Why an ESM programme could be a kiss of death: Recovery values and subordination. CEPS Commentary, 27 June 2012

Spain, needing a bailout for its banks, was granted a vague promise by EZ leaders for up to €100 billion. The details remain obscure, yet they matter enormously. This column argues that the so-called ‘subordination effect’ of fresh official lending could put Spain on the slippery road to ruin. It argues that if sovereign bonds must be bought, this should be done in the secondary market which, would be on an equal footing with private investors and thus avoid the subordination trap.

The Great Transformation: Memo to the Incoming EU Presidents. Bruegel Policy Brief 2014/04, July 2014

The European Union’s leadership spent the last five years fighting an acute and existential crisis. The next five years, under your leadership, will be no less difficult. You will have to tackle difficult economic and institutional questions while being alert to the possibility of a new crisis. You face three central challenges: (1) The feeble economic situation prevents job creation and hobbles attempts to reduce public and private debt; (2) EU institutions and the EU budget need reform and you will have to deal with pressing external matters, including neighbourhood policy and the EU’s position in the world; (3) You will have to prepare and face up to the need for treaty change to put monetary union on a more stable footing, to review the EU’s competences and to re-adjust the relationship between the euro area and the EU, and the United Kingdom in particular.

ECB Policy and Eurozone Fragility: Was De Grauwe Right? CEPS Working Document No. 397, June 2014

Paul De Grauwe’s fragility hypothesis states that member countries of a monetary union such as the eurozone are highly vulnerable to a self-fulfilling mechanism by which the efforts of investors to avoid losses from default can end up triggering the very default they fear. The authors test this hypothesis by applying an eclectic methodology to a time window around Mario Draghi’s “whatever it takes” (to keep the eurozone on firm footing) pledge on 26 July 2012. This pledge was soon followed by the announcement of the Outright Monetary Transactions (OMT) programme (the prospective and conditional purchase by the European Central Bank of sovereign bonds of eurozone countries having difficulty issuing debt). The principal components of eurozone credit default swap spreads validate this choice of time frame. An event study reveals significant pre announcement contagion emanating from Spain to Italy, Belgium, France and Austria. Furthermore, time-series regression confirms frequent clusters of large shocks affecting the credit default swap spreads of the four eurozone countries but solely during the pre-announcement period. The findings of this report support the fragility hypothesis for the eurozone and endorse the Outright Monetary Transactions programme.

Trudny "Sojusznik" Bialorus w polityce Rosji. Prace OSW 2008. = Difficult "ally." Belarus in Russia's foreign policy. OSW Study 28/2008

Belarus holds a special position in Russian policy due to its geopolitical, military and transit significance. Russia's influence and position in the entire Eastern European region largely depend on how strong Russian influence in Belarus is. The process of Russian-Belarusian integration began in 1994, when Alyaksandr Lukashenka came to power in Minsk. At the time, Russia's policy towards Belarus was based on twomain assumptions. Firstly, the Kremlin supported Lukashenka's authoritarian regime. This allowed Russia to keep Belarus within its orbit of political influence and prevent other states from getting involved, since an undemocratic Belarus could not count on closer contacts with the West. Secondly, Russia heavily subsidised Belarus with cheap energy resources (way below the market price) and allowed the duty-free access of Belarusian goods to its market. Thus Belarus became a kind of 'sponsored authoritarianism' with a specific economic model, owing its existence to Russia's economic and political support. At the same time, Moscow's key objective in its policy towards Belarus was to make Minsk accept the Russian conditions concerning integration, which would in fact lead to Belarus' incorporation by the Russian Federation. However, Belarus managed to maintain its sovereignty, while Alyaksandr Lukashenka bandied the term 'integration' about in order to maintain the preferential model of his state's relations with Russia. Russia's intention to alter the nature of these bilateral relations became evident when Vladimir Putin took power in 2000. However, Moscow faced Minsk's refusal to accept the Russian integration plan (which, among other measures, provided for the takeover of Belarusian economic assets by Russian companies). This forced Russia to use its main tool against Minsk: the supplies of cheap gas and oil that had been sustaining Belarus' archaic economy. The most serious crisis in Russian-Belarusian relations broke out at the beginning of 2007, following Moscow's decision to raise the energy resource prices. This decision marked the beginning of the application of market principles to settlements between Moscow and Minsk. The key question this study is meant to answer concerns the consequences of the aforementioned decision by Russia for future Russian-Belarusian relations. Are they at a turning point? What are Russia's policy objectives? What results can come from the process of moving mutual relations onto an economic footing? What policy will replace Russia's 'sponsoring of Belarusian authoritarianism', which it has been implementing since 1994? Finally, what further measures will Russia undertake towards Belarus? The current study consists of five chapters. The first chapter offers a brief presentation of Belarus' significance and position in Russian policy. The second analyses the development of Russian-Belarusian political relations, first of all the establishment of the Union State, Belarus' position in Russian domestic policy and Russia's influence on Belarusian policy. The third chapter presents bilateral economic relations, primarily energy issues. The fourth chapter describes the state and perspectives of military cooperation between the two states. The fifth chapter presents conclusions, where the author attempts to define the essence of the ongoing re-evaluation in Russian-Belarusian relations and to project their future model.

Is the EU-Central Asia Strategy running out of steam? EUCAM Policy Brief No. 17, May 2011

The EU’s Central Asia Strategy approaches its fourth anniversary. In that time the EU has placed its relationship with Central Asia on a more structured footing. Although progress has been made in building dialogue and in furthering engagement, the strategy’s limitations are increasingly obvious. This brief argues that the driving force of the EU engagement should be based on a closer link between security and development. Engagement in this broad field should be underpinned by a values based approach that seeks to promote more explicitly reform on human rights, rule of law, governance and democracy. The momentous changes sweeping across the Middle East and North Africa have demonstrated that even the most apparently durable authoritarian regimes are vulnerable to sudden political shocks.