Apr 12, 2017
What Went Wrong No sharp break with
the Soviet system As a consequence
pervasive corruption evolved
GDP per capita, PPP, 1990 and 2013
Ukraine Poland Russia Turkey0
5,000
10,000
15,000
20,000
25,000
1990 2013
(constant 2011 international $
Source: World Bank, World Development Indica-tors
What Needs to Be Done?
Political reformReform of the stateFinancial stabilizationEnergy Reform Social ReformEU – reform anchor
Europe: Reform Anchor
Political & legal standards: Outstanding
Market access: Too limited - 36 quotas for agriculture
Financial assistance: Tiny €5bn 2014-5
Technical assistance: Twinning has not taken off
Fix Politics FirstPresidential elections, May 25
Parliamentary elections, Oct 26
New government of young, well-educated outsiders, Dec 2
Reform program, Dec 9Decentralize power, no doneImpressive achievements!
Next Comes the StateClose unnecessary state
agencies: A dozen or so – some but too little
Lustration & judicial reform: Very limited progress
Deregulation: Substantial progress
Reform public administration: Minimal
Achieve Financial StabilityFloating exchange rate, late
2013IMF program, March 11Fiscal Adjustment: Reduce public expenditures long term from 53% of GDP to 35% of GDP – much done
Get large foreign financing to replenish reserve, $5bn to $20bn, now $12.4bnImpressive progress!
Clean up Energy Sector!
Unify energy prices: Much doneAbolish all energy subsidies:
70% doneProvide social cash
compensation: DoneCreate markets for all energy:
LegislatedStimulate private energy
production: Not doneStop buying gas from Russia:
Great progress
Social Policy Cannot Wait
Pension reformHealth care reformEducation reform
3 Big RisksAggravated Russian aggression
Underfunding: EU & US should step up financing: $8bn more!
Politics - severe economic hardship:
GDP fell 17.2% Q1, 14.2% in Q2, Inflation 53%