The OTC derivatives markets after financial reforms. CEPS ECMI Commentary No. 36, May 2014

Over the past five years, over-the-counter (OTC) derivatives markets have received heightened regulatory attention, due to their opaqueness, size and interconnectedness, with a view to improving the robustness, safety and resilience of this market segment. There has been continued progress in the follow-up to the G-20 commitments, with the EU (EMIR, MIFID II, CRD/CRR IV, MAD) and the US (Swap Execution Facility or SEF, Title VII of Dodd-Frank Act, Basel III) leading in the implementation timelines and capturing approximately 80-90% of the overall market. Based on the data compiled for the yearly ECMI Statistical Package, this commentary provides a snapshot of the current status of the global OTC derivatives markets by: i) identifying general trends over the past decade, ii) looking at the changes in the market structure (instruments and participants), iii) estimating the uncollateralised derivatives exposure and iv) examining the relationship between OTC derivatives and exchange-traded derivatives (ETD).

Labour Market Reforms and Current Account Imbalances: Beggar-thy-neighbour policies in a currency union? CEPS Working Document No. 399/September 2014

Member countries of the Economic and Monetary Union (EMU) initiated wide-ranging labour market reforms in the last decade. This process is ongoing as countries that are faced with serious labour market imbalances perceive reforms as the fastest way to restore competitiveness within a currency union. This fosters fears among observers about a beggar-thy-neighbour policy that leaves non-reforming countries with a loss in competitiveness and an increase in foreign debt. Using a two-country, two-sector search and matching DSGE model, we analyse the impact of labour market reforms on the transmission of macroeconomic shocks in both non-reforming and reforming countries. By analysing the impact of reforms on foreign debt, we contribute to the debate on whether labour market reforms increase or reduce current account imbalances.

Russian army justifies its reforms. OSW Commentary No. 109, 2013-06-25

The Armed Forces of the Russian Federation have been more active than usual since mid- -February this year, holding a number of previously unannounced military exercises aimed at testing combat readiness. They have also maintained, for many months, a Russian warship task force in the Mediterranean in connection with the civil war in Syria. Those activities stand out of the usual training routine of the Russian army. They have no precedent in Russia’s recent history in terms of the size of the forces involved, the measures employed, the territorial span, the number of exercises, or the scheduling and mode of carrying out the drills. The last combat-readiness tests on this scale were carried out by the Soviet army in the 1980s. The intensity of the Russian Navy’s activities in the Mediterranean and the military means engaged are comparable, in due proportion, with the activities of the Soviet fleet during the Vietnam war. The Russian leadership, including president Vladimir Putin, has been directly following the recent activities of the Russian Armed Forces and their evolution.

Reforms in Moldova: Moderate progress and an uncertain outlook for the future. OSW Commentary No. 100, 2013-01-22

After coming to power in September 2009, the Alliance for European Integration (AIE)1 coalition began implementing a wide-ranging programme of reforms, with a view to bringing Moldova closer to the European Union, and ultimately to ensure the country’s full membership of the EU. Today, Moldova is considered a clear leader in European integration among the members of the EU’s Eastern Partnership programme. This, however, has less to do with the concrete reforms introduced by the Moldovan government, and more to do with, on the one hand, Chișinău’s excellent public relations with Brussels, achieved through effective diplomacy; and on the other hand, the growing disillusionment with the lack of progress in other Eastern Partnership countries, particularly in Ukraine. Attempts to evaluate Moldova’s reforms have proven rather problematic. On the one hand, the ruling coalition has managed to make significant progress in the areas of civil liberties, human rights and electoral reform. The government has also successfully implemented regulations which have brought Moldova closer to signing a Deep and Comprehensive Free Trade Agreement (DCFTA) with the EU, and it has made headway in talks on visa liberalisation with Brussels. On the other hand, Chișinău has still not carried out the structural and economic reforms without which real change in the country will be impossible. No reforms have been introduced in the Ministry of the Interior, the Moldovan police force, or the judiciary. The AIE has also failed to decentralise governance and has had no real success in reducing corruption; its attempts to rebuild the country’s financial institutions have proved equally unsuccessful. The main reasons for this poor performance include mutual mistrust and conflicting interests among the coalition members, a shortage of financial resources, strong resistance to change by public administration staff, and significant pressure from those political and business groups whose interests could suffer as a result of the proposed reforms. It should also be noted that since the AIE took power, the international context of the reform efforts has undergone significant changes. On the one hand, the EU has been facing an economic crisis, which has had a negative impact on Moldovan exports and contributed to the worsening of the economic situation in the country; and on the other hand, Moldova has been offered membership of the Customs Union as a viable alternative to EU membership.

