
The result, as the International Monetary Fund has pointed out, is that benefits will most likely have to be cut or revenues increased, or a combination of both.
Pension fund expenditures will this year increase from 15 to 16.5 percent of GDP, among highest in the world, according to Ceyla Pazarbasioglu, the head of the IMF mission in Ukraine. But revenues add up to only 11 percent of GDP, leaving a deficit that is covered by the state’s general fund revenues, Pazarbasioglu noted.
“In this context, the IMF recommended measures to avoid a further deterioration of the finances of the pension fund,” she said. Pazarbasioglu said that, over the past three years, the average pension has increased by 140 percent, more than the rate of inflation.
“Pensions were growing faster than average salaries and the economy, which led to a huge deficit during the crisis,” said portfolio manager Alexander Tulko from Troika Dialog Ukraine.
Operating on the pay-as-you-go principle, employers contribute 33 percent of the total wage pool to the pension fund. The remainder comes directly from the state and compulsory 2 percent contributions from individual salaries. “However, this is a road to nowhere, because this money is used to finance only existing pensioners, and you don’t know what your situation will be like in 20-25 years from now,” Tulko said.
Besides having economies flusher than Ukraine’s, many European countries also give people a greater range of private investment options with their mandatory deductions. Many private companies in these nations also offer private pensions to their workers.
The financial turmoil, however, has drastically cut investment returns on private funds. The MacDonalds said that many retirees in Scotland “are faced with a much less comfortable existence in retirement than they had anticipated – no new car, fewer or no foreign holidays, difficulty in finding buyers for their large houses if they want to move to smaller ones, etc.”
But private, company-sponsored pension funds and individual private investment portofolios are rarities in Ukraine.
Improvements in Ukraine’s state pension system – either from the point of view of beneficiaries or the state – are not expected anytime soon because of politics. Ukraine’s next presidential election is likely in January.
Analysts at the International Center for Policy Studies explain that the state can’t afford to let people divert some of their state-fund contributions to private investments – not if government wants to keep pensioners such as the Zhornyaks from slipping more deeply into poverty. “Obviously, no one will dare institute [the reform] in 2009 or even in 2010, while attempts to introduce it later will stumble on worsening demographic trends,” analysts said in their pension system overview in December.
The IMF and World Bank have suggested that Ukraine might want to increase its retirement age. Ukrainian women currently are pension-eligible at 55 and men at 60, while most Europeans leave work at 60 and 65, respectively.
Tymoshenko dismissed the change out of hand, noting Ukrainians’ shorter life expectancies. According to the World Health Organization, Ukrainian men can expect to live to 61 years and women to 74.
Some demographers disagree. “It’s a common delusion,” said health expert Olena Paliy of the Kyiv-based Institute of Demography, who favors raising the retirement age as part of the solution. “Life expectancy at birth is sensitive to the rate of deaths in the early years of life. Those who reached 60 are expected to live another 14 years.”
Meanwhile, in Scotland, the MacDonalds write books, play in a jazz band and plan their next foreign trip while the Zhornyaks of Ukraine will be getting their hands dirty growing their own food – putting their faith in the land, rather than the state.
(from the Kyiv Post)
Tags: Alexander Tulko, Anton Olff, Case Ukraine Center of Socio-Economic Research, Center for Policy Studies, Ceyla Pazarbasioglu, demographic trends, employment, Europe, food and medicine, inflation, International Monetary Fund, Kyiv Post, life expectancy, Ludmyla Kotusenko, MBS. Ltd. Yuliya Popova, pay-as-you-go, pensions, President Victor Yuschenko, private pensions, recession, retirement, social safety net, subsidized electricity, Troika Dialog Ukraine, ukraine, wages, World Bank, World Health Organization, Yuliya Tymoshenko
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Thursday, May 21st, 2009
Went for my run today along beautiful Primorskiy Bulvar here in Odessa. As I crossed the pedestrian bridge I noticed workers cutting and removing all the “love locks” that are attached to the iron bars of the bridge. The attachment of metal locks-some modern, some antique- are an informal tradition for couples who often scroll their names and dates of weddings and/or anniversaries on the locks.
