KIEV, Jan. 31 – President Viktor Yushchenko urged Prime Minister Yulia Tymoshenko on Friday to urgently and drastically cut budget spending to avert a looming “social catastrophe” as the economy plunges into a severe recession.

Yushchneko, in a televised address to the nation, accused Tymoshenko of distorting the real economic situation with “flows of lies” as the country’s financial system appears to be “unbalanced.”

“This all may end up with the social catastrophe,” Yushchenko said, adding that a quick action must be taken to improve the situation.

“Now, every minute counts,” Yushchenko said. “I demand that amendments to the state 2009 budget are submitted immediately. This is the only way to improve the situation.”

Yushchenko’s address echoes a gloomy economic picture drawn in a recent secret memo that is thought to have been written by Finance Minister Viktor Pynzenyk.

The memo, which was leaked to the media last week, called as “too optimistic” the forecast of Ukraine’s 5% economic contraction in 2009.

Tymoshenko’s press service denied that Pynzenyk had ever written the memo, underscoring that Tymoshenko stands by the government’s forecast that predicts Ukraine’s economic growth at 0.4% in 2009.

Pynzenyk himself said he has written “a lot of memos” to the government, but those were not for “public discussions.” He said he hadn’t seen the memo printed in the media.

Yushchenko, who said he based his report on Pynzenyk’s data and analysis, said state budget revenue had dropped by more than 50% in January, underscoring the depth of the economic crisis.

“There is only one reason for that,” Yushchenko said. “The budget is not realistic.”

“The opinion of a [finance] minister is critical in drafting the budget of any country,” Yushchenko said. “Today he [Pynzenyk] is not heard; first of all, not heard by the government.”

Yushchenko also criticized Tymoshenko’s last week’s attempts to dismiss Volodymyr Stelmakh as the governor of the National Bank of Ukraine.

“The intention, of course, was to get access to the money printing to cover budget deficit,” Yushchenko said. “This could lead to an unseen inflation.”

Oleksandr Shlapak, a deputy chief of staff at the Yushcenko office, estimated the government may be facing a budget deficit at 70 billion hryvnias in 2009, and the amount that can be only covered by money printing.

The government earlier predicted budget revenue would increase by 3.1% to 238.9 billion hryvnias in 2009, while spending was set to increase 10.7% to 267.3 billion hryvnias, according the Finance Ministry.

Meanwhile, the State Treasury raised 4.23 billion hryvnias in January to the general fund, which represents the biggest chunk of the budget, compared with 9.52 billion hryvnias originally forecast, exposing a major budget deficit.

The figures suggest the government is facing a major pressure to cut budget spending or risk plunging the economy into turmoil, analysts said.

“I address Yulia Tymoshenko and the [Parliamentary] majority she had organized: This is your responsibility,” Yushchenko said.

“You consciously used inflated indicators in the budget to incorporate inflated promises that you cannot meet today,” Yushchenko said. “After reaching the critical line, she [Tymoshenko] will not be able to hide in opposition. That’s enough lies.”

Tymoshenko reacted by personally attacking Yushchenko and calling his address “a mixture of non-truth, panic and hysteria.”

“All people can see that Yushchenko is not the leader that the people need in a time when Ukraine’s strength is challenged under blows of powerful international economic crisis.”

“To fight the crisis, we need political consolidation, cold and sober mind, iron nerves, will-power, decisiveness and deep responsibility, the qualities that Viktor Andriyovych [Yushchenko] is lacking,” Tymoshenko said. (tl/ez)