Enhancing the Prospects of the EU’s Deep and Comprehensive Free Trade Areas in the Mediterranean: Lessons from the Eastern Partnership. CEPS Commentary, 24 June 2015

In their March 2015 Consultation paper on the review of the European Neighbourhood Policy (ENP), the European Commission and the High Representative raised the question whether the Deep and Comprehensive Free Trade Areas (DCFTAs) “are the right objective for all or should more tailor-made alternatives be developed, to reflect differing interests and ambitions of some partners?” Such ambitious but complex trade agreements have now finally been signed with Ukraine, Moldova and Georgia, but they are still on the table for several Mediterranean ENP countries. Although these Mediterranean partners have a completely different political, economic and legal relationship with the EU, some important lessons can be drawn from the ‘Eastern DCFTA experience’. In particular, the DCFTA negotiators should avoid overly ambitious and ill-defined legislative approximation commitments and develop a comprehensive implementation strategy.

Addressing the immediate needs of the Greek banks. CEPS Commentary, 31 July 2015

Based on a detailed calculation of the recapitalisation requirements of the Greek banks, we find that the sector needs an infusion of capital, but that the level largely depends on the stringency of the capital requirements applied. An expedient quick fix to comply with the minimum capital requirements could be achieved by a bail-in of existing creditors under the EU Bank Recovery and Resolution Directive of around €5 billion, leaving only €6 billion needed for re-capitalisation. If the ‘Cypriot’ standard is applied, however, the required re-capitalisation would be €15 billion. A ‘generous’ approach, which takes into account the phasing in of the new more-stringent capital requirements until 2018, would imply a re-capitalisation of €29 billion (or more bailing-in of creditors). The re-capitalisation should be undertaken preferably by the EIB, the EBRD or the new Greek investment fund, rather than via loans from the ESM to the Greek government.

The consequences for Russia of the nuclear deal with Iran. OSW COMMENTARY NUMBER 177/03.08.2015

The five permanent members of the UN Security Council (the USA, the United Kingdom, China, France and Russia) plus Germany and the European Union signed a deal with Iran on 14 July in Vienna (a Plan of Action with five appendices, henceforth referred to as the Vienna Agreement). Under this agreement, Iran undertook to restrict its nuclear programme and to bring it under international scrutiny for 15 years in exchange for a gradual lifting of international sanctions (both those imposed between 2006 and 2010 by the UN Security Council and the unilateral US and EU sanctions). Even though Russia has officially reacted positively to this deal, the consequences it will have are rather ambiguous from Moscow’s point of view. Iran looks set to become stronger and will possibly normalise its relations with the West, and especially the United States. This, in political terms, is a disadvantage for Russia. The Kremlin’s ability to use its policy towards Iran as a bargaining chip in contacts with Washington will be reduced significantly. In turn, the benefits will include improving the perception of Russia in the West and the opening up of new opportunities for the geopolitical game in the region, both with Iran and its opponents in the Arab world. Similarly, in economic terms, the possible lifting of sanctions will offer Russia new opportunities to achieve immediate benefits owing to co-operation in the nuclear and military-technical areas. In the short term, the lifting of sanctions will not pose any threat to Russia’s position on the global energy markets. However, in the long term, the end of Iran’s international isolation may bring negative consequences for Russia, such as the dominant position of Western and/or Chinese companies in the Iranian upstream sector, rising exports of Iranian oil and gas to EU and Asian markets (which are essential for Russia) and the downward pressure on oil and gas prices.

Treat the root causes of the asylum crisis, not the symptoms. CEPS commentary, 11 September 2015 Friday, 11 September 2015

In the wake of the long-awaited State of the Union address delivered by Jean-Claude Juncker on September 9th, Sergio Carrera and Karel Lannoo express deep disappointment with the EU’s response, both in scope and in ambition. In their view, two key challenges lie behind the current asylum crisis. First, existing EU rules do not fit the purpose and the second challenge relates to the systemic failure of states like Greece, Hungary and Italy to adhere to the democratic rule of law principles and fundamental rights.

Strengthening the beating heart of the European economy. EPC Commentary, 29 September 2015

In an atmosphere of crisis, distrust and fragmentation, policy-makers in Brussels are mostly focused on fighting fire without having an ambitious vision for the future – in effect, muddling through, as has been the characteristic response in recent years. However, by remaining in crisis response mode, the European Union (EU) is failing to provide the basis for the compromise politics that can get the European system out of the current impasse: the EU needs to be engaged in a positive sum game to ensure that countries see an incentive for making deals.

