The New York Times: Looking to Greece, Ukraine is in a hurry to reduce its debt

“No one knows how the endless conflict between Athens and the European leaders who control its spending will turn out. But in Kyiv, another European capital caught in the grip of debt negotiations, one thing is clear: the Ukrainian government does not want to end up like Greece - with years of wrangling with creditors,” writes Andrew E. Kramer in an article in The New York Times.

“In light of this, with the support of the IMF, the Ukrainians are persistently trying to force foreign investors - in particular the giant investment fund Franklin Templeton - to accept significant losses in the original bailout agreement,” the author claims.

At the start of negotiations that started Tuesday in Washington, the funds led by Franklin Templeton did not agree to a deal to write off part of the Ukrainian debt, insisting instead on extending the payment period until 2019. “According to the creditors’ analysis, Ukraine’s economy will recover quickly enough to make payments from its gold and foreign exchange reserves,” Cramer writes.

“The government demands an immediate reduction in the principal amount of the debt by 40%. If bondholders don't relent, Ukrainian officials say the initial bailout may have no effect and Ukraine could end up back at the negotiating table with creditors, repeating the Greek path.

“If there's one thing we can learn from Greece, it's the need to be very aggressive from the outset about what kind of cuts are required,” said Ivan Chakarov, an economist at Citigroup who follows the situation in Ukraine.

“Officials in Kyiv are also making it clear that creditors have only themselves to blame for ignoring obvious signs of corruption in the government of former President Viktor Yanukovych,” the article says.

“The IMF, while not accepting the argument that the previous government’s misdeeds provide an excuse to avoid paying Ukraine’s debt, suggested that creditors should accept serious losses, basing its argument on the need to curb the uncontrolled increase in Ukraine’s debt/GDP ratio,” writes edition.

Having demonstrated its support for the Ukrainian government in the negotiations, the IMF also said on Thursday that it had reached an agreement with Kiev on the policies needed to pay off part of the debt in 1,7 billion dollars, reminds Kramer.