What kind of European Banking Union? Bruegel Policy Contribution [2012/12?]June 25, 2012

This paper discusses the creation of a European Banking Union. First, we discuss questions of design. We highlight seven fundamental choices that decision makers will need to make: Which EU countries should participate in the banking union? To which categories of banks should it apply? Which institution should be tasked with supervision? Which one should deal with resolution? How centralised should the deposit insurance system be? What kind of fiscal backing would be required? What governance framework and political institutions would be needed? In terms of geographical scope, we see the coverage of the banking union of the euro area as necessary and of additional countries as desirable, even though this would entail important additional economic difficulties. The system should ideally cover all banks within the countries included, in order to prevent major competitive and distributional distortions. Supervisory authority should be granted either to both the ECB and a new agency, or to a new agency alone. National supervisors, acting under the authority of the European supervisor, would be tasked with the supervision of smaller banks in accordance with the subsidiarity principle. A European resolution authority should be established, with the possibility of drawing on ESM resources. A fully centralized deposit insurance system would eventually be desirable, but a system of partial reinsurance may also be envisaged at least in a first phase. A banking union would require at least implicit European fiscal backing, with significant political authority and legitimacy. Thus, banking union cannot be considered entirely separately from fiscal union and political union. The most difficult challenge of creating a European banking union lies with the short-term steps towards its eventual implementation. Many banks in the euro area, and especially in the crisis countries, are currently under stress and the move towards banking union almost certainly has significant distributional implications. Yet it is precisely because banks are under such stress that early and concrete action is needed. An overarching principle for such action is to minimize the cost to the tax payers. The first step should be to create a European supervisor that will anchor the development of the future banking union. In parallel, a capability to quickly assess the true capital position of the system’s most important banks should be created, for which we suggest establishing a temporary European Banking Sector Task Force working together with the European supervisor and other authorities. Ideally, problems identified by this process should be resolved by national authorities; in case fiscal capacities would prove insufficient, the European level would take over in the country concerned with some national financial participation, or in an even less likely adverse scenario, in all participating countries at once. This approach would require the passing of emergency legislation in the concerned countries that would give the Task Force the required access to information and, if necessary, further intervention rights. Thus, the principle of fiscal responsibility of respective member states for legacy costs would be preserved to the maximum extent possible, and at the same time, market participants and the public would be reassured that adequate tools are in place to address any eventuality.

What do the Maidan protests tell us about Ukraine? Diagnosis and prospects for Ukrainian politics. OSW Commentary No. 125, 22.01.2014

The outbreak of the protests in the Maidan in Kyiv, and also periodically in other Ukrainian cities, has come as a surprise to both the government and the opposition. These rallies have now been ongoing for several weeks and their most striking feature is their focus on citizenship and their apolitical nature and, by extension, a clear attempt to dissociate the protests from Ukraine’s political opposition. Neither Batkivshchyna, UDAR nor Svoboda have managed to take over full control of the demonstrations. On the one hand, this has been linked to the fact that the protesters have little confidence in opposition politicians and, on the other hand, to disputes over a joint strategy and to rivalry between the three parties. As a result, the citizen-led movement has managed to retain its independence from any political actors. As a consequence of the radicalisation and escalation of the protests following 19 January, the political opposition has lost a significant proportion of the control it had been in possession of until then. Maidan should also be seen as the first clear manifestation of a new generation of Ukrainians – raised in an independent Ukraine, well-educated and familiar with new social media, but nonetheless seeking to ground themselves in national tradition. After the initial shock and a series of failed attempts to quell the protests, the government has seemingly opted to wait out the unrest. At the same time, however, it has been creating administrative obstacles for both the political and the civil opposition, restricting their access to the media and severely limiting the legal possibility to organise demonstrations.

Od demokracji "wirtualnej" ku europejskiej: Geneze i konsekwencje przelomu politycznego w Moldawii. Prace OSW 32/2009. = From "virtual" to European democracy - the origins and consequences of the political breakthrough in Moldova. OSW Study 32/2009

2009 may become a turning point in the history of post-Soviet Moldova. The country’s political class and society are faced with a fundamental choice. On the one hand, if the Party of Communists of the Republic of Moldova, which has governed the country since 2001, remains in power, this would mean a consolidation of the authoritarian rule of the party leader Vladimir Voronin, perpetuation of the superficial nature of democratic institutions and a continuation of the manoeuvring between the European Union and Russia (with the increasing risk of falling into the latter’s exclusive zone of influence). On the other hand, the take over of political power by the opposition parties creates an opportunity for Moldova to resume building a democratic, pluralistic political system based on the rule of law and to develop closer links with the European Union within the framework of the European Neighbourhood Policy, including the Eastern Partnership.

On the verge of crisis? Mounting economic problems in Belarus. OSW Commentary No. 51, 2011-04-06

Belarus’s financial condition has visibly worsened since the beginning of this year. The severe falls in the country’s foreign currency reserves and its shortage of foreign currency on the international market pose an increasing threat to the stability of the Belarusian economy. Fearing an outbreak of public dissatisfaction, The government has so far been trying to avoid devaluing the rouble or structural economic reforms. Maintaining full control inside the country and the stability of the authoritarian regime are still the main concerns for President Alyaksandr Lukashenka. For this reason, the actions taken by the Belarusian government have been limited to imposing short-term administrative restrictions on the foreign currency market and obtaining external support in the form of loans. Given Belarus’s falling creditworthiness, Minsk is only able to ask Russia for financial support, thus offering the Kremlin more opportunities to realise its desire to take over strategic industrial plants in Belarus. However, the present economic problems of Belarus are so serious that no loan will be able to safeguard its government from the need of carrying out serious economic reforms.

Holes in the skies over NATO's Central European member states. OSW Commentary No. 119, 22.10.2013

Over the past few months, four Central European states have made decisions which will determine the shape of their air forces over the next decade. On 11 October, Romania signed a contract under which it will buy twelve used US F-16A/B multi-role fighter aircraft from Portugal. In August, Slovakia signed contracts with Russia’s MiG for repairs and the limited modernisation of its twelve MiG-29 fighter aircraft currently in service. The Czech Republic entered into a preliminary agreement in July with Sweden on extending the lease of fourteen JAS-39 Gripen multi-role fighter aircraft (the new Czech government will hammer out the details following the parliamentary election). Bulgaria, which has been facing financial problems and political instability, in June postponed the purchase of new (non-Soviet) combat aircraft at least until the end of this year. If Sofia decides to buy any within the next few years, these will be not more than twelve relatively old and worn-out machines (most likely F-16A/B from Portuguese or Dutch army surplus). Given the fact that Hungary in 2012 made the same decision regarding its fourteen Gripen aircraft as the Czech Republic, there are good grounds to claim that the capabilities Central European NATO member states have to take action in airspace are durably limited. The region’s saturation with combat aircraft is the lowest when compared to the entire continent (with the exception of the Baltic states). Furthermore, the machines to be used in the coming decade will be the oldest and the least advanced technologically (all of them belong to the so-called “fourth generation”, the roots of which date back to the 1970s). The problem with gaining full interoperability within NATO has not been resolved in its Central European member states. By modernising its MiG-29 aircraft, Slovakia is to say the least postponing the achievement of interoperability once again. Bulgaria will gain interoperability by buying any Western combat aircraft. However, it is very unlikely to introduce new machines into service earlier than at the end of the present decade. Since the introduction of new fifth generation multi-role combat aircraft or transitional 4+ generation machines in the region’s air forces is unrealistic, the defence of the airspace of NATO member states in Central Europe can be termed an ever more porous sky.