Ukrainian President Viktor Yanukovich accepted the resignation of Prime Minister Mykola Azarov's government on Monday (3 December), without indicating whether he would re-appoint the long-time ally ahead of tough IMF loan talks.
The move was expected after several government members including Azarov were elected to parliament on 28 October, obliging them to give up their ministerial roles.
Yanukovich told Azarov's government to stay on in an interim capacity, according to a decree published on the presidential website, and may well re-appoint it.
The 64-year-old Azarov is seen as a safe pair of hands who spent two and a half years trying to revive a debt-ridden economy that is struggling to recover from recession.
Growth rates have fallen again this year as demand shrank for Ukraine's main exports like steel, and further painful reforms seem inevitable.
"Yanukovich will not take risks and complicate things at a time when the world economy is in crisis," said political analyst Taras Berezovets.
The dour Azarov has also been at the forefront of tough – and so far unsuccessful – negotiations with Russia, Ukraine's main energy provider, to try to bring down the price of natural gas supplies, which the government says are way above market price and a huge drain on the economy.
Appointing someone else as prime minister, such as central bank chief Serhiy Arbuzov, with whom Yanukovich is personally close, could prove unwise and unpopular, commentators say.
As acting prime minister, Azarov is supposed to lead talks on a fresh lending agreement with an International Monetary Fund mission due to arrive in Kyiv on 7 December.
Whether or not he will keep his post thereafter will only become clear when the new parliament meets on 12 December.
Yanukovich's choice is likely to be approved by the assembly given that the Party of the Regions, which he and Azarov lead, says it is close to securing a majority in the chamber.
Ukraine says it hopes to use fresh IMF loans to repay $6.4 billion (€5 billion) of its debt to the Fund falling due next year. The IMF, in turn, insists that Kiev needs to raise gas and heating prices for households to cut the growing budget deficit.
The December 2011 EU-Ukraine Summit failed to initial the country's Association Agreement with the Union, largely due to the imprisonment of former Prime Minister Yulia Tymoshenko that Brussels sees as politically motivated.
The five-year long negotiations over the Association Agreement were concluded, but EU leaders made it clear that the deal would not be signed until improvements are made to the "quality of democracy and rule of law" in Ukraine.
European Council President Herman Van Rompuy also made it clear that the country's association agreement, which includes a Deep and Comprehensive Free Trade Area, would not be signed until the parliamentary elections in Ukraine due in October 2012.