The uncertain future of the coal energy industry in Germany. OSW COMMENTARY #188, 2015-10-20

Germany’s current energy strategy, known as the “energy transition”, or Energiewende, involves an accelerated withdrawal from the use of nuclear power plants and the development of renewable energy sources (RES). According to the government’s plans, the share of RES in electricity production will gradually increase from its present rate of 26% to 80% in 2050. Greenhouse gas emissions are expected to fall by 80–95% by 2050 when compared to 1990 levels. However, coal power plants still predominate in Germany’s energy mix – they produced 44% of electricity in 2014 (26% from lignite and 18% from hard coal). This makes it difficult to meet the emission reduction objectives, lignite combustion causes the highest levels of greenhouse gas emissions. In order to reach the emission reduction goals, the government launched the process of accelerating the reduction of coal consumption. On 2 July, the Federal Ministry for Economic Affairs and Energy published a plan to reform the German energy market which will be implemented during the present term of government. Emission reduction from coal power plants is the most important issue. This problem has been extensively discussed over the past year and has transformed into a conflict between the government and the coal lobby. The dispute reached its peak when lignite miners took to the streets in Berlin. As the government admits, in order to reach the long-term emission reduction objectives, it is necessary to completely liquidate the coal energy industry in Germany. This is expected to take place within 25 to 30 years. However, since the decision to decommission nuclear power plants was passed, the German ecological movement and the Green Party have shifted their attention to coal power plants, demanding that these be decommissioned by 2030 at the latest.

Is there a way out of the Polish pickle? EPIN Commentary No. 31/22 January 2016

Poland is making headline news again. This time, however, not in a role of Central European Wunderkind surfing the economic crisis, but for reasons to be less proud of. Ever since the Prawo and Sprawiedliwość (PiS, a member of European Conservatives and Reformists group in the European Parliament) government took power after the elections in November, Poland has experienced political turmoil and is now facing accusations that the rule of law is in danger. This constitutes a major challenge for the European Union and for its other member states, which are looking for ways to deal with a recalcitrant state that makes a rapid U-turn on democratic fundamentals and takes any criticism hysterically. This is not the first time that the organisation has had to deal with such a case, yet solutions have not yet been found. Hungary is a case in point. And now Polish leaders too seem convinced about the virtues of the concept of illiberal democracy. Which prescription should the EU use to buck the trend and what are the potential side-effects?

Germany’s engagement in the resolution of the Syrian conflict. OSW COMMENTARY NUMBER 194/25.01.2016

German Tornado Recce aircraft have been engaged in reconnaissance operations over Syria since January 2016. In December 2015 the German government and parliament decided that up to 1,200 Bundeswehr soldiers would take part in the international coalition fighting Islamic State in Syria. This decision marks a new chapter in Germany’s activity in the Middle East. The increasing destabilisation of the southern neighbourhood and the consequences this has for the EU and Germany have forced the German government to increase its level of engagement in the region. Even though Germany is a third-rate player in the Middle Eastern game, it is nonetheless ever more engaged politically and wants to be viewed as a neutral mediator between the competing actors in the region. It has also allocated more funds on regional development co-operation and humanitarian aid. Germany, whose attention has been directed towards Europe’s eastern neighbourhood, is currently turning its attention to the South. The Middle East (and Africa) is taking on increasing significance in German foreign and security policy. This may affect NATO’s eastern flank and the EU’s eastern neighbourhood since part of Germany’s instruments and funds may be redirected to the South.

Aftermath of the Maidan. Ukrainian society two years after the revolution. OSW Commentary Number 199/04.03.2016

Two years after the Revolution of Dignity, it is clear that hopes of a quick reconstruction and modernisation of the Ukrainian state as a political and institutional system have not been fulfilled. The resistance of the bureaucrats, politicians and oligarchs who make up the informal, corrupt systems has proven to be very strong, and the will of part of the political elite and the EU and the United States to implement the procedures they have suggested has proved insufficient. If not for the war and the economic collapse, which forced Kyiv to seek external financial assistance and political support, the modernisation of the state would have proceeded even more slowly and with yet greater difficulty.

