Orange Revolution Is Bruised Fruit

As if the global market collapse weren't enough. Ukraine's parliamentary speaker Arseny Yatsenyuk announced Tuesday that the country's Western-leaning governing coalition had officially fallen apart. Back on September 3, President Victor Yushchenko pulled out of the coalition with his erstwhile ally, PM Yulia Tymoshenko. The two sides had 10 days to reconcile the political rift, but were unable to come to any agreement. Should the frost continue for another 30 days, Mr Yuskchenko has the right to dissolve parliament and call for another round of elections.

Back in November of 2004, Mr Yushchenko and Ms Tymoshenko were global icons as they led the Orange Revolution in Ukraine. After a fraudulent round of presidential elections triggered widespread protest, Mr Yushchenko won a run-off against the sitting PM Victor Yanukovych. The election was hailed as a victory for political progress in the region. Mr Yushchenko and his Our Ukraine party endured a nasty campaign (his supporters were intimidated and he was poisoned) en route to a peaceful transfer of power. For her part, Ms Tymoshenko lent the opposition her populist charisma in exchange for assurances that she would become prime minister. On the heels of an unsavory, Kremlin-backed regime, Mr Yushchenko and Ms Tymoshenko were seen as the darlings of democracy. 

The political honeymoon did not last long. In September 2005, a series of senior officials resigned from the ruling coalition in response to political infighting, and Mr Yushchenko dismissed the government headed by Ms Tymoshenko. Since then, Ukraine's political landscape has been reeling. In 2006, Mr Yanukovych's pro-Russian Party of Regions dominated the parliamentary elections, securing the most seats ahead of Ms Tymoshenko's bloc. The Our Ukraine party came in a humiliating third. Faced with accepting his bitter rival Mr Yanukovych as the new PM, Mr Yushchenko hastily organized a new coalition that would enable his former prime minister, Ms Tymoshenko, to head the government. 

Such political wrangles were only exacerbated by economic troubles that began in 2003. Ukraine is home to the fastest rise in price levels in Europe (inflation now tops 31%) and has been struggling to stimulate the sort of growth that can lift some 8% of its population out of poverty. Indeed, the present rue began with disagreements over the struggling economy. In May, Ms Tymoshenko prevented President Yushchenko from addressing parliament as an apparent response to the premier's veto on government policies. There are historic tensions between these camps on how to navigate the sale of state assets, such as its metallurgic enterprises.

More recently, and indeed more openly, the president and PM disagreed over Russia's war in Georgia. Mr Yushchenko condemned the fighting in the breakaway republics, no doubt alarmed by the precedent Moscow was setting for its former republics. The president's cozy relations with NATO and US Vice President Dick Cheney stand in contrast to the prime minister has issued only general statements calling for peace and stability. These remarks fail to convince observers that Ms Tymoshenko would rule out a coalition with the increasingly popular Mr Yanukovych.

Such an alliance would undoubtedly play well in Russia. The Party of Regions, which has the most seats in Ukraine's assembly, backed President Dmitri Medvedev's recognition of Abkhazia and South Ossetia and has consistently pushed for pro-Russian foreign policy. For now, members of Ms Tymoshenko's bloc are denying any efforts to swap their coalition partners. Vice PM Hrihoriy Nemyria claimed that, "Our priority is to restore the Orange coalition," and Ms Tymoshenko has attempted to downplay the standoff. 

Still, economic woes produce strange bedfellows. The embattled global economy has sent shock waves to Ukraine, creating a negative symbiosis with internal developments. News of the coalition collapse caused Standard & Poor's to cut Ukraine's credit rating, and credit-default swaps on government bonds reached a record 5.92% (up 22 basis points). Credit-default swaps are financial instruments designed to protect bondholders in the case of a default, and their price fluctuations are seen as a the market's prediction for stability. These increasing prices indicate eroding confidence in the Orange coalition. 

The political turmoil in Ukraine has likely scrapped any foreseeable plans to join NATO. If nothing else, Russia will chalk up another victory in the Caucasus and press to reëstablish its influence in Kiev.