Daily Austerity Watch: Belarus — The Next Bailed Out European Country

The IMF is poised to offer Belarus a $8 billion bailout as the former Soviet Republic teeters on the brink of insolvency.  While it’s chicken feed compared with the aid being offered to Greece and other cash-strapped nations, it does point out the economic chaos many nations find themselves in even as the worldwide economy slowly recovers from the worst economic decline since the Great Depression.

Belarus’ woes are exacerbated by the fact the country is ruled with an iron fist by Alyaksandr Lukashenka , the nation’s  ruler since 1994,  who has been called one of the most corrupt leaders in the world by the U.S. government.   A 2008 IMF loan of $3.5 billion,  $3.5 billion in Russian-backed loans and $1 billion in trade credits all have done little good.   Inflation is at double-digits and the value of the national currency has plunged, according to Radio Free Europe.

“The meltdown was sparked largely by increases in the rates Minsk must pay for Russian energy and a lavish, populist campaign of public spending that Lukashenka rolled out in the run-up to the December 2010 presidential election,” the service says. “The economic situation in Belarus — which is a relatively small and isolated economy — is increasingly presenting political challenges to the Lukashenka government. In addition to a sweeping crackdown since December against the political opposition that has provoked the ire of the West, Belarusian security forces have put down numerous protests sparked by the crisis.”

Belarus may get some help from neighboring Russia, but the price that Lukashenka will pay will be a steep one.   Bloomberg News is reporting that Moscow wants billions of dollars in state assets to be sold.   FIguring a way to do that without lining the pockets of Lukashenka and his family and friends will be difficult.  The IMF, the U.S. and the EU may be loathed to assist Belarus because of its awful human rights record.

“We thought President Lukashenko knew the scale of his economic challenge this year,” Polish Foreign Minister Radoslaw Sikorski said in an interview with Bloomberg News. “But the bill for mismanaging his economy has just arrived, and he’ll need to be rescued by those who endorsed him.”

Europeans are watching Belarus the same unease that Americans watch Cuba.    Both are a mess economically.   Cuban President Raul Castro has introduced economic reforms that were decades overdue.  Whenever the Castros leave power, Cuba will need billions in U.S. aid to right its economy.  The Castros, like Lukashenko, may stubbornly cling to power for years even though their people no longer want them.

–Jonathan Berr