This is one of the most beautiful and romantic areas in the historical center of the city. Nearby, are the famous Potemkin Steps.
While the workers removed the locks so they can give the bridge a fresh coat of badly needed paint, it would be a shame if the locks are discarded. That appears to be the case. One can only hope that couples return to the bridge, renew their vows, and replace the locks.
    
Tags: Anton Olff, bridge, locks, MBS Ltd., Odessa, painting, Potemkin Steps, Primorskiy Bulvar, renovation, romantic
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Thursday, May 21st, 2009
OK, we are being provocative here! Russia is not exactly “buying” Ukraine like the American purchase of Alaska from Imperial Russia in the 19th century (or what the Chinese may try with Siberia in the future). The Russian Government is considering a loan, essentially bailing out Ukraine. Simply, the IMF bailout package is insufficient to keep the Ukrainian economy intact. As with Iceland, Russia is the lender of last resort.
For the Russian government, this is an opportunity to reassert itself in a positive way, into a region it considers it’s “manifest destiny” to control. Indeed, the geopolitical chess players in the Russian government would not loan Ukraine this sum of money without some very big strings attached. At the very least, Russia’s loan-and we believe it will happen given the financial state of Ukraine-will give Russia a great deal more influence that it currently has, and could provide the leverage the Kremlin needs to keep Ukraine oriented towards Moscow and away from the EU, the USA and NATO.
Russia says “NO” and then maybe to Ukraine’s $5 billion loan request
Russia has decided not to lend Ukraine $5 billion, Deputy Finance Minister Dmitry Pankin told Reuters in an interview on Wednesday. But in an unexplained sign of mixed messages being sent by Moscow, Pankin told Russia’s Interfax news agency the very same day that a decision had not yet been made. He said the issue is still being “reviewed.”
Ukraine asked for the funds in February to help its economy withstand the economic downturn and help pay for Russian gas.
“They proposed to borrow and the decision to offer such a loan was not made … We analysed the situation and we said no,” Pankin told Reuters speaking in English.
But hours later, Russia’s Interfax agency quoted Pankin saying: “Ukraine turned to us in February 2009 asking for a loan. The issue is being reviewed. At the current moment, the loan has not been issued.”
“Discussions on joint actions between the finance ministries of Russia and Ukraine are continuing,” Pankin told Interfax.
Battered by recession, Ukraine is desperate for cash to fill a budget shortfall and help pay for vast amounts of natural gas supplies which are traditionally pumped into underground storage in summer periods, and used to fill peak demand in winter periods.
But the prospects of a loan from Russia, and possible tough strings attached, is a touchy subject in Ukraine.
Prime Minister Yulia Tymoshenko has worked hard to harmonise relations with Russia, which went sour after a pro-western leadership was propelled to power in Ukraine by the Orange Revolution of 2004. Tymoshenko has been seen cozying up to Vladimir Putin, Russia’s prime minister, in an effort to establish pragmatic relations and possibly to winover support for her presidential bid.
Improving relations with Russia and reviving Ukraine’s recession hit economy are seen as major challenges Tymoshenko faces ahead of a presidential contest in which she will challenge Kyiv’s outgoing leader and other candidates.
Swept to power by the pro-Western “Orange Revolution” mass protests, Ukrainian President Viktor Yushchenko has strained ties with Russia which fiercely opposes his goal of Ukraine joining the NATO military alliance. Europe, which depends on Russia for a quarter of its gas, is closely watching turbulent relations between Moscow and Kyiv for signs of any future threat to European energy security.
Ukraine received a second IMF loan tranche worth $2.625 billion last week, part of a $16.4 billion loan programme. It had been held up for three months in a dispute over budget policies.
Pankin also told Reuters that Russia had not made a decision about whether to loan money to Iceland, which asked for funds last autumn.
