Oct. 9 (Bloomberg) -- Ukrainian President Viktor Yushchenko called an early general election for Dec. 7, the second in as many years, after lawmakers missed a deadline to form a new coalition government.

``I was not informed of any coalition agreement,'' Yushchenko said late yesterday in Kiev. ``I use my constitutional power to dissolve parliament. Let the people help to solve the political crisis.'' In a decree posted on his Web site today, he set Dec. 7 as the election date.

Yushchenko's party, which is seeking closer ties with the European Union and the North Atlantic Treaty Organization, quit the coalition on Sept. 3 after former ally Prime Minister Yulia Timoshenko joined with the pro-Russian opposition to strip the president of some powers. Under the constitution, Timoshenko had one month to form a new majority.

Yushchenko and Timoshenko joined forces to win the 2004 election after the bloodless Orange Revolution on promises to move the country toward West. After a split in 2005, the two reunited before last year's elections. Since then, Yushchenko and Timoshenko have been locked in a battle over how to tackle Europe's fastest inflation rate, sell state assets and how to spend budget funds.

``Ukraine's political turmoil arguably could not have come at a worse time,'' said Kaan Nazli, the director at Medley Global Advisors LCC, a New York based policy intelligence service. ``The economy is struggling with multiple demons'' and elections ``are also bad for Ukraine's NATO and EU prospects.''

Inflation Rate

Timoshenko's alliance is backed by 24.1 percent of voters, according to the most recent opinion poll, conducted by the Kiev-based International Institute of Sociology. Regions of Ukraine, the opposition party that is led by Viktor Yanukovych and advocates closer ties to Russia is supported by 23.3 percent, according to a Sept. 1-7 survey of 2,036 people with a margin of error of 3.3 percentage points, the institute said.

Yushchenko's party is third with just 3.8 percent, the same as the communists, the poll showed.

``Early elections are not likely to bring political stability,'' said Svitlana Maslova an analyst at London-based Barclays Capital. ``Tensions between the parliament and the president are likely to continue'' as ``the pro-presidential party may gather even fewer votes than predicted. Yushchenko is thus likely to face, after the elections, parties he has already had a lot of difficulties working with.''

`Greed for Power'

Yushchenko said in his address last night that the coalition government ``was ruined by one thing -- the ambitions of one person and her greed for power. There were no economic reforms, just social populism, which lead to inflation and decline in living standards.''

Ukraine's inflation rate, driven by global food and energy costs and exacerbated by government spending, rose to 24.3 percent in August. The annual rate almost tripled in a year to 31.1 percent in May, prompting Standard & Poor's to cut the country's credit rating.

The hryvnia fell 18 percent in the past month as the country's ruling coalition collapsed and debt markets seized up.

Ukraine's price for government 6.75 percent bonds maturing in 2017 fell to 58.990, the lowest since they were issued in November last year, compared with 61.750 yesterday. The yield jumped to 15.229, compared with 14.437 yesterday.

`Precarious' Situation

``The early elections are clearly negative for the economy. They may further undermine economic fundamentals,'' Maslova said. ``The country is in a very precarious economic situation. The economy is expected to slow sharply, while consumer price inflation should remain high.''

Timoshenko said Sept. 26 she wanted to revive the coalition with Yushchenko's party, adding she would join any political force to avert early elections. She also warned she would push for presidential elections, scheduled for 2010, to be brought forward if Yushchenko dissolved parliament. Both politicians are expected to run for the presidency.

Lawmakers from Timoshenko's bloc, including Andriy Portnov, had threatened to challenge any decree to dissolve parliament in the Constitutional Court.

Timoshenko will remain as acting prime minister until the new Cabinet is formed.

Yushchenko today urged the parliament to pass necessary changes to the election law and the state budget to finance the vote, according to a statement on his Web site. But Timoshenko's alliance physically blocked the parliament's presidium, so the parliamentary Speaker Arseniy Yatsenyuk had to close the meeting, minutes after he opened it.

To contact the reporters on this story: Daryna Krasnolutska in Kiev at dkrasnolutsk@bloomberg.net

Last Updated: October 9, 2008 11:38 EDT