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With Cabinet shake-up, Zelenskyy undermined all benefits launched in last six months – Pekar

The resignation of ex-Prime Minister Honcharuk (pictured bowing) and appointment of Denys Shmyhal (second from the left, first row). Photo: press service of the Servant of the People party
With Cabinet shake-up, Zelenskyy undermined all benefits launched in last six months – Pekar
Article by: Valeriy Pekar
Translated by: Christine Chraibi
The dismissal of Prime Minister Honcharuk and reshuffle of the Ukrainian Cabinet on 4 March came like a bolt out of the blue. The Cabinet was blamed for not living up to expectations, despite having worked for only six months. However, the real reasons for the shake-up are likely less benign-appearing, while the consequences range from the return of politicians from Yanukovych’s times to jeopardizing Ukraine’s collaboration with the IMF – which, in its turn, will leave Ukraine with one indispensable partner – Russia, writes Valeriy Pekar.

What happened?

The resignation of Ukraine’s government, the dismissal of Prosecutor General Riaboshapka, and very likely, soon-to-be attacks on the National Bank of Ukraine, the National Anti-Corruption Bureau of Ukraine (NABU), and the management of major state-owned enterprises.

What reasons were named?

The Honcharuk government [was accused] of failing to live up to people’s expectations. Living standards have not improved, industrial production has declined, smuggling has not been stopped, and extra high salaries and bonuses have been paid out to government officials and members of supervisory boards.

President Zelenskyy also accused the government of strengthening the hryvnia exchange rate (though it would have been worse if it had weakened), and the Prosecutor General of failing to imprison or initiate court proceedings against so-called “enemies.” It should be noted that the President’s rhetoric has long been playing into the hands of the oligarchic media.

Could it have been different?

Productivity growth and job creation are the most important determinants of a country’s standard of living, which means that the government must ensure a more favorable business climate. First of all, this takes time, but the duration of this process can strengthen a government’s position. In six months, the Honcharuk government managed to initiate many important things, but failed to bring them to completion.

Second, these measures need to be supported by the Parliament, but the Parliament only approved 20% of government bills, and half of them were sham. Third, judicial reform is a key factor in improving the business environment, but the judiciary should be independent of government pressure.

Industrial decline was precipitated by the unfavorable situation on Ukraine’s traditional markets for metal, grains, etc. In addition, a surprisingly warm winter meant that less gas was consumed; the hryvnia appreciated strongly against the dollar; finally, the pace of technological change is accelerating everywhere (old industries are declining, while new ones require a more favorable business climate).

Imprisoning corrupt officials is the responsibility of special bodies, which are not in the Prosecutor’s sphere of influence. Moreover, sentences are pronounced by a court, which is a separate branch of power. As for members of the political opposition, there is no one to imprison, as no crimes have been committed.

What are the real reasons?

First, President Zelenskyy blames the government for the decline in his approval rating [which fell from 64% in September 2019 to 47% in February 2020]. However, it is not clear why the President would need a high approval rating if he intended to launch so many reforms. (After all, if you want to change your country, your approval rating will probably take a nosedive.)

Furthermore, it should be noted that the government lacked the resources and authority to act independently and constantly looked for signals from the President’s Office, which were often contradictory. In fact, it was the President himself who was directly in charge of the government. Journalist and political analyst Yuriy Butusov made a spot-on remark:

“…the President failed to delegate powers to the government, but he did delegate responsibility for his own approval rating.”

Second, the Honcharuk government dared to say “no” to the oligarchs (the Tsentrenergo scandal came to the surface, but there have been many other similar stories; oligarchic media and their parliamentary accomplices attacked the government constantly and violently), and the Prosecutor’s Office protected the Privatbank case.

We all know that approval ratings are formed by the media, not by objective indicators – as long as living conditions are tolerable, TV will win [in the battle for reality – ed]; if they become intolerable, then TV loses. Next, the media belongs to the oligarchs, and only they can restore the President’s approval rating, but there is always a price to pay.

Third, the Honcharuk government was formed by ex-head of the Presidential Office Andriy Bohdan, but Bohdan is no longer on the President’s team. According to the logic of clan politics, if the head of the Presidential Office is dismissed, all the officials appointed by the former head must be replaced. But, the tradition of the Presidential Office running the government has not disappeared, so the new government is actually run by the new head Andriy Yermak, and not by the newly appointed PM Denys Shmyhal.

