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For Ukraine's Poroshenko, a growing crisis hits a critical juncture (+video)

Amid plunging public trust, the Panama Papers revealed this week that the struggling Ukrainian president holds offshore accounts, and the Dutch resoundingly voted against accepting Ukraine into the EU.

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    Ukraine's President Petro Poroshenko (c.) speaks to media as he visits Miraikan (National Museum of Emerging Science and Innovation) in Tokyo today.
    Issei Kato/Reuters
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It's been a terrible week for Ukraine's Petro Poroshenko.

Amid a deepening government crisis and plunging public trust, President Poroshenko has been battered by a flash flood of bad news. On Monday came allegations of personal financial impropriety via the Panama Papers. And yesterday, Dutch voters resoundingly rejected the key hope of Ukraine's 2014 Maidan Revolution – integration with the European Union – in a non-binding but highly symbolic referendum.

Things are coming to a head, experts say, largely because Ukraine has failed to deliver on promised reforms under Poroshenko's two-year-old presidency. That in turn has deeply disillusioned the Ukrainian public, fractured tenuous elite consensus, and prompted the rise of a resentful "Ukraine fatigue" among some segments of the European population. And many now fear that the Maidan Revolution might sputter out amid infighting and policy failure, leaving people more cynical and frustrated than ever, just as the Orange Revolution did a decade ago.

"We're seeing the accumulated consequences of Poroshenko's failures, and it will certainly impact his future prospects," says Mikhail Pogrebinsky, director of the independent Kiev Center for Political Studies. "What we probably need now is a complete rethink of the country's direction. But it seems more likely he will just keep hanging on, trying to muddle through."

Government in crisis

The current crisis was triggered in February by the resignation of the Western-backed economics minister, Aivaras Abromavičius, who insisted he could no longer work in an environment of endemic corruption, cronyism, and oligarchic rule-from-behind-the-scenes.

"Neither I nor my team have any desire to serve as a cover-up for the covert corruption, or become puppets for those who, very much like the 'old' government, are trying to exercise control over the flow of public funds," Mr. Abromavičius said.

The International Monetary Fund, which is supposed to be keeping Ukraine afloat financially, has not disbursed any funds since last August due to the political paralysis in Kiev, and doesn't seem ready to resume the funding anytime soon. Bloomberg reported this week that some international creditors are abandoning Ukrainian bonds amid the political turmoil, and more could follow if the crisis isn't resolved.

A parliamentary vote of no confidence in the prime minister, Arseniy Yatsenyuk, failed to pass last month, but left the governing coalition fractured and depleted after key allies, such as the liberal Samopomich party, walked out. Poroshenko, who has called on Mr. Yatsenyuk to resign, is trying to promote his own ally, parliamentary speaker Volodymyr Groysman, to replace him. Many others are calling for fresh parliamentary elections to break the log jam.

The last round of elections, in October 2014, was intended to bring in a new reformist majority, but instead resulted in a parliament mostly full of old faces, including representatives of oligarchs and former members of the old regime. Experts say there is no guarantee that new polls would significantly change the mix, but might leave the country rudderless for months as political struggles play out.

"Poroshenko refuses to even mention the possibility of new elections, because that is really not in his interest," says Viktor Nebozhenko, director of Ukrainian Barometer, a Kiev-based sociological agency. "Parliamentary elections would open the floodgates of criticism. Since he made the mistake of creating his own party, the Poroshenko Bloc, it will all inevitably pour down upon him, and look like a rehearsal for new presidential polls. Poroshenko was lucky to get elected once. After that it's been one failure after another."

But failure to form a new governing coalition will, at some point, leave no alternative to fresh elections, analysts say.

"Some groups of the elite think elections would give them better chances, and they are ready for that," says Vladimir Panchenko, an analyst with the independent Center for Political Studies in Kiev. For one, Yulia Tymoshenko, the ambitious former prime minister, has pulled her party out of negotiations for a new coalition, effectively declaring war on the government.

"The public, in general, are tired of all the lies and finger-pointing. So, people may look forward to a cleansing of the elite through elections," says Mr. Panchenko. "At least new elections might take people's minds of the state of the economy, which is really dire."

Dwindling popularity

A massive survey conducted by the International Republican Institute in the middle of last year found public trust in government and parliament at dangerous lows, with more than two-thirds of the population saying the country is "going in the wrong direction." A Gallup poll in December revealed worsening trends, with Poroshenko's approval rating down from 47 percent the previous year to just 17 percent.

Mr. Nebozhenko says his own agency's recent polling finds Poroshenko's rating "is not more than 10 percent, and keeps falling with each passing month."

Wednesday's referendum in the Netherlands, in which voters called upon their government not to ratify the EU-Ukraine association agreement, may have been more about internal European frustrations than rejection of Ukraine. But it will be a severe blow to the morale of those Ukrainians who supported the Maidan Revolution as a critical "European choice" for their country.

The news that Poroshenko opened an offshore company to manage his assets at the height of fighting with eastern separatists in 2014 will not improve his image. The president denies any wrongdoing, but that's not likely to help him much, says Nebozhenko.

"This is not an economic or legal issue; almost all Ukrainian businessmen have offshore property. But apart from being a businessman, Poroshenko happens to be president of Ukraine. He is the one person who shouldn't be doing that. It suggests to everyone that he doesn't believe in his own country, thinks the chances of reforms are slim, and so he's hedging his bets. That's the message from the person we entrusted to carry out reforms in the first place."

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