KIEV, Dec. 21 – President Viktor Yushchenko and Prime Minister Yulia Tymoshenko exchanged sharp personal attacks over the weekend, marking the onset of a 12-month battle that will end with presidential election in early 2010.

The attacks, however, may delay emergency measures and economic recovery in Ukraine just as the country is going through its worst economic and financial crises in more than a decade.

Yushchenko, responding to Tymoshenko’s allegations that his office - jointly with the National Bank of Ukraine - is behind a concerted attack on the hryvnia, accused Tymoshenko of losing control over the economy, and said she must now pay the price.

“The situation, of course, is out of control by the prime minister,” Yushchenko said in an interview with Inter television aired Sunday night. “But today the moment of responsibility begins.”

“Who will be responsible for inflation of 22%?” Yushchenko said. “The international crisis? The crisis sits at Hryshevsky Street, on the seventh floor, in the office of the prime minister.”

The hryvnia, the local currency, lost 50% of its value against the U.S. dollar over the past three months, the world’s worst performance after the Zimbabwean dollar (-99.99%) and the Seychelles rupee (-51.57%), according to Bloomberg data.

The figures suggest Ukraine is experiencing much more difficult situation compared with other countries in the region, explaining the urgency of the International Monetary Fund’s recent move to approve a $16.4 billion emergency loan.

But Tymoshenko, who has been running a controversial economic policy over the past 12 months, including inflated social spending, discouraging exports and encouraging imports, suddenly attacked Yushchenko on Friday and Saturday, alleging the president had been overseeing a complicated operation aimed at lowering the hryvnia for his own profits.

Tymoshenko cited unnamed sources to allege the NBU had allocated 7.1 billion hryvnias to Nadra Bank, a commercial bank owned by Dmytro Firtash, a wealthy co-owner of RosUkrEnergo, Ukraine’s only natural gas supplier, and said the money had been used to buy dollars.

Tymoshenko alleged these dollars were later supposed to be sold on the forex market - when the hryvnia loses more value - and the transaction would help Nadra earn 4.5 billion hryvnias in profits.

The argument, however, is not in line with the way forex markets operate as massive selling of dollars would immediately trigger the hryvnia’s appreciation, making it less likely for a bank to make so much money on the transaction, analysts said.

Yushchenko, himself a former long-time governor of the NBU, pointed to this logic, suggesting the allegation was an indication of the prime minister’s lack of economic and financial background.

“One must have no education, even high school level education, because she manipulates things with terminology that she does not even know the meaning of,” Yushchenko said.

Yushchenko stressed that stability of the local currency can be achieved when the country’s foreign trade is balanced, and added that the government’s policy had led to ballooning trade deficit, estimated at $14 billion in 2008.

He mentioned the government’s three controversial policy moves that had contributed at least $6 billion to the trade deficit, including the ban on exports of 5 million metric tons of grain between January and May, imports of 550,000 metric tons of meat and imports of extra natural gas that hasn’t been consumed this year.

“No other government has ever done that,” Yushchenko said.

The relations between Yushchenko and Tymoshenko worsened dramatically over the past week and both are seen as main rivals at the next presidential election due in January 2010.

The prime minister on Saturday sought to expand her attack on Yushchenko, underscoring the onset of her campaign to win the presidency.

“I don’t want to be a co-participant of this power team and that’s why I clearly state that I am in opposition to officials, such as the president of Ukraine, the governor of the NBU, all this criminal group that surrounds them,” Tymoshenko said.

“I will be together with the country, with the people of Ukraine and will be fighting to prevent these phenomena in Ukraine,” Tymoshenko said. “I am very sorry that I was standing behind Yushchenko on all Orange rallies [in 2004], but he had plunged to levels that it’s even a shame to mention his name.”

Yushchenko responded sharply.

“The problem today is not in my relations with this lady,” Yushchenko said. “She announced opposition to the nation, to the state.”

“This is an adventurist in politics that will be drowning everybody as she needs only one thing: unlimited power,” Yushchenko said. “She splits the world in two - either you are flunkey or an enemy that is always under anathema. There is no third position.” (tl/ez)