“About Iceland we didn’t take any decision up to now. There are some questions about Iceland’s financial situation … And the second part of the story is that when we started our discussion then it was a different financial situation for us, we expected that our problems would not be so serious,” he said.
“The question for us is are we ready to invest our National Wealth Fund in a not very liquid instrument … I cannot say it is off the table but (it is) still under analysis.”
Iceland’s economy nearly collapsed last year under the weight of billions of dollars of foreign debts, racked up by its now bankrupt banks, forcing it to take a $10 billion IMF-led rescue package.
Separately, Russia announced on Wednesday it had granted a $500 million loan to Armenia.
(from the Kyiv Post)
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Tuesday, May 19th, 2009
The article below from www.ukrainianjournal.com highlights the bad news from this nation’s industrial sector during the first quarter of this year. It will be quite a while before exports pick up due to both domestic factors, as well as external demand.
The good news regarding the banking sector, is that the central government of Ukraine has lifted the moratorium on bank withdrawals that was in effect since October 2008. Some cynics might suggest that this is to allow oligarchs to “cash out” of their positions, which may well be true. However it will have the more positive effect of restorating some confidence in the banking system as a whole. This could lead to increased deposits in Ukraine’s banks and go a long way towards normalizing the economy.
Ukraine industrial output down 32% in Q1
Journal Staff Report
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KIEV, May 18 - Ukraine’s industrial output plummeted by 32% on the year in the first quarter, while its trade deficit narrowed significantly, reflecting the impact of the global financial crisis on the country.
The industrial output decline is largely due to a sharp plunge in global demand for steel, Ukraine’s major exports commodity, as construction activity around the globe has slowed down.
Meanwhile, rapid depreciation of the hryvnia against the U.S. dollar over the past six months has cut Ukraine’s imports even more dramatically, helping to narrow foreign trade deficit.
Ukraine reported foreign trade deficit at $419.7 million in the first quarter, compared with $3.7 billion in the same period a year ago, according to the State Statistics Committee.
Ukraine’s overall exports fell 36.6% on the year to $10.41 billion in January through March, while overall imports had dropped 46.4% on the year to $10.83 billion, according to the committee.
Exports of goods and commodities dropped 39.6% on the year, reflecting weak demand for commodity worldwide, to $8.34 billion, while imports declined 48.1% on the year to $9.78 billion, the committee reported.
Ukraine has been reducing imports of natural gas dramatically this year as some of the main consumers – steelmakers – had stayed idle due to weak demand for steel.
Meanwhile, the exports of service dropped 20.3% on the year to $2.07 billion in January through March, and the imports of services declined 22.9% on the year to $1.05 billion, the committee reported.
Ukraine’s, main exports of services, such as shipment of Russian natural gas and oil to markets in the European Union, fell following a three-week shutdown in gas supplies between Russia and the EU in January.
Ukraine has been hit by the crisis harder than most countries because of the country’s heavy reliance on exports, prompting the International Monetary Fund to approve a $16.4 billion rescue package in November 2008.
Ukraine already received two installments worth $7.3 billion within the loan package and may get another $3 billion after June 15 if the government keeps budget deficit in check and successfully restructures the banking sector. |
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Monday, May 18th, 2009
With summer fast approaching, the locals here know what to expect: the Ukrainian currency-the hryvnia-will be pushed higher. The hryvnia is almost always “adjusted” around holidays to levels often disconnected to the real value on the market. The approval of the second tranche of the IMF loan may give the Central Bank of Ukraine more leverage to push exchange rates down even further than what was previously expected, at least temporarily.
For years, the hryvnia was fixed at a level of around 5 per $1USD. When the financial crisis hit last year…and it hit Ukraine harder than many other emerging market economies in Eastern Europe, the hryvnia lost nearly 100% as it declined to almost 10 to $1USD.
Even as the Ukrainian economy continues to shrink, the Ukrainian government is doing their utmost to push the currency back down. Current levels are around 7.4 to $1USD, but many expect the hryvnia to be at the 5 to $1USD level as in past years. We think this is a fantasy!!
