A ship run aground Deepening problems in the Ukrainian economy. OSW Commentary Number 173, 16 June 2015

The drop in Ukraine’s GDP by nearly 18% in the first three months of 2015 (versus the corresponding period in 2014) has confirmed the decline of the country’s economy. Over the last 14 months, the Ukrainian currency was subject to an almost threefold devaluation against the US dollar, and in April 2015 the inflation rate was 61% (year-on-year), which exacerbated the impoverishment of the general public and weakened domestic demand. The main reason behind the crisis has been the destruction of heavy industry and infrastructure in the war-torn Donbas region, over which Kyiv no longer has control, as well as a sharp decline in foreign trade (by 24% in 2014 and by 34% in the first quarter of 2015), recorded primarily in trading volume with Ukraine’s major trade partner, i.e. Russia (a drop of 43%). The conflict has also had a negative impact on the production figures for the two key sectors of the Ukrainian economy: agriculture and metallurgy, which account for approximately 50% of Ukrainian exports. The government’s response to the crisis has primarily been a reduction in the costs of financing the Donbas and an increase in the financial burden placed on the citizens and companies of Ukraine. No radical reforms which would encompass the entire system, including anti-corruption reforms, have been carried out to stop the embezzlement of state funds and to facilitate business activity. The reasons for not initiating reforms have included the lack of will to launch them, Ukraine’s traditionally slow pace of bureaucratic action and growing dissonance among the parties making up the parliamentary coalition. The few positive changes, including marketisation of energy prices and sustaining budgetary discipline (in the first quarter of 2015, budgetary revenues grew by 25%, though partly as a result of currency devaluation), are being carried out under pressure from the International Monetary Fund, which is making the payment of further loan instalments to the tune of US$ 17.5 billion conditional upon reforms. Despite assistance granted by Western institutional donors and by individual states, the risk of Ukraine going bankrupt remains real. The issue of restructuring foreign debt worth US$ 15 billion has not been resolved, as foreign creditors who hold Ukrainian bonds have not consented to any partial cancellation of the debt. Whether Ukraine’s public finances can be stabilised will depend mainly on the situation in the east of the country and on the possible renewal of military action. It seems that the only way to rescue Ukraine’s public finances from deteriorating further is to continue to ‘freeze’ the conflict, to gradually implement wide-ranging reforms and to reach a consensus in negotiations with lenders.

Taiwanese Lobbying in the European Union: ‘Workable Diplomacy’ and its Limitations. EU Diplomacy Paper 8/2015

The policy of the European Union (EU) towards Taiwan has mostly been analysed either as a by-product of EU-China relations or with reference to the general lack of a European geopolitical approach towards East Asia. By adopting a lobbying approach which focusses on Taiwan’s different ‘channels of influence’ within the complex European foreign policy system in Brussels, this study provides new insights into the functioning of EU-Taiwan relations. It also sheds new light on the implications of the radical change in Taiwanese diplomacy after 2008, when Chen Shui-bian’s assertive and identity-based diplomacy was replaced with the Kuomintang’s new dogma of ‘workable diplomacy’. Based on semi-guided interviews with Taiwanese and European actors, this paper examines why Taiwanese lobbying in Brussels, albeit very active and professional, is not salient enough to meet the challenges arising from the overwhelming Chinese competition and from the increasing proliferation of regional trade agreements – with active EU participation – in the Asia-Pacific region. It argues that the pragmatic ‘workable diplomacy’ approach, while smoothing out working-level relations between Taiwan and the EU, fails to attract a sufficient degree of political and public attention in Europe to the Taiwan question and thus fosters the neglect of Taiwan by European foreign policy-makers. The main challenge faced by Taiwanese diplomacy, however, is not simply one of convincing through technical arguments, but one of agenda setting, that is, of redefining European priorities in Taiwan’s favour.

The reform of the EU courts (II). Abandoning the management approach by doubling the General Court. Egmont Paper 83, March 2016

The 2011 proposal of the European Court of Justice aiming to increase the number of judges of the General Court has mutated after four years into a complete change of the EU judicial system. This long legislative debate was the first implementation of the Lisbon Treaty in the judicial domain. It has revealed different problems – formal and substantial – of the approach of public service reform in the European institutions.