The Ukrainian parliament has adopted an anti-crisis bill proposed by the IMF to secure an international financial aid package. Ordinary Ukrainians will have to tighten their belts to help the coup-installed government keep the collapsing economy afloat.
It took two readings of the bill for 246 MPs out of 321 registered to approve the austerity measures outlined in the legislation dubbed “On prevention of financial catastrophe and creation of prerequisites for economic growth.”
Ahead of the vote, Ukrainian self-imposed Prime Minister Arseny Yatsenyuk told the Parliament that it had “no other choice but to accept the IMF offer,” as country fiscal gap in 2014 is projected to reach $26 billion. Ukraine’s Finance Ministry says it needs $35 billion over the next two years to avoid default.
“The country is on the edge of economic and financial bankruptcy,” Yatsenyuk said. “This package of laws is very unpopular, very difficult, very tough. Reforms that should have been done in the past 20 years.”
It is ordinary Ukrainians who will suffer the most under the new austerity measures as the floating national currency is likely to push up inflation, while spike in domestic gas prices will impact every household. Under the IMF conditions Kiev has to cut the budget deficit, increase retail energy tariffs, and shift to a flexible exchange rate.
The state-owned energy company Naftogaz already said that it will increase household gas prices by 50 percent starting May 1, while utility companies will see a 40 percent rise as of July. According to estimates, this year Ukraine’s economy will contract by 3 percent while inflation will rise to 14 percent. The government is not planning to raise minimum wages in response to inflation.
The law adopted on Thursday, in particular, introduces a permanent application of the basic rate of corporate income tax at 18 percent and VAT at 20 percent, according to RBC-Ukraine. The government will also cancel the VAT refund for grain exporters.
The bill also introduces a 15 percent tax rate on pension payments if they exceed 10 thousand hryvnas (about $900). This tax, however, won’t really hurt an ordinary Ukrainian pensioner since an average pension in Ukraine is $160 – which may be further cut by 50% for those still working.
A progressive personal income taxation scale has also been installed to charge individuals 15, 17, 20 and 25 percent depending on their earnings. Those persons who make over 1 million hryvnas will be charged 25 percent income tax.
Car enthusiasts will also suffer as taxes on new cars and motorcycles with engine capacity exceeding 0.5 liters will also be doubled. Those who shop online and use overseas retailers will now see lowering of the limit on tax-free imports from 300 to 150 euros.
Excise taxes on alcohol and tobacco will also go up. In 2014 spirits price will see a 39 percent increase, while tobacco products will see a rise of 31.5 percent. Beer lovers will suffer the most with a 42.5 percent rise.
The legislation also reduces the total number of personnel in law enforcement agencies. Almost 80,000 people will be dismissed in the Ministry of Internal Affairs, Security Service, the Office of the State Guard, and the prosecutor’s office.
The International Monetary Fund has agreed to throw Ukraine’s sinking economy a lifeline provided the country adopts severe austerity measures. According to a preliminary agreement announced by the IMF, it would provide Kiev between $14 and $18 billion in loans over the next two years. Pending final approval by the IMF’s board, Ukraine could get their hands on the first installment as early as April.
“The mission has reached a staff-level agreement with the authorities of Ukraine on an economic reform program that can be supported by a two-year Stand-By Arrangement (SBA) with the IMF,” the Fund said in a press release.
A successful deal with the IMF is expected to unleash further $10 billion in loans from other international partners, including the EU and the US. The World Bank is also considering the possibility of providing Ukraine with $1 to $3 billion. Canada, Japan and Poland are also contemplating financial aid.
“The financial support from the broader international community that the program will unlock amounts to US$27 billion over the next two years. Of this, assistance from the IMF will range between US$14-18 billion, with the precise amount to be determined once reforms are in place,” the IMF said.
In Washington, both the Senate and House of Representatives passed a bill on Thursday to provide a $1 billion loan guarantee aid to Ukraine. In addition the Senate bill includes $50 million for democracy building and $100 million for enhanced security cooperation.
“This significant support will help stabilise the economy and meet the needs of Ukrainian people over the long term because it provides the prospect for true growth,” US President Barack Obama said in Rome.
Despite the promised injection of cash into Ukraine, Nikolay Gueorguiev, IMF Mission Chief for Ukraine said that “Nonetheless, the economic outlook remains difficult, with the economy falling back into recession,” he said cited by Kyivpost. “With no current market access, large foreign debt repayments loom in 2014-2015.”
