Ukraine sets its sights on national recovery

Ukraine's efforts to complete a debt restructuring deal with its creditors by June serve as a reminder that its authorities and citizens are fighting a war on two fronts. On the outcome of this perilous contest hang the nation's prospects of becoming a law-based, prosperous democracy with a secure place in the European state system.

The first front is a military and political struggle against separatists in eastern regions who are armed, trained and financed by Moscow and supplemented by Russia's forces. A February 12 ceasefire, known as Minsk II, is generally holding, but at the unacceptable price of Ukraine's de facto dismemberment, and with the risk that Russia will one day resume whetting the separatist appetite for territorial gain.

The second front is a battle to save Ukraine's economy and state finances from collapse, to eradicate corruption and lawlessness, and to establish public trust in a state whose rottenness prompted the February 2014 revolution in Kiev. Under the leadership of President Petro Poroshenko some encouraging signs of progress are starting to appear. But Ukraine's reform-minded politicians, its people, and its western partners should be under no illusions about how long, arduous and costly this task will be.

The two fronts of Ukraine's war are subtly connected in ways that will make it difficult for the government in Kiev to claim victory. Minsk II illustrates the problem. The ceasefire foresees a new constitution by the end of this year, enshrining self-government for the Donbass rebels and permitting Ukraine to regain full control over its eastern borders. But if this compromise fails to materialise, the conflict is likely to flare up again, jeopardising Ukraine's state-building project.

The Kiev authorities have yet to produce convincing proposals for regional autonomy in the Donbass. They must summon the courage and unity to do so. But the fundamental obstacle to a settlement lies in the unreasonable demands of Russia and the separatists for a reconstructed Ukrainian state.

Their model is not Germany, which operates Europe's most efficient system of decentralised government, but Bosnia-Herzegovina, a state paralysed by constitutional mechanisms that entrench and reward political obstructionism. Russia is also demanding limits on Ukraine's free-trade deal with the EU that would damage Ukrainian economic development. In short, what the Kremlin wants is diametrically opposed to what would constitute success for Ukraine as a state and society.

Conversely, the more Ukraine grasps the reforms needed to advance on the war's second front, the higher the risk that Vladimir Putin, Russia's president, will apply pressure, including separatism, to destabilise Ukraine's progress. For Russia will find it harder to defend its age-old habits of guarding its rulers' privileges and limiting its people's freedom if Ukraine transforms itself into an enlightened, law-abiding polity.

The Kiev government has passed laws that tighten budgetary discipline, liberalise energy markets and amend pensions. Now it aims to destroy the hydra-headed monster of corruption by overhauling governance at state corporations and cleaning up the tax system. If effective, all these changes will unlock substantial western financial and technical support, including an International Monetary Fund-led bailout worth up to $40bn.

Of course, political promises and legislative texts are one thing, implementation another. But Ukraine is on the right road. Russian truculence should not deter its leaders from pressing on with economic renewal, state reform and a sincere offer of self-government.

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