Archive for February 25, 2014

Ukraine Faces Economic Crisis

There’s one country dominating European news channels at the moment – the events in Ukraine seem to be moving with ever increasing speed.  Most reports of course are concerned with the country’s political future and it’s relationship with Europe and Russia.

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However there is another crisis which is looming for whoever ends up being in charge of this divided country – an economic one.  The country is hugely indebted and relies heavily on the one country it is seeking to distance itself from – Russia.  In fact there is a major lending programme in place which is essential to Ukraine’s survival agreed with the Russian government and currently only 20% of it implemented.  It would be highly unlikely to continue if the new EU friendly Ukraine turns it’s back on it’s powerful neighbour.

It is estimated that Ukraine needs about £21 billion over the next couple of years to maintain stability.  If the Russians pull the plug on aid, which seems likely then it is to Europe that the country will look.  It has already been mentioned by several important European officers who are well aware that the country will require substantial economic aid.  The US Treasury secretary has also said that international support would be the best way forward probably via the IMF.

So will the US and EU fill the ever growing hole in the Ukrainian finances?  It has happened before but the previous lending programmes with the country have not been overly successful, with the Ukranian authorities not sticking to the agreed policies in return for financial support.  There were many problems but the central one was probably the reluctance of the government to raise the country’s energy prices.  The subsidies cost Ukraine finances which they couldn’t really afford, it also meant that there was little encouragement for being more fuel efficient in both industry and domestic markets.

But it’s not all gloom and doom for the country, there are many resources the country can turn to with a modicum of political and financial stability in place.  Like many former Soviet countries, there is a strong educational system in place and Ukraine has a large population of young well educated young people.   There is also a large entrepreneurial spirit, and many people are highly active in the global digital economy.  They use technologies such as VPNs, proxies and even these Smart DNS technology like this to break down digital borders that many countries have put in place.

There is a huge potential in the country, like most former Soviet countries when they broke away their economies contracted rapidly as they struggled to transform from a centrally planned economy to a western style capitalist economy – it’s never an easy process.  There’s a lot of coverage in the media throughout Europe but some of the best is possibly in Germany through their domestic broadcasters – for those outside the country and with the necessary language skills you can use this technique to help bypass the geo blocks which normally block access.

 

Torrid Times in Emerging Markets – G20 Focus

This weekend in Sydney, the finance ministers of the G20 group of countries meet.  Every meeting has an official theme, and this one is no exception – the subject is restoring global group.

Over the last few years we have seen amid the turmoil in the developed economies of the world, the emergence of huge growth in Asia and South American economies in particular.  Much of this growth had in part been due to the other countries problems particularly the US.  The US Federal Reserve for example  has been buying bonds in order to keep money cheap and interest rates low – this has helped the US economy return to growth but it has many other economic impacts.  For example funds were driven towards the emerging countries seeking to invest in the higher growth rates and higher interest rates.

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Now this money is being returned to a more prosperous US, also because the risks in developed countries are much lower. This is causing a huge problem with big falls in currencies in Argentina and India for example.  The US has faced some criticism that it’s own economic policies have caused such instability in other countries.

Over the last few years, we amongst others have reported some of the incredible rises in the economies of some of these nations particularly the likes of Brazil and Argentina.  However it seems that the underlying instability and weaknesses of these economies means that they could be subject to damaging fluctuations when big economies like the USA change their policies.

It’s unlikely that we will ever see the situation where a country like the US will alter it’s economic policy in order to reduce global instability, western democracies really aren’t built like that.   However it is hopeful that meetings like this with the other G20 countries will at least make them ‘mindful’ of the affect that their policies can have on other countries with less stable infrastructure.

There are some interesting debates on the US media both print and online, you can access the US online news services from ABC, CNN and NBC by using a US proxy service like this.

Additionally there is coverage of the G20 meeting itself on the BBC website, the majority is accessible internationally although to view the news and broadcast documentaries  – you may need to watch this video.

Additional
For accessing the above reports on an iPad please see this post