UKRAINIAN Prime Minister Mykola Azarov and the entire government resigned on Monday in a surprise move after controversial elections as the economy teeters on the brink of recession.
The presidency said President Viktor Yanukovych had accepted Azarov's request to give up his post and become an MP, a move expected to be repeated by several cabinet ministers.
It remained unclear who would fill the powerful post of premier, with some analysts speculating it could go to a member of the elite close to Yanukovych known as the "Family".
"President Viktor Yanukovych accepted the resignation of Prime Minister Mykola Azarov, satisfying the demand of the latter," the statement added.
The move comes as a new parliament prepares to meet after October 28 legislative elections which raised new concerns about democratic standards under Yanukovych.
The ruling Regions Party appears to have retained control of the Verkhovna Rada with the help of independents despite a strong challenge from the opposition parties of boxer Vitali Klitschko and imprisoned ex-premier Yulia Tymoshenko.
OSCE observers slammed the polls as a setback for Ukraine, marred by the absence of Tymoshenko who is serving a seven-year sentence on abuse of power charges she says were trumped up by Yanukovych.
But economists also fear the country is entering troubled times and could be on the brink of a new recession that would see it seek billions of dollars in disbursements from an IMF standby package.
Ukraine's economy contracted by 1.2 percent in the third quarter of this year, and several banks fear the country is heading for zero growth in 2012, not to mention a sharp devaluation of the local currency.
"This (the resignation) is linked to a number of economic challenges which Ukraine has fallen into thanks to this president and this government," said opposition leader Arseniy Yatsenyuk.
A Russian-speaking bureaucrat mocked by many in Ukraine for his dry and humourless image, Azarov took office in 2010 shortly after Yanukovych defeated Tymoshenko in a fiercely contested presidential election.
Azarov has always been seen as a close ally of Yanukovych, but some analysts believe his power base has been undermined by the recent rise of a "Family" of close acquaintances of the president into top positions.
Possible successors to Azarov could include First Deputy Prime Minister Valery Khoroshkovsky and National Bank chief Sergiy Arbuzov, analysts said.
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