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Ukrainian economy will not withstand European integration

November 28, 2013, 11:43 UTC+3

The suspension of Ukraine’s advancement towards European integration casted down many European and US politicians

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MOSCOW, November 28. /ITAR-TASS/. The suspension of Ukraine’s advancement towards European integration cast down many European and US politicians. President of the European Council Herman van Rompuy and President of the European Commission Jose Manuel Barroso found it possible to deliver a open address to the Ukrainian people, promising fair future to them, Nezavisimaya Gazeta daily reported on Thursday, when a EU Eastern Partnership summit will begin in Vilnius, Lithuania’s capital, where Ukrainian President Viktor Yanukovich will arrive to participate in the summit.

The economy is guided by the realities, but not the dreams. In September 2013, the average salary in Ukraine has made a little bit more than $400 (about $1,000 in Russia). In 2012, the GDP per capita rate in Ukraine has made $7,500, $18,000 in Russia. With the average world figure of $12,700 the Ukrainians live more than two times worse than people in Russia. The situation will worsen, if Ukraine joins the European Union. Then the country’s government will have to freeze the salaries and pensions and increase the utility bill rates sharply.

After Ukraine’s accession in the EU and the creation of a free trade zone one will have to forget about relatively cheap Ukrainian food products. The duty-free import of European agricultural products in Ukraine, the introduction of discriminatory tariff quotas for Ukraine and the retainment of multibillion subsidies to the agrarian sector (the volume of the budget support to the agrarian sector in the EU states reaches 45% from the price of agrarian products, while this figure makes about six percent in Ukraine) are the conditions for the creation of a free trade zone. This factor makes Ukrainian food products uncompetitive in the EU and Ukraine. Finally, Ukraine will lose forever the most precious resource of any economy - the domestic market.

The taxes for the enterprises in Russia and Ukraine are almost equal (with a slight excess in Ukraine). The VAT tax in Ukraine is 20% (18% in Russia), the income tax — 19% in Ukraine (20% in Russia). Meanwhile, one of the conditions for Ukraine’s accession in the EU is growth of taxes, primarily the income tax and the taxes for the enterprises. If these requirements are met, massive bankruptcy cases and an upsurge of the unemployment rate are inevitable.

The economic crisis has already set in Ukraine. Upon the results of the second quarter of this year, the country’s GDP went down 3.3%. This is happening amid chronic excess of the imports over the exports (by 8.4% of GDP in 2012) and the permanent growth of the state debt (36.6% of GDP in 2012). Meanwhile, Russia is the historically main foreign trade partner for Ukraine. Upon the results of 2012 the share of Ukrainian exports in Russia has made 23.7% in 2012, imports’ share — 19.4%. After Ukraine’s entry in the EU the duty-free trade agreement between Russia and Ukraine will be annulled.

What kind of goals the European Union and the United States are pursuing, fanning up the hysteria over Ukraine’s refusal from associate membership in the EU? Along with geopolitical aspects and historical predetermined rivalry with Russia, the key economic motive is the annexation of a new sale market for the produce of the EU states, Nezavisimaya Gazeta daily believes.

“The signing of an association agreement is not just unprofitable for Ukraine today, but it is very risky. This is why the sense of the whole process and the Europeans are saying about it straightforwardly that Ukraine will get hypothetical advantages and benefits in some vague future. But serious economic losses related with the change in the model of trade with Russia and a highly probable socio-economic crisis in this case will come literally tomorrow,” Komsomolskaya Pravda daily quoted chairman of the Council on Foreign and Defense Policy Fyodor Lukyanov as saying.

Before the departure to Vilnius in an interview with Ukrainian TV channels Yanukovich did not give the direct answer to the question when he will sign an association agreement with the EU. “The words of the president produced the full impression that the head of Ukrainian state wants his country to balance further between Russia and the European Union,” Novye Izvestia daily noted.

Itar-Tass is not responsible for the material quoted in these press reviews

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