MacroScope

Five days on, Ukraine accord at risk of unravelling

By Mike Peacock
April 22, 2014

An international agreement to avert wider conflict in Ukraine, brokered only five days ago, is teetering with pro-Moscow separatist gunmen showing no sign of surrendering government buildings and Kiev and Moscow trading accusations over who was responsible for killings over the weekend.

Washington, which signed last week’s accord in Geneva along with Moscow, Kiev and the European Union, said it would decide “in days” on additional sanctions if Russia does not take steps to implement the agreement. U.S. Vice President Joe Biden is in Kiev where he is expected to announce a package of technical assistance.

So far, markets’ worst fears have not materialized but with thousand of Russian troops massed on the frontier with Ukraine and deadly clashes between Ukrainian forces and pro-Russian separatists, it would not take much to change that.

The European Commission handed documents to EU member states last week explaining the potential impact on their economies of imposing stricter trade and financial sanctions on Russia. There is talk of an emergency meeting of EU leaders if necessary but building a consensus on tougher measures is tricky in Europe where many countries rely on Russian energy exports.

Polish Prime Minister Donald Tusk has written in the FT, calling on the EU to create an energy union to secure its gas supply because the current dependence on Russian energy makes Europe weak.

French President Francois Hollande’s cabinet meets on Wednesday to adopt an updated schedule for EU deficit reduction commitments. After outlining 50 billion euros of savings for 2015-2017 to help pay for consumer and business tax cuts, the government is due to sign off on already delayed deficit reductions to bring things, eventually, to three percent of output as demanded by Brussels.

The European Commission has taken a dim view of any further relaxation and there could be criticism from closer to home today. France’s High Council for Public Finances, an audit panel created to offer independent assessment of feasibility of the budget programmes, is issuing its verdict on whether the government’s assumption of growth are right.
If they offer a negative view, it would amount to telling the French that those spending cut proposals that they don’t like are not tough enough.

Former British premier Gordon Brown will enter the Scottish independence debate today. This suggests the “No” campaign now realises it is in a real fight to keep Scotland within the UK – Brown remains a potent political figure in Scotland.

Just as interesting is Brown’s theme; that Scottish pensions will be safer and more lucrative within the union. The arguments about whether Scotland can keep the pound and be part of the EU, and the suggestion that major companies may relocate south, are powerful ones but it is more likely that personal wealth and security will be decisive for voters in September.
Brown will also argue that the Scottish parliament should get more devolved powers, another strategy that could help sway the electorate.

European Council president Herman Van Rompuy will have a working dinner with Prime Minister David Cameron in London with EU parliamentary elections nearing.

Turkish Prime Minister Erdogan will address deputies from his ruling AK Party at their weekly parliamentary meeting. Looking for his comments on the August presidential elections where he is expected to be a candidate and on proposed AK Party changes to electoral boundaries ahead of parliamentary elections due in 2015, which could help it strengthen its parliamentary majority.

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