Ukraine's Yanukovich gets close ally as PM (Reuters)

KIEV (Reuters) –

Ukraine's new prime minister Mykola Azarov, declaring state coffers were empty, promised on Thursday to meet all obligations to the International Monetary Fund and push through a realistic 2010 budget.

President Viktor Yanukovich has moved swiftly to consolidate power since his election last month to end years of dysfunctional government and economic backsliding under the leaders of the 2004 Orange Revolution.

"The country has been plundered, the coffers are empty, state debt has risen threefold," Azarov, a former finance minister and a close Yanukovich ally, told parliament shortly before deputies confirmed his appointment.

Battered by the economic downturn, Ukraine needs to adopt a 2010 budget and restart talks with the International Monetary Fund on a suspended $16.4 billion bail-out package.

Azarov said he would invite the IMF to visit the country 'as soon as possible' and pledged to redraft and get approval for a realistic version of the much-delayed budget.

The IMF will watch closely how Ukraine handles the budget after a series of spending blowouts, backed by Yanukovich's Regions Party, derailed the bail-out package. The IMF held back a $3.5 billion tranche expected last November after parliament increased minimum wages and pensions by up to 10 percent.

Azarov said he hoped the IMF would resume lending, but added: "We hope that this program will be broadened and will be reviewed, taking into consideration realities in our country."

He said Ukraine had to repay 44 billion hryvnias ($5.5 billion) in domestic debt by the end of the year, a challenge he described as very serious.

DIVIDED COUNTRY

Azarov is seen as a safe pair of hands but no radical reformer. He gives Yanukovich a reliable ruling partner after the infighting that split the alliance that emerged from the Orange Revolution.

Yanukovich needed a new ruling coalition to avoid calling a snap parliamentary election.

But the coalition announced on Thursday between the Regions Party, the Communists and the Litvyn bloc relies on the support of several deputies outside those factions for its 235-seat majority, and it remains to be seen how stable this will be.

Russian-born Azarov replaces Yanukovich's rival Yulia Tymoshenko, who was ousted in a vote of no-confidence last week.

A powerful orator, she could yet prove a thorn in the government's side from opposition, having refused to recognize Yanukovich's election.

Tymoshenko said the new government was "made up completely of Ukrainian oligarchs," or powerful tycoons.

"I predict the first thing they will do is to divide amongst themselves the financial spoils ... and the strategic state assets for shady privatization," she told a news conference.

The country of 46 million people is split between a Russian-leaning south and east and a west and center inclined more to the west.

Yanukovich's victory tilted the former Soviet republic back toward Russia, source of the gas that runs through Ukraine to Europe.

Parliament endorsed his nomination of Ukraine's ambassador to Moscow, Kostyantyn Khryshchenko, as foreign minister and former Navy commander Mykhailo Yezhel as defense minister.

It also appointed old Azarov associate Fedir Yaroshenko as Finance Minister and Socialist Party deputy and former interior minister Vasyl Tsushko as Economics Minister.

Former central bank chairman Sergey Tigipko, who came a strong third in the first round presidential election on a reformist platform, is one of six deputy prime ministers.

(Writing by Richard Balmforth and Matt Robinson; editing by Mark Trevelyan))

Taken from here