In the 1920s and early 1930s war reparations, national debt, runaway inflation, lost income resulting from lost territories, and post-war reconstruction costs crippled Germany’s economy. Consequently, political extremism, from communism to national-socialism, thrived. This era, known as Weimar Germany, ended with the rise of power of Adolf Hitler and his National-Socialist or ‘Nazi’ Party in 1933. Today, a similar dynamic is unfolding in Maidan Ukraine.
Ukraine’s GDP fell by an estimated 8 percent last year and, according to most estimates, will achieve growth this year but of no more than 1 percent. Ukrainians have the lowest average incomes in Europe, amounting to less than half that of Russians’ average salary and having fallen 13.5 percent last year. Official inflation for consumer prices in 2014 will end up at around 12 percent and is expected to increase to at least 14 percent this year. The hryvnia declined by 46 percent to the US dollar in 2014 from just over 8/1 to almost 16/1 and is likely to continue to decline through 2015 given the country’s poor fundamentals. Official unemployment is running at 9 percent and is predicted to peak just over 10 percent in the second quarter of this year. Real may be at levels twice these. For every hundred workers there are 113 dependents. Production and tax revenues are falling because of the exodus of a million refugees and the loss of Crimea and de facto of Donbass. There are another 600,000 refugees from the civil war in the east stranded within Ukraine. Donbass coal production has collapsed by half this year forcing Kiev, formerly an exporter of coal, to import.
Kiev is about to default on its sovereign debt. Government debt is 41 percent of GDP and will grow to 48 percent through 2020. The IMF has already approved a $27 billion standby loan to Ukraine conditional on the implementation of wide-ranging and likely politically unsustainable reforms, but Kiev seeks another $15 billion to avoid default. But Kiev’s borrowing is increasing the country’s debt burden aggravated by the weakening of the hryvnia. Ukrainian government bonds maturing in coming years have fallen in value by anywhere from 29-45 percent. All this will remain a drag on the economy for at least several years, robbing it of whatever chance it might have of recovering.
Overall, the Ukrainian economy remains largely dependent on Russia for trade and money transfers from Ukrainians working in Russia. Yet Ukraine’s policy is to reduce trade and interaction with Moscow, making the prospects for recovery even more morbid.
To address the crisis, the government is introducing an austerity program, drastically cutting services while raising taxes and all manner of fees such as public transport fares. Water, gas and heat bills will rise by two or three times. It initially passed a law abolishing free high school education but was forced to repeal the law after demonstrations rocked the capitol and other cities.
Ukraine’s economic collapse is feeding the country’s extremists, who took the opening provided by the revolution, state failure, and civil war and ran with it. Similar to the early days of the Nazi party, members of neo-fascist parties – Right Sector, Svoboda (Freedom, ironically enough), the Radical Party – and host of less nationalist but still in good part national chauvinist in ideology roam the countryside.
They beat up parliamentarians and former parliamentarians, seize businesses, attack democratic media outlets, crash university classrooms looking for ‘moskals’ (derogatory term for ethnic Russians) and force them and entire classrooms to stand and sing the national anthem, infiltrate the military, and run autonomous armed units reminiscent of private armies for business and ideological warlords.
Hastily-manned National Guard units, poorly subordinated to the regular Ukrainian army and Internal Affairs Ministry are dominated by as many as 10,000 neo-fascist and national chauvinist recruits. Battalions with the names Azov, Aidar, and Dnepr have become infamous among human rights groups for their war crimes and violations of human rights. In a sign of the times, the neo-fascist Right Sector party, led by Dmitro Yarosh – a parliamentary deputy whose seat was bought by the notorious oligarch and Dnepropetrovsk warlord Ihor Kolomoiskii and whose brown shirts filled the ranks of battalions like Azov, Aidar and Dnepr – has refused to subordinate his troops to the army, giving Ukraine’s perhaps most virulent neo-fascist party its own several thousand-strong private army. Yarosh and his thugs “coordinated” the 2 May 2014 pogrom in Odessa in which nearly 50 peaceful anti-Kiev picketers were burnt and shot to death while hundreds of Ukrainians stood by and sang the national anthem. Odessa (and several other cities) has been the scene of several mysterious terrorist bombings in recent weeks.
As in Weimar Germany, elements within the government also display authoritarian tendencies. Television channels are threatened with closure followed by attacks on them by neo-fascists in the streets. Any problem that arises – from economic to security issues – is immediately blamed on Russia, Putin and the FSB. When a clearly videotaped Ukrainian jet fighter bombed a Donbass village last summer, the Ukrainian Security Service, the SBU, claimed it was a Russian plane. Such charges in the highly charged anti-Russian atmosphere immediately cuts off criticism of the Maidan regime, since those who challenge the official version are immediately accused of being ‘moskal’ fifth columnists – a term Poroshenko has used twice in his mere half year as president.
As the economy continues to decline through 2015 and likely through 2016 and perhaps beyond, the national extremists will be in a better position to parlay instability into power, first on the streets and increasingly in the corridors of power where they already have a foothold. Top police, security, and military posts are being taken by neo-fascist or their sympathizers. It may be just a matter of time before Ukraine’s strongman emerges.
The regime hardliners in the Petro Poroshenko regime like Defense and Security Council head Oleksandr Turchynov, Internal Affairs Minister Arseniy Avakov and, under dire circumstances, even Prime Minister Arseniy Yatsenyuk could make common cause with the neo-fascists and national chauvinists on the streets as poverty and chaos increase and engineer a coup. Yarosh and Dnepr Battalion commander Semen Semenchenko have already threatened to march on Kiev to deliver Poroshenko the same fate Viktor Yanukovich met. Whether it is Yarosh, Turchynov, or one of a myriad of other candidates emerges as leader, only time will tell.
Much talk has been heard about fascist Russia and Putin as today’s Hitler, but in fact Putin is a moderate compared to many of the characters roaming the corridors of power and dominating the streets in Poroshenko’s Ukraine. If Weimar Ukraine is to avoid a full-fledged neo-fascist fate rather than the present national chauvinist one, the West must demand that Yarosh and his ilk submit their armed forces to the Defense Ministry or be arrested.
More importantly, it is imperative that the West and Russia get beyond their national aspirations for global and regional power, respectively, and secure peace and prosperity, including a massive economic aid package, for Ukraine, east and west.
Originally published at http://www.geostrategicforecasting.com/weimar-maidan-ukraine/#sthash.nqQyjbje.dpuf