Ukraine's government falls in no-confidence vote

Deputies passed a motion of no confidence in Tymoshenko's administration, with 243 out of 450 voting in favour.

The fall of the government came almost a month after Yanukovich defeated Tymoshenko, co-architect of the 2004 pro-Western Orange Revolution, in a bitter presidential run-off, a narrow victory that has yet to restore much-needed stability.

Yanukovich's Regions Party will now seek to form its own coalition within 30 days and a government within another 60, or face a snap parliamentary election.

After years of infighting with Orange co-revolutionary and former president Viktor Yushchenko, Tymoshenko had lost the loyalty of their fractious coalition. Her resignation or dismissal was seen as inevitable after the victory of her bitter rival Yanukovich on February 7.

Yanukovich met with all faction leaders bar Tymoshenko's shortly after the vote and urged them to quickly agree terms.

The (coalition) talks are not simple but I think they will be finalised in the coming days, Mykola Azarov, a close ally of Yanukovich and a likely candidate for the post of prime minister, told reporters after the vote.

Even if a coalition emerges, the fractious nature of Ukraine's parliament and the limited powers of the presidency mean that the country -- split between a Russia-leaning east and south and a Western-friendly west and centre -- may yet face further political instability.

It's just a continuation of the problem, said Oleksander Pchela, a 20-year-old student in Kiev. Tymoshenko will enter the opposition and demand new elections. There's no end in sight while people vote for personalities but not for ideas.The nation of 46 million people desperately needs strong government to tackle a debilitating economic crisis that saw GDP contract by 15 percent in 2009, and to restart talks with the International Monetary Fund on a $16.4 billion (10.8 billion pounds) bailout package.

The government says it does not expect IMF funds to be released before the second half of the year, leaving a hole of $3-5 billion per quarter that Ukraine must fill to cover government spending and debt payments.

MEETING OF MINDS?

Ukrainian assets remained stable after the motion was passed -- the hryvnia traded at 7.975/$ at the same level as in the morning, the Ukrainian Equity Index edged 0.5 percent higher to 1,822 points, while benchmark bonds were unchanged.

The bonds and credit default swaps -- tradeable instruments that insure against a Ukrainian default -- have strengthened in recent days however, signalling that investors have high hopes the political dust will settle soon. The uncertainty surrounding the politics is likely to bring negative sentiment in the short term. However, these actions were deemed inevitable and the fact that political processes are moving relatively quickly is encouraging, Phoenix Capital, a Kiev-based brokerage, wrote in a note.

Local media said Tymoshenko, instead of staying on in a caretaker role, would take holiday leave and hand the reins to her deputy, Oleksander Turchynov. Justice Minister Mykola Onyshuk told Ukrainian television it was a possibility.

Wednesday's vote sounded the death knell for the fractious coalition that emerged from the Orange Revolution, when street protests overturned Yanukovich's victory in a rigged election.

Tymoshenko has refused to recognise Yanukovich's February 7 win, which could tilt the former Soviet state back towards Russia.

... this person, Yanukovich, presents a threat to (Ukrainian) independence, a threat to its territorial integrity, to democracy and freedom of speech, Tymoshenko told parliament.Yanukovich's party is the biggest bloc in the chamber with 171 seats but is well short of the required 226 majority.

Seven of Tymoshenko's 153-member bloc voted to dismiss the government, alongside 15 of 71 members of the Our Ukraine bloc of ex-president Yushchenko -- a critical force when it comes to forming the next coalition.

Besides Azarov, Yanukovich has named reformist former central bank chairman Sergey Tigipko and former Finance Minister Arseniy Yatsenyuk as possible prime ministers.

Gleb Vyshlynsky, an analyst at GfK Ukraine, said a meeting of minds was likely between Yanukovich's party and Our Ukraine, who both want to avoid a potentially costly snap election.

There is a 70 percent chance that they will manage (to form a government) in the coming week or two, he said.