Despite the IMF loan, the Ukrainian Government still has a shortfall of at least $5billion USD. Moreover, Ukraine is still locked in political limbo with needed reforms delayed by the lack of resolution in Kyiv regarding the general direction of the country.
Any strengthening of the hryvnia will be used by those with means to liquidate their portfolios in exchange for hard currencies. This will put additional pressure on the economy. When the summer season is over, Ukraine will face a very cold autumn and a harsh winter as the reality of unresolved problems becomes apparent.
Stelmakh does not rule out abrupt strengthening of Ukraine’s hryvnia
Central bank of Ukraine chairman Volodymyr Stelmakh does not rule out an abrupt strengthening of Ukraine’s hryvnia.
According to an UNIAN correspondent, he said this in an interview to journalists in Switzerland.
V.Stelmakh pointed out that the International Monetary Fund has disbursed Ukraine the second tranche of the stand-by loan ($2.8 billion), out of which $1.5 billion were transferred to the state budget for financing foreign debts.
“If the government enters the [currency] market, without any doubt, there will be a tendency towards hryvnia’s strengthening, and if the government enters carelessly, a stress strengthening of hryvnia may take place”, the central bank head noted.
According to him, presently it is necessary to coordinate the work with government to avoid any stress jumps of the hryvnia’s exchange rate.
On the whole, V.Stelmakh noted, a tendency towards strengthening the hryvnia has outlined at the currency market.
(from www.unian.net)
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Thursday, May 14th, 2009
With a global crash in real estate caused primarily by low interest rates, overbuilding and greed, the aftermath has not been pretty. This is particularly true for those projects that were not completed before the market correction.
As this article in the Kyiv Post states, there are thousands of incomplete structures, empty apartment buildings and offices throughout Ukraine. Moreover, there is a vast inventory of unsold properties at a time when Ukrainians are short of cash. This is a great opportunity for investors to cherry pick the best as sellers are in the most negotiable state…to say the least.
Slow-Moving Cranes
Yuliya Popova, Kyiv Post Staff Writer
The global economic crisis stalled completion of hundreds of apartment complexes throughout the nation. Billions of hryvnia in investment or loans are needed.
Just like in the children’s novel Wizard of Oz, Ukraine’s housing market got swept up in a tornado and tossed into a no man’s land.
The crisis stalled 5,000 real estate projects across the country, leaving hollowed out shells of buildings where finished offices and apartments are supposed to be standing. There is little hope that many of them will be completed anytime soon.
Expensive loans and a sharp drop in the value of the hryvnia currency ended five years of dramatic growth for the property sector in Ukraine. Prices in Kyiv once equaled those of Rome and Paris, but the market is quickly stripping away such pretentions.
Tens of thousands of families who put their real savings into these virtual homes are now forced to squat with their relatives until the market gets off the ground and puts cranes back to work.
The difference between this spring and last spring can be qualified in one word: radical.
NAI Pickard, a real estate consulting firm in Kyiv, said developers with half-finished projects are desperately seeking investment capital to finish construction and pay off bank loans. “A 50 percent-plus share in a project can now be bought for half its price a year ago,” the firm said in its spring overview.
One of the largest building companies in Kyiv, KyivMiskBud holding, recorded a 30 percent drop in construction output and demand since last autumn. “We used to sell 10-15 flats daily on average. Now it’s down to 5-8,” said Zoya Fedorchuk, the company’s spokeswoman. The company keeps laying bricks only on projects close to completion, while freezing work on new sites.
Among other struggling developers, XXI Century brought all of its projects, including hotels and shopping centers, to a standstill. The company was building four of them, while another 39 were drafted and at various stages of approval and preparation.
Prime Minister Yulia Tymoshenko said earlier in the year that the central bank had enough reserves to give the industry a lift. In February, the government approved details of credits for residential properties that are at least 70 percent complete.
