Bank crisis hits hard in Ukraine's coal belt

10:06, 05 November 2008
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"We`re still waiting for our salaries..."

For the weary miners coming out at the end of the day`s shift in this remote village in the barren hills of eastern Ukraine, the country`s financial crisis has hit all too close to home, AFP reported.

"We`re still waiting for our salaries. We`re working for free," grumbled one miner with a soot-blackened face in a scuffed orange helmet, as he handed in his identification number tag in a decrepit grey building by the mineshaft.

Thousands of miners are in the same situation after Prominvestbank, a major lender where many coal mines have their accounts, was forced into receivership in October amid a deep financial crisis in one of Europe`s worst-hit countries.

It`s just one example of the kind of financial panic that has hit Ukraine.

Ukrainians have queued up in droves to close down their accounts and change hryvnias into dollars, taking billions of dollars out of the banks.

There has also been a sharp increase reported in consumer purchases of electronic goods and gold amid expectations that worse is to come.

The central bank has reacted by limiting withdrawals from deposit accounts.

Few miners were willing to speak about the salary issue but one mine director told AFP on condition of anonymity that he had 100,000 dollars (77,000 euros) in Prominvestbank for salaries in an account that has been frozen.

Salaries for coal miners average around 500 dollars (387 euros) a month.

"It`s not going to be resolved until May. It`s not just Prominvestbank. It`s the whole political crisis too," said Vladimir Tsygany from the Belitskaya Mine at an investment conference in Donetsk, the centre of Ukraine`s coal belt.

The economic crisis has hit Ukraine at a time when President Viktor Yushchenko and Prime Minister Yulia Tymoshenko are involved in a feud that could result in the country`s third parliamentary elections in three years.

Another conference delegate from the Krasnolimanskaya Mine near Donetsk, which employs more than 5,000 people, said: "The financial crisis has affected us. Our main account is with Prominvestbank and it`s been blocked."

The banks were once a source of pride for economic reformers in Ukraine, where the Orange Revolution protests of 2004 brought to power a pro-Western leadership that called for European integration and reducing ties with Moscow.

But the exposure of many banks to foreign loans meant the global financial crisis hit particularly hard and the political infighting has delayed further government action to stabilise the banking sector.

"Hard Times Are Here For Lenders," read a headline in the business magazine Expert. International ratings agencies Fitch and Moodys have downgraded several Ukrainian banks in recent weeks as a result of the crisis.

Standard and Poor`s, another rating agency, spoke of "low confidence in Ukraine`s financial and monetary institutions" and said this would in turn increase inflation and the risks for the real economy.

Ukraine`s parliament on Friday approved laws to set up a stabilisation fund to help ailing banks and companies and the International Monetary Fund has offered a 16.5-billion dollar (13-billion euro) loan.

But it`s all little comfort for Dima, a 38-year-old engineer in the Donetsk construction business, who can`t take any money out from his deposit account with Ukrbiznesbank, a local lender.

"I don`t know what`s going to happen. I didn`t realise there would be a problem so soon. My friends are in the same situation. I realise I may never get my money back," he said.


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