KYIV, Ukraine - Ukraine's prime minister said Tuesday the country cannot afford an early election in the face of a battered stock market, one of the world's highest inflation rates and massive bank withdrawals by depositors spooked by the growing political and financial instability.
Ukraine's central bank took emergency measures Monday to limit bank lending and restrict withdrawals from some accounts as the government tried to avert a large-scale panic that could lead depositors to pull even money out of their accounts.
Prime Minister Yulia Tymoshenko used the quickly escalating financial crisis as ammunition in her power struggle against President Viktor Yushchenko's push for early parliamentary elections. The fighting shattered their pro-western alliance last month.
"We are categorically against destabilizing the situation with the early election and that is why we think the president's decree should be cancelled," Tymoshenko said Tuesday. "When every kopiyka is needed to counter the global financial crisis, spending half a billion hrvyna for the early elections adventure is a direct action against national interests," she added, referring to the Ukrainian currency.
The deepening financial problems are compounding a political crisis that threatens to destabilize the pro-western former Soviet republic at a time when it is confronting a resurgent Russia.
Russia's August war with Georgia -- another pro-western former Soviet republic -- exacerbated tensions with the West and caused concern in Ukraine.
The two Ukrainian leaders' alliance fell apart last month after Tymoshenko sided with the opposition in adopting a law trimming presidential powers. They also differed in their reactions to the Russia-Georgia war.
Yushchenko accused Tymoshenko of betraying efforts to join NATO and selling out to the Kremlin by failing to condemn the war. Tymoshenko says she opposed the war, but wants a partnership with Russia.
Depositors frightened by the political and economic uncertainty have made large-scale withdrawals of savings from banks in the past two weeks.
On Monday, the central bank had to rescue two major banks after there was a run on them earlier this month. One central bank official said Ukrainians withdrew as much as C$1.5 billion from their accounts, or 2.7 per cent of all bank deposits that have a maturity date, so far this month. But other analysts say the figure could be as high as 4.0 per cent.
Authorities also took measures to shore up the weakening national currency, the hryvna (Pronounced HRIV-nyah'), which has fallen 12 per cent in recent weeks.
Stocks have plummeted some 30 per cent over the past month as investors fled emerging markets amid the world financial crisis. Many steel mills -- the backbone of the country's fragile economy -- have had to halt or slow production because of a lack of global demand.
Ukrainian inflation as of September was among the highest in the world, at 25 per cent year-over-year.
On Tuesday, the government sought to bolster the shaky economy by lowering transport and other costs for the key steel and chemical industries, where output fell along with global demand, Tymoshenko said.
Tymoshenko and Yushchenko, the two leaders of the 2004 Orange Revolution, have turned into fierce rivals and their fight over whether elections will be held on Dec. 7 has now turned to the courts.
Yushchenko dissolved parliament and called early elections after his coalition with Tymoshenko collapsed. But the prime minister pledged there would be no election and appealed to a Kyiv court to block preparations.
"The Ukrainian government is doing everything possible and impossible so that the impact of the global crisis on the Ukrainian life, the Ukrainian economy is minimized," Tymoshenko told reporters Tuesday.
Tymoshenko, seen as Yushchenko's rival in the 2010 presidential vote, is battling to retain her office and avoid the third vote in three years. Yushchenko is determined to push through with the election and has abolished a court that froze election preparations on Tymoshenko's request.
The vote would be the third parliamentary election in as many years, and experts say it will only exacerbate the country's economic and political problems.
