Ukraine backed into a corner?

Amid the global economic downturn, Ukraine is finding itself pushed into an even tighter financial corner.

The International Monetary fund predicts the country's Gross Domestic Product will fall by 12% by the end of this year.

The third credit installment from the IMF Stabilization Fund is expected to be transferred to the increasingly impoverished nation next week.

Since the beginning of 2009, Ukraine has printed more than $3 billion worth of the national currency, the hryvna, to shore up its economy.

These measures, along with its huge debt to Russian gas monopoly Gazprom, have many experts saying the country is on the verge of bankruptcy.

EU keeps itself aloof

Meanwhile, the European Union has refused to help Ukraine with the money the country needs to pay for gas.

The European budget had no funds to help Ukraine pay for Russian gas, European Commission President, Jose Manuel Barroso, said at a press conference on Friday.

“I will be frank: this is not our responsibility,” Interfax quoted him as saying.

Ukraine hopes to get a loan of $4.2 billion from European banks, to be able to fill its underground reservoirs with Russian gas. As an alternative, Kiev has suggested that European gas companies purchase the required amount of gas and store it in Ukraine.

Analysts say the present non-payment situation increases chances of new breaks in gas supplies to Europe this summer.

Earlier in June, Russian PM Vladimir Putin called upon Europe to provide Kiev with financial aid. Otherwise, he warned, Western consumers may face new breaks in the transit of Russian gas through Ukraine as early as late June or early July.

The EU replied that the dispute between Moscow and Kiev was purely commercial, and had to be dealt with as such, without any interference from outside.