The Ministry of Regional Development and Construction calculated that some 500 residential complexes fit the description, needing Hr 7.5 billion to complete. Half of them are in Kyiv and its oblast.
The program requires the central bank to buy bonds from the state mortgage fund. Money received will be lent to credible developers and banks, as well as private buyers on favorable terms.
However, cash injections have yet to be seen. “This program is purely of a psychological character,” said Oleksandr Rubanov, head of the non-profit union of real estate specialists. “It’s another bubble to calm down the public for awhile.”
And that may be why KyivMiskBud refuses to believe it.
They have seven apartment houses in the capital in the final stages of construction. When viewing these properties in April, President Victor Yushchenko said it was a national priority to complete them. He approved the injection of the first $125 million in early April from the stabilization fund. But good luck in finding where the money is being spent.
Fedorchuk from KyivMiskBud suggested political instability may have delayed the program. Head of external economic relations at the central bank, Serhiy Kruglyk, said there was no clear plan how to finance people and developers, hence the delay.
Property analysts, however, put it more bluntly.
Andriy Guselnikov from the Association of Real Estate Specialists compared the likelihood of state sponsorship to guessing the weather a year from now. “I know that it’s a complete mess. There’s no money and there won’t be any in the nearest year,” he said.
Banks have stopped giving out loans as they struggle to recover what they’ve lent already. “So why would they finance, out of the blue, unfinished houses when there’s no demand for them?” asked Guselnikov, criticizing the government’s plans.
With an average price of over $1,000 per square meter in new houses and no finishing point in their construction, people prefer to buy on the secondary market. Prices dropped by 20-30 percent for lived-in flats over the last half-year and now equal those on the primary market. Experts estimate they would drop even lower in summer.
“Customers lost faith in this [primary] market,” said Serhiy Kostetsky from SV Development private consulting. “There are thousands of defrauded clients who sue their companies, but no one can help them because neither banks nor the state have money,” he added.
Entrepreneur Oleh Moroz is one of them. He bought his studio flat for $55,000 in 2006, hoping to move in two years ago. But the company halted construction over a dispute with a local administration. His apartment house is 90 percent finished, he said, and could possibly qualify for the state lending program.
“I am still waiting,” Morozov said. “In summer, I live on the boat and in winter I share grandma’s one bedroom flat with six other relatives.”
Some analysts, however, have stopped monitoring the primary homes market.
“To finish 400 houses this year is a fantasy,” said Guselnikov. “Even if all construction companies in the world started building them now, they would not have finished them physically, even if they had plenty of money and an unlimited supply of building materials.”
Guseselnikov pins his hopes on some sort of awakening next year after the presidential elections take place. “Until then, construction is a dead market,” he predicts.
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Wednesday, May 13th, 2009
As the dollar declines against most major currencies as well as the Ukrainian currency-the hryvnia-and banks around the World recover from a real version of “stress tests,” or what the Federal Reserve in the USA euphemistically calls them, European banks are looking to reduce their exposure to risk in some emerging markets. This is a good thing.
It was becoming clear to nervous regulators in Europe long before the global financial crisis, that some banks were overexposed in emerging markets. Many banks tended to focus in just one or two markets…for example Russia and Ukraine…that were also closely linked in other areas. A hiccup in one, meant a cold in the other.
The good news is that the healthiest banks will be able to recapitalize. Moreover, the banks that were poorly run will go out of business and their best assets will be cherry picked by the remaining banks.
Swedbank may reduce stake in Ukraine, Russia ops
Swedish bank Swedbank (SWEDa.ST) said it was open to reducing stakes in its subsidiaries in Ukraine and Russia but ruled out divestments in the Baltics where a deep recession has weighed on its business, Reuters reported.
“This concerns the operations in Russia and Ukraine. We already have a part ownership there and we`re prepared to increase this on commercial grounds,” Swedbank spokeswoman Anna Sundblad said on Wednesday. “But we are not including the Baltics.”
