KIEV, Aug. 3 – President Viktor Yushchenko on Monday vetoed legislation calling for 9.8 billion hryvnias in financing from the central bank to pay for infrastructure projects in preparation for the Euro-2012 soccer championship in Ukraine.

Yushchenko’s office said relying on central bank financing would de-facto amount to money printing, greatly widen the budget deficit and exert major downward pressure on the local currency, the hryvnia.

The office also argued there was little transparency in the way this money is supposed to be spent, suggesting that the government could use the cash to finance undisclosed other projects.

Also, Yushchenko urged Volodymyr Stelmakh, the governor of the National Bank of Ukraine, within a week to come up with a plan that would involve money from commercial banks for the projects.

“Please approve the measures within a week, and make them public and make sure that the society and I are informed on this matter on a weekly basis,” Yushchenko said in a letter to Stelmakh.

Yushchenko’s action on the legislation triggered a wave of criticism from pro-government and opposition lawmakers, who joined their forces to approve the legislation last month.

The cash-strapped government has been lagging behind on most of the infrastructure projects, such as construction of soccer stadiums, highways and hotels, raising concerns that Ukraine may fail to be fully prepared for the Euro-2012.

“Using imaginative reasons, he [Yushchenko] has vetoed the legislation that would encourage construction of infrastructure worth a European country,” Olena Shustyk, a lawmaker from Prime Minister Yulia Tymoshenko’s group, said.

“No one has any doubts now that Yushchenko in his hostile attitude towards the successful government can sacrifice the international prestige of the state and undermine the hopes of millions of [soccer] fans,” she said.

The Yushchenko office said the legislation was rejected because it would de-facto amount to money printing.

Roman Zhukovskiy, the head of the economic department at the presidential office, said the financial crisis forces the NBU to increase reserves to back the lending, and that may result in the central bank actually showing losses, not profits. The law says the government to cover the losses.

“In this situation, the advance [9.8 billion hryvnias] turns into money printing to finance the budget deficit, which conflicts with the article 15 of the Budget Code,” Zhukovskiy said.

But perhaps ever more importantly, there was no clear way of spending the money that the NBU was supposed to be channeled to the government, according to the legislation.

“There are great doubts that this money would be actually spent on targeted projects,” Zhukovsjkiy said.

As an example, he pointed to the Stabilization Fund, which had been created last year to stimulate the economy.

The Stabilization Fund is supposed to have about 7 billion hryvnias as of the end of June, but reports indicate there is currently about 500 million hryvnias on the account of the Treasury. “This means this money has been already used on other needs, including on current spending,” Zhukovskiy said.

For the past several weeks, the presidential office has been exploring the possibility of attracting funds from commercial banks to finance the infrastructure projects, and the tests show the banks have enough “available liquidity,” he said.

He said the banks have drafted a solution allowing to attract the funds to finance the Euro-2012 projects, but the government had refused to approve resolution in its support, turning to the NBU for the money instead.

“The president is suggesting focusing on realization of the solution that has been submitted to the government to finance the Euro-2012 without any delay,” Zhukovskiy said. (tl/ez)