1.
What Went Wrong
 No sharp break with the
Soviet system
 As a consequence pervasive
corruption evolved

2.
GDP per capita, PPP, 1990 and 2013
0
5,000
10,000
15,000
20,000
25,000
Ukraine Poland Russia Turkey
1990 2013
(constant 2011 international $
Source: World Bank, World Development Indicators

3.
What Needs to Be Done?
Political reform
Reform of the state
Financial stabilization
Energy Reform
Social Reform
EU – reform anchor

4.
Europe: Reform Anchor
Political & legal standards: Outstanding
Market access: Too limited - 36 quotas
for agriculture
Financial assistance: Tiny €5bn 2014-5
Technical assistance: Twinning has not
taken off

5.
Fix Politics First
Presidential elections, May 25
Parliamentary elections, Oct 26
New government of young, well-
educated outsiders, Dec 2
Reform program, Dec 9
Decentralize power, no done
Impressive achievements!

6.
Next Comes the State
Close unnecessary state agencies: A
dozen or so – some but too little
Lustration & judicial reform: Very
limited progress
Deregulation: Substantial progress
Reform public administration:
Minimal

7.
Achieve Financial Stability
Floating exchange rate, late 2013
IMF program, March 11
Fiscal Adjustment: Reduce public
expenditures long term from 53% of
GDP to 35% of GDP – much done
Get large foreign financing to replenish
reserve, $5bn to $20bn, now $12.4bn
Impressive progress!

8.
Clean up Energy Sector!
 Unify energy prices: Much done
 Abolish all energy subsidies: 70% done
 Provide social cash compensation: Done
 Create markets for all energy: Legislated
 Stimulate private energy production: Not
done
 Stop buying gas from Russia:
Great progress

9.
Social Policy Cannot Wait
Pension reform
Health care reform
Education reform

10.
3 Big Risks
Aggravated Russian aggression
Underfunding: EU & US should
step up financing: $8bn more!
Politics - severe economic hardship:
GDP fell 17.2% Q1, 14.2% in
Q2, Inflation 53%