Macroeconomic Scenarios for the Euro-Mediterranean Area Quantification based on the GEM-E3 Model. MEDPRO Report No. 7, July 2013

Four alternative macroeconomic scenarios for southern Mediterranean countries are quantified in this study with the use of GEM-E3, a general equilibrium model. These are i) the continuation of current policies (business-as-usual scenario), ii) southern Mediterranean–EU cooperation (Euro-Mediterranean Union scenario), iii) a global opening of the southern Mediterranean countries and cooperation with the rest of the Middle East and other developing countries like China (Euro-Mediterranean alliance scenario), and iv) a deterioration in the regional political climate and a failure of cooperation (Euro-Mediterranean under threat scenario). Explicit assumptions on trade integration, infrastructure upgrade, population and governance developments are adopted in each scenario. The simulation results indicate that an infrastructure upgrade and governance improvements in the context of southern Mediterranean–EU cooperation could benefit most of the countries under consideration. The analysis remains important in light of ongoing regional developments and the need to design the best policies to pursue in the aftermath of the Arab spring.

The economic and financial crisis in Russia – background, symptoms and prospects for the future. OSW Report 02/2015

The crisis in Russia’s financial market, which started in mid-December 2014, has exposed the real scale of the economic problems that have been growing in Russia for several years. Over the course of the last year, Russia’s basic macroeconomic indicators deteriorated considerably, the confidence of its citizens in the state and in institutions in charge of economic stability declined, the government and business elites became increasingly dissatisfied with the policy direction adopted by the Kremlin, and fighting started over the shrinking resources. According to forecasts obtained from both governmental and expert communities, Russia will fall into recession in 2015. The present situation is the result of the simultaneous occurrence of three unfavourable trends: the fact that the Russian economy’s resource-based development model has reached the limits of its potential due to structural weaknesses, the dramatic decline in oil prices in the second half of 2014, and the impact of Western economic sanctions. Given the inefficiency of existing systemic mechanisms, in the coming years the Russian leadership will likely resort to ad hoc solutions such as switching to a more interventionist “manual override” mode in governing the state. In the short term, this will allow them to neutralise the most urgent problems, although an effective development policy will be impossible without a fundamental change of the political and economic system in Russia.