Independence Day 2019: a government with no excuses left
Twenty-eight years, and for the first time since 1991 one political force holds the presidency and a single-party majority in parliament. Everything that does not get done from here is a choice.
Twenty-eight years, and Ukrainian politics has just done something it has never done before. A president elected with seventy-three per cent in April now has a party holding an absolute majority of seats in parliament after the July election. No coalition, no cohabitation, no constitutional dispute over who appoints whom.
This archive has spent fifteen years explaining that Ukrainian reforms stall because power is fragmented and every measure requires a bargain. That explanation has just expired. Whatever happens over the next two years happens because this government chose it.
What is on the desk
Three items dominate, and each has a hard deadline.
The farmland moratorium has been extended annually since 2002 and expires again on 1 January. The government has said it will open the market. The technical questions — who may buy, how much, whether legal entities and foreigners are included, how the mortgage mechanism works — are more important than the headline, because they determine whether the reform produces investment or merely produces transactions.
The gas transit contract with Gazprom expires on 31 December. Nord Stream 2 is under construction. If no new contract is signed, Ukraine loses roughly two to three billion dollars a year in transit revenue, and Naftogaz — which the budget depends on — has a hole in it. Negotiations are running under European Commission mediation and will go to the last week of December.
The third is less visible: the unbundling of Naftogaz's transmission business into a separate operator, required under the EU energy package and a precondition for any European-standard transit arrangement. It is a corporate governance problem disguised as an engineering one.
The economy is in reasonable shape
Growth will be above three per cent. Inflation is heading below ten. The hryvnia has actually appreciated this year, from twenty-eight to around twenty-five, driven by foreign portfolio inflows into local-currency government bonds at very attractive yields.
That last point deserves a caution. Hot money into hryvnia debt is welcome while it stays and destabilising when it leaves, and it will leave when global rates move or when a domestic shock arrives. The current strength of the currency is not a productivity story; it is a carry trade. Exporters are already complaining, correctly, that an appreciating currency alongside domestic wage inflation is squeezing them from both sides.
The IT sector is now systemically important
Software and IT services exports will exceed four billion dollars this year, growing at over twenty per cent annually. The sector employs somewhere around two hundred thousand people at wages three to five times the national average, and it is the largest single source of foreign currency after agriculture and metals.
It grew without industrial policy, without state investment and largely without domestic clients. What it needed was fast internet, an English-speaking technical workforce and the ability to invoice abroad — and it has been careful to keep the fourth ingredient, the simplified tax regime, protected in every legislative round.
For anyone assessing Ukraine, this sector is the strongest available evidence about what the country produces when the state neither helps nor obstructs.
What to watch for and what to fear
The optimistic case is straightforward: a government with a mandate does land, courts and state enterprise privatisation in eighteen months, growth moves to five per cent, and Ukraine starts closing the gap with its neighbours.
The pessimistic case is equally straightforward and more common historically. A majority with no internal check tends to legislate quickly and badly, to concentrate decisions in a small circle, and to discover after two years that it has replaced the old informal networks with new ones. The absence of a coalition partner removes the friction that sometimes produced better law.
The indicator to watch is whether the independent institutions built between 2014 and 2018 — the anti-corruption bureau, the specialised prosecutor, the new court, the reformed central bank — retain their independence under a government that does not need their support to pass anything.
Twenty-eight years in
Ukraine has just handed one political force everything it needs to govern. That is the condition every reformer here has asked for since 1991. The next two years will show what the constraint actually was.
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