July 24 (Bloomberg) -- Ukrainian Prime Minister Arseniy Yatsenyuk resigned after two parties quit the ruling coalition and President Petro Poroshenko signaled his support for early elections.
Yatsenyuk told the parliament in Kiev today that he’s stepping down after losing his allies’ backing and failing to pass legislation. Former world boxing champion Vitali Klitschko’s UDAR and Svoboda, a nationalist group, said they’d leave the coalition and seek a snap parliamentary ballot, according to statements today on their websites.
“The coalition has fallen apart, laws haven’t been voted on, soldiers can’t be paid, there’s no money to buy rifles, there’s no possibility to store up gas,” Yatsenyuk told lawmakers. “What options do we have now?”
Yatsenyuk’s administration took charge of Ukraine in February after pro-European street protests prompted Kremlin-backed President Viktor Yanukovych to flee. Since then, the government has battled a pro-Russian insurgency in the east of the country, which it says is supported by the government in Moscow. Russia also annexed Ukraine’s Black Sea peninsula of Crimea in March.
“All opinion polls and direct talks with the people show that society wants a full-power reboot,” Poroshenko, who has pledged to call parliamentary elections this year, said in a statement on his website.
Ukraine’s parliament must approve Yatsenyuk’s resignation, according to the constitution.
Yields on Ukrainian government bonds due 2023 rose to 8.38 percent as of 6:54 p.m. in Kiev from 8.27 percent yesterday, data compiled by Bloomberg show. Ukraine’s hryvnia weakened to 11.73 per dollar, compared with 11.68 yesterday.
Parliamentary Speaker Oleksandr Turchynov called on the parties that withdrew from the coalition to propose a candidate for interim prime minister. Under the former Soviet republic’s constitution, the existing cabinet will remain in place until a new coalition is formed.
The breakup of the coalition “was probably agreed on by political parties seeking elections and the president,” Yuriy Yakymenko, the head of political research at Kiev’s Razumkov Center, a non-governmental policy group, said by phone.
“Withdrawals from the coalition should not paralyze the parliament’s work,” Poroshenko said before Yatsenyuk announced his resignation. “The parliament must adopt amendments to the state budget needed to finance our army and also documents needed for cooperation with international financial institutions.”
Ukraine obtained a $17 billion loan from the International Monetary Fund in May to stay afloat as its economy may contract 6.5 percent this year. The hryvnia lost 29.75 percent versus the dollar since the beginning of the year, according to data compiled by Bloomberg.
The government expected lawmakers to approve changes to the 2014 budget, which envisages social-spending cuts and army spending increases, needed to qualify for the IMF’s next tranche. The 450-seat legislature rejected putting the amendments on the agenda.
Yatsenyuk’s resignation “brings some volatility to the process,” said Vladislav Sochinsky, the treasurer at Citigroup Inc.’s unit in Kiev. “The IMF program has some risk as the dysfunctional parliament may be reluctant to vote on austerity measures ahead of the snap elections,”
The parliament also rejected a cabinet law on a joint venture to operate the country’s gas transportation system.
“Ukrainian authorities are interested in holding parliamentary elections as early as possible to consolidate the mandate of trust that Ukrainian society gave to Poroshenko during the last presidential elections,” Serhiy Yahnych and Yevgeniy Orudzhev, analysts at BNP Paribas SA’s Ukrsibbank unit in Kiev, wrote in a note to clients.
To contact the editors responsible for this story: Balazs Penz at email@example.com Scott Rose, Eddie Buckle