Maybe this is why the US and EU seem to be dumping the Ukraine.

The Ukrainian government is on the brink of declaring default.

The Ukrainian government has proposed a bill allowing the government to impose a “moratorium” on payment of the country’s external debts.

Kiev is preparing for default.

Such a moratorium is just another word for a default.

It is the same device the Russian government used when it defaulted on its external debt in 1998.

This is not quite the end of Ukraine’s debt saga. Ukraine will only be formally in default when it misses a payment.

It is possible Ukraine has taken this step as a negotiating tactic to put more pressure on its Western creditors.

It is also possible Ukraine is hoping to preserve some financial credibility by picking and choosing which creditors it will pay.

As we have discussed previously, it might try to go on paying its Western creditors while defaulting on the debts it owes to Russia.

Frankly, this all looks unlikely and it seems that what we are looking at is an across-the-board default.

In truth, as has been pointed out by several people --- notably by Eric Kraus --- the numbers of the various IMF plans have never added up, and a default looked increasingly inevitable from the moment the Maidan coup happened, when it became clear the Ukrainian government was heading into a confrontation with its economically critically important eastern regions and with its biggest trade partner Russia.

The accelerating collapse of Ukraine’s economy (with GDP contracting by 17% in the first quarter by comparison with last year) and the deadlock in the negotiations with the Western creditors, appears to have made today’s default announcement unavoidable.

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The following Statement has just appeared on the Ukrainian government’s website: