Ukraine's Yatsenyuk Hobbled despite Winning No-Confidence Vote

Ukraine's pro-Western government has been left politically weakened and under even fiercer pressure from foreign allies to pursue reforms needed for the release of vital aid despite narrowly surviving a no-confidence vote.

Prime Minister Arseniy Yatsenyuk was left standing but battered after a white-knuckle fight in parliament Tuesday that saw deputies muster only 194 of the 226 votes needed to force out his cabinet over its perceived failure to tackle graft.

The outcome has given the cabinet a reprieve of at least five months under a law that forbids the chamber from trying to oust Yatsenyuk again during its current session ending on July 22.

But the cash-strapped government remains hobbled by this month's loss of a reformist economy minister who accused an ally of President Petro Poroshenko of trying to seize the cash flows of the vast but opaque defense and energy industries.

IMF chief Christine Lagarde warned last week that it was "hard to see" how a Fund-crafted $40-billion (35.9-billion-euro) global bailout could continue without Ukraine keeping the pledges it made when the package was agreed a year ago.

And Poroshenko sowed further confusion by urging Yatsenyuk to step down voluntarily after losing public trust in his ability to fight corruption and overcome Ukraine's deep economic malaise.

The president made no public comments about the political confusion Wednesday and it remained unclear how Ukraine's two top leaders intended to work together in the months to come.

"While Yatsenyuk survived this vote of no confidence, his reputation -- and to some degree Poroshenko's too -- have been dealt a heavy blow," said political analyst Andreas Umland.

One of the most crucial questions facing Ukraine and its Western partners is whether the government will still manage to push through the reforms needed for Kiev to secure the release of $10 billion in foreign assistance this year.

"We're watching developments in Ukraine's parliament very closely," U.S. State Department Deputy Spokesman Mark Toner said.

We "don't want to speculate too much on other potential outcomes, but we strongly urge all of Ukraine's political parties to put the needs of the country first."

Glib Vyshlinsky of Kiev's Center for Economic Strategy said the government had no choice but to follow through on the painful and socially unpopular belt-tightening measures demanded by the International Monetary Fund.

"There are no other sources of foreign assistance," Vyshlinsky told AFP.

"Turning to (Russian President Vladimir) Putin is not an option."

Ukraine's economy shrank by about 10 percent last year while annual inflation soared to more than 43 percent even with the Western assistance in place.

A withdrawal of funding could crush Ukraine's hopes of a 2016 economic revival and running only a modest budget deficit.

"An inability to cut the gridlock would... put at risk the financial support of the country not only from the IMF, but also from other official creditors," Dutch banking giant ING said in a research note.

"Given the latter would be a financial disaster for Ukraine, it is in politicians' interest to find a credible and sustainable solution and pass through the current tensions."

Yatsenyuk's weak hand was highlighted Wednesday by fiery former prime minister Yulia Tymoshenko's decision to quit the ruling coalition in parliament.

The 2004 pro-Western Orange Revolution's co-leader accused lawmakers who objected to Yatsenyuk's dismissal of following the orders of shady tycoons "who formed the government and ruled the country."

But her Batkivshchyna (Fatherland) party is the smallest of the four factions that comprised the ruling majority in Ukraine's increasingly splintered parliament.

Analysts said her decision may make things for the cabinet more difficult but not catastrophic.

The Eurasia Group political risk consultancy said "coalition parties will likely work out a deal on reshuffling other cabinet posts that allows the government to function through the spring and summer."

"The IMF never demanded Yatsenyuk's resignation," added Oleksandr Paskhaver of Kiev's Center for Economic Development.

"Moreover, it favored the current team staying in place."