A group of high-profile academics has written an open letter warning that food poverty has become an “emergency” in the UK. Use of food banks has tripled in the past year alone, but the government says this does not mean more people are starving.
“This has all the signs of a public health emergency that could go unrecognised until it is too late to take preventive action,” said the letter, co-signed by six leading public health experts, and addressed to the prestigious British Medical Journal (BMJ).
The authors, led by David Taylor-Robinson from the Medical Research Council, speculate that “the rising cost of living and increasingly austere welfare reforms” from the Conservative-Liberal government are at fault.
“The effects of these policies on nutritional status in the most vulnerable populations urgently need to be monitored… Access to an adequate food supply is the most basic of human needs and rights.”
Official statistics show that the number of those admitted to hospitals with malnutrition has risen from 3,161 in 2008/09 to 5,499 in 2012/13.
Even those who are not on the verge of starvation are suffering. The signatories cite a recent report by the Institute for Fiscal Studies that claimed that families are spending 8.5 percent less on food than before the recession, and there has been a “reduction in quality” of produce consumed during a “substitution towards processed sweet and savoury food and away from fruit and vegetables” particularly by poorer and single-parent families.
Leading food bank charity The Trussell Trust, which operates 400 outlets, says that three times more people have asked it for help than just a year ago. Nearly 350,000 people have received at least three days’ worth of meals from it in the 12 months leading to October.
British Red Cross has also started its first food aid collection drive since World War II.
The government has not only refused to take blame for increased food poverty, but has questioned that there has been an increase at all.
“The benefits system supports millions of people who are on low incomes or unemployed and there is no robust evidence that welfare reforms are linked to increased use of food banks,” said an official statement in response to the open letter.
“In fact, our welfare reforms will improve the lives of some of the poorest families in our communities with the universal credit making three million households better off – the majority of these from the bottom two fifths of the income scale.”
Government officials have said that the rise of food banks – which are made up from private donations – has actually been the result of greater generosity from private citizens, and charities opening new access points. Another issue is that of entitlement to receiving meals from the food banks. In order to be given a free meal, a needy individual has to be issued a voucher by a local official, policeman, or church minister. In recent months, employment office workers have begun to offer more food vouchers, whereas before, they might have handed out cash benefits.
But no definitive, non-ideological estimations of the scale of the food poverty problem are likely at least until the publication of an official Department for Environment Food and Rural Affairs (Defra) report on the issue commissioned last February, which has been completed but not released to the public.
The authors of the BMJ letter and The Trussel Trust have both hit out at the government for failing to publish the report – supposedly finished in July – implying that it is hiding the devastating effect of its welfare reforms, which include stricter criteria for receiving state aid and greater penalties for those who fail to comply with them.
In response Defra has said that it is simply conducting the “necessary review and quality assurance process” before publication.
The Spanish government has approved a new draft law which imposes harsh penalties on Spaniards taking part in unauthorized anti-government demonstrations, a move criticized by the opposition as trying to silence protests.
The draft law, presented by Interior Minister Jorge Fernandez Diaz on Friday, sets fines of up to 30,000 euros ($40,800) for offenses like torching the national flag, affronting the state or causing serious troubles outside parliament.
Fines of up to 1,000 euros will be imposed on people insulting or intimidating police officers.
Four “very serious” offenses, including interfering in electoral processes and illegal protests at strategic facilities such as airports or nuclear power plants, could be fined up to 600,000 euros (about $1,000,000).
The opposition says the bill is meant to prevent demonstrations against the government as the country struggles with a debt crisis and high unemployment.
“When more than 20 percent of people are unemployed, I don’t think this legislation is what we require,” said Alejandro Tourino, from law firm Ecija.
The government, however, has defended the bill, saying it will create discipline and safeguard public freedoms.
It will help “regulate and protect public freedoms,” said Deputy Prime Minister Soraya Saenz de Santamaria.
Madrid’s harsh spending cuts and rising unemployment have sparked massive anti-government protests across the country in recent years. Protesters argue that the government-imposed measures have failed to curb rising poverty or help extricate the country from its worst recession in years.
The draft law must be approved by parliament, where it may change to some extent. However, it will probably be ratified as the governing party has an absolute majority in the parliament.
Spain has seen numerous protests in recent years. On November 20, students gathered in front of the Education Ministry in Madrid to show their anger at the government’s austerity cuts, rising fees and other changes to the education system.
The Spanish government has been sharply criticized over the austerity measures that are hitting the middle and working classes the hardest.
Battered by the global financial downturn, the Spanish economy collapsed into recession in the second half of 2008, taking with it millions of jobs.