How to get out of the crisis without reforms? The Belarusian authorities confront growing economic problems. OSW Commentary NUMBER 202/21.03.2016

2015 saw a drop in Belarus’s GDP for the first time in almost 20 years, which is primarily the result of a significant reduction in levels of production and export. As a consequence, there was also a serious depletion of the country’s foreign exchange reserves, as well as a progressive weakening of the Belarusian rouble. The macroeconomic figures from January and February 2016 show that these trends are not only continuing, but they are also becoming even more severe, which confirms that Belarus now finds itself in a prolonged economic crisis. On one hand, the reason for this state of affairs is the protracted economic recession in Russia, which is Belarus’s main economic partner, together with the drastic global decline in prices for fuel, which is a key Belarusian export. On the other hand, meanwhile, an equally important reason for the current crisis is the failure of the Belarusian economic model. President Aleksandr Lukashenko, out of fear that his authoritarian system of government will be dismantled and that public discontent will rise, has categorically rejected the proposals for even partial reforms put forward by some of his entourage, who are aware of the need for the immediate transformation of the country’s anachronistic and very costly economic model, based as it still is on quasi-Soviet management policies.

The consequences of the Western financial sanctions on the Russian economy. OSW COMMENTARY NUMBER 203/23.03.2016

Although they are not the deciding factor, the Western financial sanctions are nevertheless an important factor affecting the deteriorating economic situation in Russia. They have significantly undermined the opportunities which Russian companies have to attract foreign capital, thus contributing to the deterioration of their financial condition (which is particularly prominent in the case of energy firms subject to sanctions). Therefore, Russian businesses need more support from the state. However, this support is becoming more difficult due to the dramatic fall in oil prices – revenues from oil exports are the main source of budget revenue.

Cutting the Gordian knot? Assessing the outcomes of the March EU-India Summit. EPC Commentary, 8 April 2016

After a four-year suspension, the 13th EU-India Summit took place in Brussels on 30 March 2016. While several deep-rooted constraints could not be overcome, the Summit’s deliverables reflect a gradually changing and cautiously optimistic mood in the historically challenging interaction between Brussels and Delhi.

The EU cannot remain a passive observer of the Karabakh conflict. EPC Commentary, 7 April 2016

When Federica Mogherini visited the South Caucasus in March, she was quoted as saying that the Nagorno-Karabakh conflict was a top priority for the EU. Facts, however, do not seem to match the words of the EU High Representative for Foreign Affairs and Security Policy. As violent clashes in the conflict zone unfolded over the past week, the EU was a passive observer, with few visible signs of engagement apart from a cursory phone call urging Armenia and Azerbaijan to show restraint. The escalation has shown how quickly and dangerously the situation can develop, and the unassailable nature of the Line of Contact (LoC). If the diplomatic efforts to resolve the conflict show no progress, a repetition is very probable. Furthermore, it is likely the next incident will be more devastating in human and material costs than this recent one, and may not be contained so quickly. The EU needs to be part of the renewed diplomatic effort.

Diplomatic parade or last struggle against fatalism? - Making sense of the Paris ministerial meeting on the Middle East Peace Process. EPC Commentary, 16 June 2016

On 3 June, the French government convened an international meeting in Paris, gathering 28 high-level delegations from all around the world, from Norway to Japan, in order to discuss the state of play and future prospects of the enduring Israel-Palestine conflict. The first ministerial meeting of the “Initiative for the Peace in the Middle East”, as it was labelled by the Quai d’Orsay, provided an important political signal, and a potential diplomatic format, to help revive the long-stalled peace process. Yet, its concrete deliverables remain beset by considerable uncertainty.

A constitution for Erdoğan. Consequences of the political conflict in Turkey. OSW COMMENTARY No. 213, 2016-06-01

Since mid-2015 Turkey has been affected by a deep internal crisis, caused by rising political polarisation, increased levels of terrorist threat (posed by the Kurds and Islamic radicals) and the revived conflict with the Kurdistan Workers’ Party (PKK). As a consequence of this crisis, over 350,000 residents of south-eastern Turkey have been forced to leave their homes. At the same time, due to the migration crisis and despite mutual distrust in relations between Turkey and the EU, cooperation between Ankara and Brussels has been intensifying. Turkey’s ongoing destabilisation does not challenge the status of the ruling Justice and Development Party (AKP), which is de facto controlled by President Recep Tayyip Erdoğan; paradoxically, it strengthens the party. The internal crisis which the authorities have been deliberately fuelling is an element of a plan to rubber-stamp political change by introducing a presidential system of government. This is happening amid a thorough reconstruction of the socio-political order which has been underway for over a decade. In the upcoming months it is expected to result in the constitution being changed and, as a consequence, the institutionalisation of Erdoğan’s autocratic rule.