Prime Minister Groysman submits resignation

Ukraine’s Prime Minister Volodymyr Groysman announced
on May 20 that he will submit his resignation and leave his office after the
weekly Cabinet meeting on Wednesday. He said he was responding to the call made
by President Volodymyr Zelenskiy for the current government to submit its
resignation. “After the new president was elected, I spoke about how I realized
all the challenges and potential threats in the future,” Groysman said during
his press conference. “I proposed to the president and parliament for us to
form a new agenda together and begin to reach decisions very quickly to make
Ukraine stronger. The president chose a different path and I believe that
today, with his statement, he took upon himself all the responsibilities for
the future threats that are on the agenda.”

In his remarks, Groysman boasted that throughout his
three years as prime minister, “we didn’t allow any crisis or any problems that
would have threatened our statehood.” Reforms were conducted to secure Western
loans, the minimum wage was raised and the Ukrainian army was financed, he
said. Moreover, Ukraine is in good condition today with gross reserves at USD
20 bln and UAH 57 bln in Treasury residuals, he said. That evening on a
political talk show, Groysman called upon Zelenskiy to appoint his replacement
(though that can only happen if a parliamentary coalition is in place. It was
dissolved on May 16). In the meantime, the acting PM will be Groysman’s first
deputy, Stepan Kubiv. He served as the National Bank head in the months
following the EuroMaidan revolt during which the hryvnia began to plummet.

Zenon Zawada: Groysman’s
resignation was unexpected but very strategic. He understands that the
following months in the government will be plagued by rivalry, mutual
accusations, grandstanding and ultimately little getting accomplished. And he
understands that amid this infighting, Zelenskiy will have the public trust as
the neophyte to politics and will emerge as the victor, with a solid result in
the parliamentary elections (the sooner the vote, the better the result for
Zelenskiy’s party). So Groysman is removing himself from the position of not
only appearing as if he is part of the “old guard” resistant to change, but
also removing from himself the responsibility for the failure to engage in
reforms in the coming months.

In the context of Ukraine’s future, Groysman’s resignation
harms Ukraine’s chances for securing the next IMF loan tranche this summer, as
we had been expecting. This won’t be painful for Ukraine if early elections are
held and a new parliamentary coalition and Cabinet emerge in early autumn to resume
IMF talks and fulfill any remaining requirements.

Groysman has solid chances to get re-elected to
parliament, but only if it’s part of a political force with figures who are
more popular than he is. Names like former PM Arseniy Yatsenyuk, former
President Petro Poroshenko and Interior Minister Arsen Avakov won’t help him
much, in our view. Yet if Groysman fields his own political force, he will need
other names because he doesn’t enjoy enough popularity or charisma to carry a
party past the 5% barrier. A possible partner is Vitali Klitschko and his
Ukrainian Democratic Alliance for Reforms.

As for a new prime minister, he or she can only emerge
if there is a parliamentary coalition in place. Despite Zelenskiy calling for
parliament’s dismissal yesterday, he has yet to sign the corresponding decree.

This morning, Zelenskiy held consultations with the
heads of parliament’s factions to discuss how the Rada can be dismissed and
early elections organized. If no agreement is reached today, or in the coming weeks
for that matter, Zelenskiy’s attempt to call early elections (in two months’
time) will face resistance from MPs of the Poroshenko Bloc and People’s Front
party, who will refer to the Constitution in arguing against parliament’s
dismissal. These two ruling parties dissolved parliament last week with
the very intent of preventing Zelenskiy
from dismissing the Rada (or at least not without their input in the process).

Also if no consensus is reached, parliament’s six
factions have 30 days to form a new coalition, according to the Constitution,
which also forbids dismissing parliament six months before the newly elected
MPs take their oath. That would likely occur in December, following the parliamentary
vote that is scheduled for Oct. 27.