Ukraine is on the brink of securing a debt deal that Greece can only dream of

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Ukrainian Prime Minister Arseniy Yatsenyuk (R) gestures as he speaks with Ukrainian Finance Minister Natalia Jaresko during a parliament session in Kiev on December 23, 2014.

In a rare piece of European economic good news, Ukraine's major creditors look set to write off 20 per cent of the embattled country's foreign debt.

Prime minister Arseniy Yatsenyuk, speaking at an economic conference on the weekend, said he expected parliament to approve the measures in the next few days.

The deal will effectively restructure £11.7bn of Ukraine's total foreign loans, thus helping the country avoid the drawn-out negotiations suffered by Greece in recent months.

It also unlocks support from the IMF and halts principal payments for the next four years to help the country get back on its feet.

Ukraine is currently in the grip of a deep recession following mismanagement by previous governments as well as dealing with ongoing skirmishes with pro-Russia rebels in the east of the country.

Ukraine’s finance minister Natalie Jaresko told The New York Times that the deal showed that creditors can work with debt-burdened countries and not end up on "opposite sides of the table":

It’s a benchmark for emerging markets [that could serve as a template]. It is every sovereign’s dream.

I would hope that it shows that you don’t need to rush into a default, even having the willingness to use a moratorium if needed.

The deal has been praised in many corners, but it's not clear what will happen if Russia, a major creditor not present at the talks, decides not to participate.

The domineering neighbour is unlikely to view the deal favourably given that the Ukrainian finance ministry released a statement saying the deal will allow more money to be channelled into fighting pro-Russia separatists.

The deal between the international creditors and the struggling country is a rare one. In the last 15 years, creditors have only agreed to help reduce debt before countries have defaulted on their loans three times - for Belize, St Kitts and Nevis, and during one round of the Greek talks, Jaresko said.

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