updated 12/18/2008 3:20:18 PM ET 2008-12-18T20:20:18

The currency has lost half of its value, tens of thousands face layoffs, residents in the capital are bundling up in winter clothes as the heat sporadically goes out and Russia is threatening to cut off gas supplies.

It's going to be a tough winter in Ukraine.

"I could understand if this were a village, but for the capital of a European country not to have heating, water and gas — how can this be?" asked Tamara Osipova, one of about 1,000 angry protesters outside the Kiev mayor's office on Thursday.

This ex-Soviet republic has been one of hardest hit by the global financial crisis. Expert warn that the discontent visible Thursday could turn into mass opposition to a government paralyzed by political infighting.

"This is all going to boil over next year," political analyst Ivan Lozowy said. "Desperate people are capable of desperate actions."

After years of robust economic growth, Ukraine has sunk into a deep recession, pressured by a drastic fall in the exports of steel, the core of the economy. A lack of confidence in the banking system, coupled with constant political turmoil under President Viktor Yushchenko has spurred a sharp devaluation in the national currency.

The hryvna has lost a half its value since the global credit crunch hit in September, and closed at trading 9.8 to the dollar Thursday, down from 4.9 in September.

Valentyna Ivanova, a 68-year-old retired engineer, said she could not survive on 700 hryvna a month — half of which she will spend on utilities after fees were raised.

"When I come home I should eat something, shouldn't I? And how will I buy food?" she asked at the protest.

Economic downturn
Yushchenko has forecast the economy will contract up to 10 percent by the first three months of 2009.

Many Ukrainians also borrowed dollars to buy apartments and cars. Yushchenko's economic adviser, Valentyn Zhukovsky, predicted that up to 60 percent of them may default. That will prompt some banks to confiscate property, while others may go bankrupt, experts say.

Prime Minister Yulia Tymoshenko has accused the central bank of speculating on the hryvna and pocketing profits and demanded the bank's head be fired.

Tens of thousands of workers, meanwhile, face layoffs at steel mills and other industries. Industrial output shrank nearly to 30 percent in November, from a year earlier, the sharpest drop in a decade.

A recent nationwide poll of 2,000 people found that 16 percent of respondents were ready to take to the streets if life doesn't improve. The study by Gorshenin's Kiev Management Problems Institute had a margin of error of 2.2 percentage points.

Adding to the tensions are Russia's threats to cut off natural gas supplies next year if a $2 billion debt isn't paid by Jan. 1.

Memories of bleak years
Ukraine has a fraught history with mass protests. The 2004 election that catapulted Yushchenko to the presidency saw hundreds of thousands take to the streets to protest electoral fraud in what came to be known as the Orange Revolution.

But unlike those mainly peaceful protests, experts say, the current mood is gloomier and actions could get violent. Many Ukrainians feel betrayed and blame authorities for aggravating the crisis by their infighting and corruption.

The anger is palpable on Kiev's snow-covered streets, where activists have been rallying for weeks. Last week, several districts saw hot water and heating cut off or disrupted, bringing back memories of the bleak post-Soviet years.

Kiev Mayor Leonid Chernovetsky and his longtime foe Tymoshenko have blamed each other for the funding shortages that triggered the disruptions.

Osipova, a 69-year-old retired music teacher who survives on a 800-hryvna monthly pension, has little use for any politicians.

"They are all bandits," she said.

Copyright 2008 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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