Swedish daily Dagens Industri reported earlier on Wednesday that the bank would consider divestments in eastern Europe, including Swedbank`s sizeable business in the Baltic region.
One possibility would be that the European Bank for Reconstruction and Development (EBRD), which already owns 15 percent of Swedbank`s operations in Russia, raised its stake, Sundblad said. She declined to comment on whether other banks would be invited to buy stakes.
Swedbank last month swung to a first-quarter operating loss, hit by a charge to cover souring credits in its operations in the Baltic countries and Ukraine. [ID:nLN150939]
The bank has also started making structural changes, including scaling back its ambitions in Ukraine and strengthening its risk management, to protect its earnings capacity.
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Saturday, May 9th, 2009
This is excellent news for Ukraine, as well as those deciding where to deposit funds. As we predicted at MBS, Western European governments and the EU collectively, would not let banks-many having very large portfolios in Ukraine-fail. The effects would have been disastrous as all European markets are connected, if not fully integrated.
Although this is not being called a “bailout,” as it certainly more targeted and specific to increasing investment through loans to businesses here in Ukraine, essentially, it is a bailout. Many banks would have not have been able to continue operations without this capital injection.
Regardless of what it is called, additional capital will certainly help prevent further decline in the Ukrainian and other Eastern European economies. Now politicians must do their part to enact the necessary reforms or growth will be severely constrained.
UniCredit’s East European Units Receive Aid
By JUDY DEMPSEY
BERLIN — Europe’s main development bank said Thursday it would pump €432 million into the East European subsidiaries of the Italian bank UniCredit, the largest banking group in the region, to encourage lending. Without more such support, it added, hopes for an economic recovery for the region next year could be in jeopardy.
The loans are expected to be the first of several as the European Bank for Reconstruction and Development, or E.B.R.D., holds talks with other Western banks that have established a major presence in the region over the past few years. These could include the Austrian banking group Raiffeisen and Swedbank of Sweden.
The loans are intended not to clean up bank balance sheets but to support the local branches in extending loans to small and midsize companies, which have faced a serious credit crunch since the beginning of the global financial crisis last year. Unless they obtain fresh loans, chances for a sustained recovery, which is expected during the second half of 2010, will be threatened, the bank warned.
“Our underlying outlook assumes continued external engagement, particularly from the Western parents of banks in the region,” said Erik Berglof, chief economist of the E.B.R.D.
The E.B.R.D.’s latest forecasts, released Thursday, showed that the economies of Central and Eastern Europe will contract 5 percent this year. Some countries, particularly Poland, are expected to fare better because of comparatively stable domestic demand, but other countries including Hungary and the Baltic States are already facing double digit declines.
The E.B.R.D. recently extended loans to Banca Comerciala Romana, a Romanian subsidiary of the Austrian bank, Erste Bank. But the agreement with UniCredit is the largest of its kind.
“As the single biggest financial investor and the largest banking group in Central Europe and Eastern Europe, the E.B.R.D. and UniCredit have a common purpose and special responsibility to this region to ensure the continuing flow of lending to the real economies in times of crisis and scarce external funding,” said Thomas Mirow, the E.B.R.D. president.
UniCredit’s chief executive officer, Alessandro Profumo, said in a statement that his bank would use the loans to support the local branches and the local economies.
Most of the €432 million will be earmarked for UniCredit’s subsidiaries in Ukraine and Kazakhstan, with each receiving €100 million. Ukraine’s economy will fall by 10 percent this year compared to 2008, according to the E.B.R.D. Kazakhstan is suffering a serious banking crisis.
UniCredit’s subsidiaries in Hungary, Bulgaria and Croatia will each receive €50 million. The remainder will be distributed to its branches in Serbia, Bosnia and Kyrgyzstan.
The E.B.R.D. has already increased its planned investments in the financial sector by 50 percent, to €3 billion, this year. That amount is distributed among 30 countries, stretching from Poland to Kazakhstan.
(from The New York Times)
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