Ukraine PM hails ‘historic’ Moscow deal

Ukraine’s prime minister says that Kiev has avoided bankruptcy and social collapse thanks to a “historic” bail-out deal with Russia, as protesters accuse the government of selling out to Moscow.

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President Viktor Yanukovych faced angry criticism after Tuesday’s deal from Ukraine’s opposition who fear it will rob the country of a European future. But Prime Minister Mykola Azarov said it was the only way to rescue the economy.

“What would have awaited Ukraine (without the deal)? The answer is clear – bankruptcy and social collapse,” Azarov told parliament.

“This would have been the New Year’s present for the people of Ukraine,” he added with characteristic irony, describing the Moscow accord as a “historic event”.

Russia’s President Vladimir Putin on Tuesday agreed to buy 11 billion euros ($A17.15 billion) of Ukraine’s debt in eurobonds and slash its gas bill by a third, a move economists said would stave off the risk of a Ukrainian default for now.

The opposition to Yanukovych fears there must be hidden strings attached to the package, and vowed to keep pushing for early elections and a shelved deal with the European Union.

But Azarov said there was no way Ukraine could have signed the Association Agreement with the European Union as Kiev would have had to have accepted unfeasibly stringent IMF conditions for economic reform.

“The agreements that were signed offer good perspectives for the Ukrainian economy,” Azarov said of the Moscow talks, while giving a warning to the thousands still occupying Kiev’s Independence Square by saying the government “will not allow anyone to destabilise” the country further.

The deal – signed almost a month since Ukraine decided to back out of its long-mooted Association Agreement with the EU, which sparked the biggest protests since the 2004 Orange Revolution – has both the opposition and European diplomats fuming.

“Yanukovych used Ukraine as a pawn,” opposition leader and world boxing champion Vitali Klitschko told the crowd of about 50,000 on Independence Square late Tuesday, accusing the president of handing Ukraine’s industries to Russia as collateral in order to get the funding.

“The big question is, what did Yanukovych sign?” Klitschko said.

“Russian emergency loans to Ukraine risk further delaying urgent economic reforms and necessary EU modernisation,” Swedish Foreign Minister Carl Bildt tweeted. “Decline might continue.”

The help from Russia might allow Kiev to stave off the threat of an imminent balance of payments crisis and possible default, amid a recession that has seen the economy shrink since the first half of last year.

Hailed by the two leaders as a new page in the Kiev-Moscow strategic partnership, it also marks a further step away from integration with the European Union.