In a new leaked audio tape, the Egyptian coup leader Gen. Abdul-Fattah al-Sisi has called for an end to subsidies on bread and energy in Egypt, as well as a 50 per cent reduction of public sector salaries.
Gen. Al-Sisi described the measure as “austerity” and pointed to examples in various countries expressing his admiration for them.
In the audio which was broadcast by Al-Jazeera Mubashir Misr on Friday 22 November, he said: “A gas container is sold to citizens for 62 to 67 Egyptian pounds, (restaurants pay much more). This means that a lot of money is being unintentionally wasted in the country.”
He said: “It is impossible to pay 107 billion Egyptian pounds to subsidise energy and 17 billion for bread.”
Al-Sisi continued: “What I would like to say, regardless if it is appropriate to raise prices or not is that when former President Sadat attempted to solve Egypt’s problems in 1977, he decided that every citizen had to pay the prime costs for the goods they bought.”
Citing other examples, Gen Al Sisi said: “I would like to tell you that Germany reduced 50 per cent of the salaries for its austerity plan, and people accepted that measure.” However, he did not give any details about when and how Germany carried out this measure.
He further pointed to the cases of South Africa and Sudan. In the latter case he said, “When South Sudan seceded from the north and became independent, it cut salaries by 50 per cent. People said nothing.”
Then he concluded: “I do not care about the decisions. I would like to say that the situation requires from all of us, Egyptians, if we love our country, to take measures regarding the issue of the prices and goods’ subsidies.”
- In interview, Egypt army chief Sisi toys with idea of presidential candidacy (uprootedpalestinians.wordpress.com)
Despite a deal to lift the debt ceiling and end the government shutdown, the United States is far from a respite, as it won’t address the underlying, internal issues that have usurped its power in the world, economics professor Rodney Shakespeare told RT.
RT: The default is averted. That’s good news, isn’t it?
Rodney Shakespeare: Nothing has been averted. Instead, there’s going to be some sort of meeting between the Democrats and the Republicans, who are two sides of the same coin. And there are three subjects, which they’ll refuse to discuss. The first is the out of control military budget, which ought to be cut to one tenth of what it is at the moment to bring it in line with comparable nations. The second thing is that the system works by exporting jobs. They’ve exported the jobs to about 56,000 enterprises over the last 11 years. That’s five million jobs – and each job creates another three. That’s roughly 15 million jobs which aren’t coming back. And the third thing, which they aren’t going to discuss at this ‘wonderful’ meeting between the Democrats and the Republicans – they will not discuss the core of the issue, which is a corrupt banking system, whose center is the Federal Reserve. Instead, what they’ll do is they’ll blame everything on the poor. So, you see, nothing has been put off. Nothing has been solved. Nothing has been addressed. The situation goes on and ultimately it’s going to result in the final collapse of the dollar. But that may be a year or two off at the moment.
RT: It’s only a temporary fix for the US debt ceiling. But what happens when America is on the verge of running out of cash again?
RS: The same thing is going to happen as is happening at this moment, except that another two or three months will have passed, in which they’ve failed to address the underlying issues and their vanity and the essence of the corruption of the system will not have been addressed. So, you’re going to find at some point that they’ll then…the world will wake up to the overall level of the American debt, which is now just at the point when it becomes unrepairable. And when that happens, you’ll get a sudden, irrevocable slide in the dollar. So, they’ll kick the can down the road for a bit.
RT: It may also be difficult for the rest of the world to understand why there had to be so much last-minute drama in Washington, DC before they reached an agreement. A domestic squabble that held the rest of the world to economic ransom – can the global community afford to risk that again?
RS: The world community should continue doing what it’s quietly doing at the moment: starting to organize it in ways which are separate [from] and outside the West. They should do it in their banking agreements. I’m pleased to say that the BRICs are creating on optic fiber cable, so that the banking can be done away from the West. They should do it by creating different national and central banks, which put out interest-free money. They should make agreements among themselves, particularly among the non-allied nations. This should be political agreements and financial agreements. They must accept that the West now…its economic powers have declined; its political powers have declined. And as of America’s moral authority? Forget it! They are putting out a poisonous depleted uranium. They’re attacking. They’re assassinating. They have no moral authority whatsoever. Everybody else should get on with organizing themselves away from the pariah states, which are now the US, Israel, Saudi Arabia, with their poodles, which are the UK and France. I say to the rest of the world: Get on with it. Organize yourselves and give up this corrupt, out-of-date system, which no longer is providing adequate leadership.
- RT: Losing faith: Global financiers look to de-Americanize (jhaines6.wordpress.com)
Greek metro workers have defied a court order to return to work and have staged the sixth day of strikes over the government’s spending cuts.
Athens was without a metro service on Tuesday for four to five hours, which comes in continuation to the protest started on Thursday over the planned cuts to metro workers’ salaries.
A Greek court ruled against Athens Metro Workers’ Union’s planned strikes and permitted the government to use force to make personnel return to work.
Union officials call on the government to abolish the planned changes to the public sector’s pay scales, which comes as Athens implements measures to satisfy its eurozone creditors.
Reductions in public sector workers’ incomes have made it harder for Greeks to make ends meet.
“With these latest cuts, someone like me who earned 1,300 euros per month will end up clearing something like 700 euros,” Metro Workers’ Union Head Antonis Stamatopoulos said.
“We cannot live on what we earn,” he added.
Stamatopoulos said that apart from stopping the changes to the pay cuts, the only way the government could make them return to work would be through force.
“Civil mobilization? They can enforce it if they want. Maybe they should come here with tanks to force us back to work,” Stamatopoulos said.
Parliament introduced new austerity measures in December 2012, which eurozone finance ministers approved for bailout packages of 9.2 billion euros on Monday and 34.3 billion euros last month.
Europe plunged into financial crisis in early 2008. The worsening debt crisis has forced the EU governments to adopt harsh austerity measures and tough economic reforms, which have triggered massive protests in many European countries.
A policeman strikes a photojournalist of AFP during the Portuguese general strike in Lisbon March 22, 2012.
Portuguese police have attacked demonstrators protesting nationwide against the government’s austerity measures.
Demonstrations were held on Thursday in 38 cities and towns across Portugal, including the capital city of Lisbon, Oporto – the second largest city after Lisbon — and Coimbra, AFP reported.
In Lisbon, police resorted to baton charge and arrests to disperse the protesters.
At least one demonstrator was arrested in Oporto as protesters expressed outrage at Prime Minister Pedro Passos Coelho during a visit to the northern city’s university.
The nationwide protests were part of a 24-hour strike against austerity measures adopted by the government in return for an international bailout. During the Thursday strike which was led by Portugal’s biggest union — the General Confederation of Portuguese Workers (CGTP) – public services across the country ground to a halt.
The trains and subways in Lisbon and Oporto, and the majority of ports, including the port of Lisbon and Viana do Castelo in the north, were shut down.
The strike is aimed at opposing changes to labor laws that make it easier to fire workers, reduce holidays and cut layoff compensation. The government argues that these changes will revive the economy.
Some European economies have introduced strict austerity plans to tackle their debt crises. The spending cuts have caused deep discontent among people in those countries.
Angel Gurria, secretary general of the Organization for Economic Cooperation and Development, said in a Thursday interview that the eurozone needs a bailout fund of at least 1 trillion euros ($1.3 trillion) to prevent its debt crisis from expanding to other European states.
Greece’s two largest unions have announced a 48-hour strike over the new austerity measures endorsed by the government in return for bailout loans.
The unions, General confederation of Workers of Greece (GSEE) and Civil Servants Supreme Administrative Council (ADEDY), announced on Thursday that their members will go on a two-day strike from Friday in protest at the controversial decision.
“We will hold a general strike on Friday and Saturday along with the civil servants’ union,” said a spokeswoman with GSEE which represents the private sector.
ADEDY’s Secretary General Ilias Iliopoulos described the measures as “painful” which will “create misery for youths, unemployed and pensioners do not leave us much room.”
“We are moving to a social uprising,” said Iliopoulos.
Greece has been the scene of repeated strikes since the country first resorted to bailouts from international lenders in 2010.
Leaders of the three parties backing Greece’s coalition government approved new austerity measures on Wednesday but failed to agree to creditors’ demands to make 300 million euros ($398 million) in pension cuts.
The country’s Prime Minister Lucas Papademos still hopes that the coalition leaders will strike a comprehensive deal by Thursday evening, his office said on Wednesday.
To secure a bailout package of 130 billion euros, Athens must first persuade the troika — the European Union (EU), International Monetary Fund (IMF), and the European Central Bank (ECB) — that it will implement long-delayed reforms and make further spending cuts.
Greece’s current debt stands at 340 billion euros ($440 billion) — a sum that equals around 31,000 euros debt per person in the country of 11 million people.
The country has, accordingly, the biggest debt burden in proportion to the size of its economy in the entire 17-nation eurozone.