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.

A Pan-European District for the European Elections? The Rise and Fall of the Duff Proposal for the Electoral Reform of the European Parliament. Bruges Political Research Papers 44/2015.

The aim of the present article is to understand the dynamics underlying the birth, the development and the eventual failure of the Duff proposal of 2009-2012, an ambitious attempt to change the provisions governing the elections for the European Parliament. In particular, the way agenda-setting on electoral reform is shaped in the European Union will be analysed, trying to understand if the current stalemate on the issue can be explained in light of factors specific to the EU. The report presented by liberal MEP Andrew Duff at the beginning of the seventh legislature called on Member States to gather a Convention, in order to introduce fundamental improvements in the way Members of the European Parliament are elected. Among the envisaged changes, the creation of a pan-European constituency to elect twenty-five Members on transnational lists represented the most controversial issue. After having analysed its main elements, the path of the Duff report from the committee of Constitutional Affairs (AFCO) to the plenary will be analysed. It will be concluded that a sharp contrast exists between the way electoral issues are raised in the AFCO committee and the way the Parliament as a whole deals with them. Moreover, diverging interests between national delegations inside groups seem to play a decisive role in hampering electoral reform. While further research is needed to corroborate the present findings, the analysis of the Duff proposal appears to shed light on the different barriers that ensure electoral reform is taken off the agenda of the Union, and on the relative weight each of them carries.