KIEV - Ukrainian President Viktor Yushchenko's party on Tuesday formed a fragile coalition with the party of Prime Minister Yulia Tymoshenko, suspending their power struggle in the face of economic turmoil.
The two pro-Western parties and a third smaller group signed the coalition deal three months after a similar alliance collapsed in a row over the feisty prime minister's attempts to water down the president's powers.
"I am happy that all these parliamentary groups have signed an accord on creating the national development, stability and order coalition," said Boris Tarasyuk, a senior member of Yushchenko's Our Ukraine-People's Self-Defence bloc.
But there were doubts the coalition could function as about 30 of Yushchenko's deputies opposed such an alliance, including the president's top lieutenant in parliament, Vyacheslav Kirilenko, who resigned as faction chief.
A Yushchenko aide also called for Tymoshenko to step down.
"It's necessary to change the composition of the government. It's clear that the prime minister should be changed," said the deputy head of the presidential administration, Roman Besmertny.
While being broadly pro-Western in outlook, the president and prime minister have repeatedly come to blows since joining forces in a popular uprising in 2004 known as the Orange Revolution that overturned a rigged presidential poll.
"The coalition will exist only when it has 226 votes" -- a majority of parliamentary seats -- said Mikhailo Chachetov, a deputy with the pro-Russian Regions party, who said the government was relying on Communist deputies not in the coalition to pass legislation.
The accord came as Yushchenko underlined the extent of the economic crisis facing Ukraine, saying the country's economy could contract by 7-10 percent in the first quarter of 2009.
"Referring to forecasts by experts, (the president) said the contraction of GDP in the first quarter of 2009 can be expected to be 7-10 percent," his office quoted him as telling local authority chiefs.
Ukraine has come under severe strain in the global financial crisis, with all-important steel exports taking a severe hit and the government turning to the International Monetary Fund for a massive bail-out.
Ukrainians have rushed to convert their savings from the national currency into harder currency as the hryvnia has lost more than half its value in six months.
In his meeting with the local administration chiefs, Yushchenko again took aim at Tymoshenko, accusing her government of trying to pass a populist budget for 2009 without the necessary financial basis.
"The cabinet is demanding a continuation of populist budget policies, an optimization of economic development indicators that are not supported by real accounts," he said.
Statistics have shown that Ukrainian industrial production is in freefall, crashing 15.2 percent in November compared to the previous month and 28.6 percent compared to November 2007.
Ukraine has been among the countries hardest hit by financial turmoil as the plunging price of steel, the country's main export, has exacerbated a credit crunch and a sharp fall in stock prices.
While growth has averaged seven percent in recent years, industrial production accounts for almost half of gross domestic product.
"Already today, several large metallurgical factories are at a standstill," investment bank Sokrat said in a research note.
Meanwhile the country remains embroiled in a row with Russian gas giant Gazprom over a disputed bill for gas.
Moscow has threatened to cut gas supplies to Ukraine, a crucial transit route for supplies to the European Union, if the dispute is not solved, raising the prospect of a repeat of gas supply cuts that occurred on January 1, 2006.