Both Ukraine and Greece are seeking debt relief from foreign creditors as the two countries teeter on the brink of insolvency. Officials in Kyiv and Athens say their nations’ debt levels are unsustainable and must be restructured, an assessment echoed by the International Monetary Fund (IMF). But while both countries push to stave off bankruptcy, here are four differences between their respective financial predicaments.
Ukraine has touted its commitment to pushing through reform measures in exchange for Western aid, even as some legislative reforms have stalled. Kyiv has acted on the request of Western creditors by raising energy tariffs and trimming Ukraine’s banking sector, while Ukrainian officials have urged lawmakers to act on legislation required to secure further Western financing, including measures concerning the banking sector, anticorruption efforts, regulating public utilities, and reforming the Naftogaz gas company.
By contrast, Greek Prime Minister Alexis Tsipras’ far-left Syriza party won elections in January by pledging to oppose deeply unpopular austerity measures imposed by Greece's creditors. Tsipras called a nationwide July 5 referendum that resulted in a resounding "no" to further austerity measures in return for bailout loans. In an apparent capitulation, however, the Greek government on July 9 submitted proposed economic reforms to secure a $55-billion bailout from European creditors.
Ukraine faces a current debt crisis mainly involving private international creditors. Four of these creditors, U.S. investment and hedge funds that hold around $8.9 billion in Ukrainian debt, are locked in negotiations over debt relief with Kyiv ahead of an interest payment due on July 24. The IMF says its $17.5 billion bailout for Ukraine is contingent upon Kyiv reducing payments to commercial creditors by $15 million through 2018. Kyiv has threatened a payment moratorium if the bondholders do not accept a 40 percent writedown, a proposal the lenders have resisted.
By contrast, the lion’s share of Greece’s official debt -- totaling some 242.8 billion euros, according to a Reuters analysis last month -- is owed to European governments. Germany is by far Athens’ largest creditor, with 57.23 billion euros in exposure to Greek debt, according to Reuters. German Chancellor Angela Merkel has taken a tough stance on Athens’ bid to restructure its debts, and German public opinion has been strongly opposed to concessions to Greece.
The IMF, which holds 21.2 billion euros in outstanding Greek debt, assumed a hard line on Greece ahead of a 1.5-million-euro repayment Athens was scheduled to make on June 30. IMF chief Christine Lagarde said last month that Greece would not be granted a grace period if it missed the payment, which Athens ultimately did. Together with Greece’s other main creditors -- the euro zone nations and the European Central Bank – the IMF on Friday is set to review Greece’s debt relief proposal.
The IMF has expressed greater leniency toward Ukraine. Lagarde said last month that the IMF will be able to continue to support Kyiv under its “Lending-Into-Arrears” program “even in the event that a negotiated agreement with creditors in line with the program cannot be reached in a timely manner.”
War And Peace
Greece’s descent into crisis occurred in peacetime, in a country that joined the European Union in 1981 and the eurozone in 2001. A flurry of EU-encouraged borrowing as its economy expanded -- including for projects linked to the 2004 Olympic Games -- spelled trouble when the global financial crisis hit, shrinking Greece’s GDP and undermining its ability to pay creditors. Financial markets slammed the door after Greece revealed in 2009 that it had been understating its deficit figures, and the following year the "troika" of the IMF, European Central Bank (ECB), and the European Commission sought to stave off Greek bankruptcy – and a possible new financial crisis – with the first of two multibillion-dollar bailouts. These were conditioned on budget cuts, tax hikes, and other austerity terms that many Greeks and others say have caused or exacerbated the country’s current predicament.
Ukraine’s economy has also been troubled for years, its financial health long hampered by corruption and resistance to reform. But unlike Greece, its economy has been sapped for over a year by war. The conflict between government forces and Russian-backed rebels in eastern Ukraine has killed more than 6,400 people since April 2014 and hindered the pro-Western government’s efforts to return the country to growth. The conflict has undermined production in the partially rebel-held Donetsk and Luhansk regions, which account for about a quarter of Ukraine’s industrial output. The World Bank said in April that Ukraine’s economy is expected to contract by 7.5 percent this year and could grow by 2 percent in 2016 – but only if the was does not worsen, the banking sector stabilizes and reforms continue.