Flash Report /
Ukraine

Ukraine: Collapse of coalition may herald early elections (or not)

  • Ukraine’s ruling coalition collapsed this morning after the withdrawal of the People’s Front party.

  • he surprising news comes just a day after President-elect Volodymyr Zelensky’s inauguration was confirmed.

  • Parliament now has 30 days to form a new majority.

Ukraine: Collapse of coalition may herald early elections (or not)
Stuart Culverhouse
Stuart Culverhouse

Head of Sovereign & Fixed Income Research

Tellimer Research
17 May 2019
Published by

Ukraine’s ruling coalition collapsed this morning after the withdrawal of the People’s Front party. The surprising news comes just a day after President-elect Volodymyr Zelensky’s inauguration was confirmed for 20 May and ahead of scheduled parliamentary elections due on 27 October. Parliament now has 30 days to form a new majority.  

The coalition’s collapse comes after recent statements from Zelensky’s camp that suggested he might seek to dissolve parliament (Rada) and call early elections, despite his suggestions to the contrary after his election victory. Zelensky may have a strong political incentive to seek early elections. After his inauguration, Zelensky will be a president with a party, but no MPs. Zelensky will want to show changes in his first few months in office. 

Early elections will enable him to boost his representation in Rada (his party is expected to do well, but fall short of a majority), capitalising on his popular support that brought him to power, and enable him to pursue his own agenda. Otherwise, he will have to wait another five months (and six months from his election victory), and that passage of time risks undermining his support if he is seen as not having been able to do anything. However, we think there is a risk also for Zelensky in calling early elections, in that his party machine (such as there is one) simply is not ready for them (ie does the party have any, or enough, candidates to field in the elections?).

As to the motives for the People’s Front’s departure from the coalition, it is not clear to us if this is a deliberate ploy by the coalition/Poroshenko to obstruct Zelensky’s hopes of dissolving Rada and to call early elections (ie are they just trying to make Zelensky’s life harder and presumably hoping his performance in Rada elections will suffer)? 

The government now has 30 days to form a new majority but, as Rada cannot be dissolved within six months of an election, this 30-day period could take it within that time limit (ie Rada would have to be dissolved before 27 May, which is possibly one reason why Zelensky was keen to have an early inauguration, so as not to miss the deadline). Nor can the president dissolve Rada if there is no government. 

Or, on the other hand, is this a legitimate attempt by the People’s Front party, which was founded by former Prime Minister Arseniy Yatsenyuk, to try to force early elections? If a new coalition cannot be formed within 30 days, the president can dissolve parliament and call snap parliamentary elections anyway (recall that President Poroshenko himself called early parliamentary elections in 2014 after the break-up of the then ruling coalition). The People’s Front party (with 82 seats) was the second-biggest party in Rada after Poroshenko’s bloc following the 2014 parliamentary elections, so finding enough support elsewhere might prove difficult. However the People's Front's leader in parliament, Maksym Burbak, still called for elections to be held on 27 October and not early. 

But regardless, whether the parliamentary election is held in October, as scheduled, or some weeks early, is largely immaterial. What will matter more is whether parliament is cooperative or confrontational with the new president, and Zelensky’s own policy vision and his ability to pursue and implement necessary reforms, and the IMF programme. And elections that make that more likely will be welcomed by investors.

In the meantime, this week also saw confirmation that an IMF mission will visit from 21 May for two weeks (ie arriving after Zelensky’s inauguration). We think it will be the first time that the IMF, Zelensky’s new team and the existing government will have been able to meet together and discuss economic developments, prospects and policies. And, given the raft of issues now likely on the agenda (illicit enrichment law, gas tariffs, Naftogas and Privatbank), it is not clear to us if there will be sufficient time to reach staff-level agreement on the first review in just one visit or whether a follow up visit will be necessary.