This is neither a tactic nor a strategy – it is called chaotic management. It is a bad TV series about chaotic management.
Did “Honcharuk’s leaked audio files,” [in which a voice like the prime minister’s was heard saying that the president has a “primitive understanding of economic processes] play a role in his dismissal? If we take a good look at Zelenskyy’s psychological portrait, this was probably another factor, albeit a minor one. Let me remind you that the recordings were edited on the computer of a journalist of the 1+1 TV channel [of which oligarch Ihor Kolomoiskyi is the primary owner].

Finally, a very important reason was given by the editor-in-chief of Borys Davydenko: the President thinks and acts in terms of TV series. He does not distinguish between TV series and reality (he himself admits this fact in a recent interview with The Guardian) and is sincerely convinced that new actors should take the place of unpopular ones. This is neither a tactic nor a strategy – it is called chaotic management. It is a bad TV series about chaotic management.

Considering the aforementioned reasons, I cannot help but mention the ongoing meme about the so-called “Soros followers, ”which claims that the Honcharuk government, as well as all the anti-corruption bodies, the National Bank, etc. were part of the philanthropist George Soros’ global plot conspiring behind the scenes. This meme has Russian roots and was actively promoted in Ukraine first by pro-Russian media and politicians, followed by Ukrainian oligarchic media and politicians.

The Honcharuk government was not infallible. It had major problems with performance efficiency, with communication, and with strategy (admittedly, it is difficult to work on strategy if the Presidential Office requires quick, small victories and a focus on low-hanging fruit).  However, it was the first government to set new working standards, and there is no certainty that we will see a return to this level any time soon.

So, where does this leave Ukraine?

  1. Greater influence of the oligarchs
  2. Degradation of management culture
  3. End of the second great wave of reformers (the first wave came at the end of 2014)
  4. Return of people and practices from the Yanukovych era.
  5. Risk of a full-blown financial crisis, which the oligarchic media have already begun talking about.

What happens next?

Zelenskyy’s approval rating will not increase. No media efforts can stop the decline, which was caused by objective reasons, because all approval ratings tend to drop during the second year in power. The new government’s approval rating starts at the point at which that of the previous government stopped declining. The President can shift the blame on to the government once, but it will not work again.

The new government will not work effectively because it knows that it will be praised not for its efficiency, but for its approval rating… but this rating will not increase. Signals from the Presidential Office will be more contradictory, performance criteria more obscure and management culture less effective.

The return of Yanukovych’s people has already begun, and it will become systematic. Many old corrupt officials are already planning to return to their posts, claiming that their dismissal was illegal. In doing so, they will be assisted by the courts. Certain provisions of civil service reform introduced by the previous government will be repealed, and the lustration law may be abolished by the Constitutional Court. Many professionals who joined the government in the last six months will be fired or will resign because their demands will not be met.

Ukraine’s cooperation with the IMF is in jeopardy, a situation that constitutes a huge financial risk and a bad signal to all other donors and creditors, most notably the European Union, whose contribution is the largest. Oligarchic MPs and media are already speaking of a default scenario (despite the fact that in 2019 Ukraine had the best macroeconomic situation in 30 years). Russia also welcomes Ukraine’s default, as this scenario will allow Russia to become Ukraine’s indispensable partner. In fact, there will be no other partners left – this was also the case in the fall of 2013, before the Euromaidan revolution began.

It is sad to say that all of these things were foreseen in my forecast for 2020. Here is what I wrote at that time:

“… the oligarchs will gradually increase their influence through a change of government and (possibly) parliament. The resignation of the government is very likely, but there are two options as to when it may happen – in the spring or in the fall – and what the government will have accomplished by that time. The next government will be neither professional nor monolithic; the very idea of ​​a technocratic non-coalition government will be called into question, so the next government will be much worse and will consist of people representing different oligarchic groups and possibly Russian interests.”

President Zelenskyy is tired and with a flick of his hand, he has undermined all the benefits that were launched in the first six months of his presidency (see Financial Times). At the same time, all the bad things are still there, and it will be difficult for the government to get up and move forward in this swamp. Of course, it is much easier to let yourself sink deeper in a muddy swamp; gravity alone will do the trick for you.

Meanwhile, not only are external conditions deteriorating, but they are approaching critical indicators…

Read also:

Translated by: Christine Chraibi
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