Lukashenka has to choose: reforms or concessions to Russia. OSW Commentary No. 42, 2010-10-27

The most serious crisis in the history of Russian-Belarusian relations has been taking place over the past few months. In 2007 Russia started the process of depriving Belarus of subsidies in the form of supplies of fuels at low prices, which have for more than a decade guaranteed the stability of the Belarusian economic model, and is continuing this process now at an accelerated rate. At the same time, the Russian media started attacks on Alyaksandr Lukashenka from the middle of this year. This toughening up of Russia’s measures indicates that the Kremlin is determined to implement its goals regarding Belarus, including first of all taking over its strategic economic assets, which would result in a significant weakening of Lukashenka’s position. The Belarusian government has been consistently avoiding meeting Russian demands, while at the same time insisting on the reinstatement of preferential conditions of co-operation. If the Belarusian leader continues resisting Russian demands, the crisis in Russian- -Belarusian relations will be aggravated, and a conflict over energy issues around the turn of 2011 cannot be ruled out. The reduction in preferences offered by Russia in the energy sector has significantly impaired the condition of the Belarusian economy, and may lead to its breakdown in a year or two. As his country comes under increasing pressure from Russia, Alyaksandr Lukashenka will soon have to make a strategic choice between yielding to the Kremlin’s demands and embarking upon an at least partial restructuring of the economy.

Counter-reforms in times of prosperity. OSW Point of View, September 2006

In 2000, Vladimir Putin came to power after nearly a decade of the rule of the first Russian president, Boris Yeltsin. As prime minister, and later as a candidate for president, Putin announced that he would reform the state. The main assumptions of this reform were presented during a congress of the pro-Kremlin Unity movement, in Putin's address entitled 'Russia at the turn of the millennium' which was delivered on 29 December 1999, and later in a open letter to voters published on 25 February 2000. Both declarations were rather general, but they gave a clear picture of the principal directions of and priority areas for the future president's efforts: they outlined Russia's development path as pro-market and democratic. Nearly seven years have passed since Vladimir Putin came to power, a time for a summary of his achievements. In a way, Vladimir Putin has partially delivered on his initial declarations; indeed, Russia has undergone a deep transformation. However, when seen in the light of the president’s initial promises, the changes appear to be no more than 'counter-reforms', because instead of putting into practice the policy he outlined seven years ago, they have largely followed a different, if not entirely opposite direction.

Ukraine's cooperation with the IMF - unfulfilled hopes for deeper reforms. OSW Commentary No. 52, 2011-06-15

The Party of Regions took power in early 2010, after Ukraine had been plunged deep in economic crisis. Over the next year, with the external markets recovering, the country’s economic situation started to improve gradually. Ukraine’s economic stabilisation was also strengthened by its resumed cooperation with the International Monetary Fund, which provided for a loan worth $15.1 billion. The issuing of successive tranches of the loan was made dependent on the implementation of a comprehensive reform programme. The cooperation went quite smoothly at first; however, as the economic situation in Ukraine improved, the reformist zeal of the Ukrainian government started to fade, and obstacles began piling up. As a result, Ukraine was refused the third tranche, scheduled for this March, and for the moment the credit line remains frozen. Even though the IMF has numerous reservations about the Ukrainian government’s economic policy, the fundamental condition for resuming cooperation is reform of the pension system, which the parliament should adopt. The difficulties with fulfilling the obligations made to the IMF reflect the wider problem with implementing reforms in Ukraine, as the Party of Regions promised after taking power. Changes which do not affect the interests of influential lobbies are quite easy to carry out. Often, however, these changes are not conducive to the economy’s liberalisation; moreover, the influential lobbies are successful in blocking reforms that could harm their businesses. Another impediment to the changes is that some reforms are likely to bring about painful social consequences, and that can affect public support for the ruling group. Even though theoretically possible, it does not seem likely that Ukraine’s cooperation with the IMF will be terminated. But even if this cooperation is continued, deeper reforms in Ukraine are likely to be postponed until after the parliamentary elections in autumn 2012.

From stabilisation to stagnation. Viktor Yanukovych's reforms. OSW Point of View Number 32, March 2013

After winning the 2010 presidential election, Viktor Yanukovych and his government developed an ambitious and comprehensive programme of reforms across key areas of social and political life. The return to a presidential system of government created the ideal conditions for the introduction of deep reforms: it allowed Viktor Yanukovych to consolidate more power than any other Ukrainian president before him.The authorities launched an overhaul of the tax and the pension systems, and of the Ukrainian gas sector. Kyiv also completed its negotiations on an Association Agreement with the EU and on a Deep and Comprehensive Free Trade Area. However, the reformist zeal of Ukraine’s political elite progressively diminished as the parliamentary election approached, the economy slowed down, and the polls showed a decline in support for the ruling Party of Regions. Many of the reforms still remain in the planning stages, and in many areas the government has moved backwards. Viktor Yanukovych has proved unable to make systemic changes, and has increasingly used his powers to crush political opposition in Ukraine. The outcome of the latest parliamentary elections prevents the formation of a stable parliamentary majority, which in turn, removes any chance of reform before the 2015 presidential ballot.

Slovakia: the Eurogroup’s enfant terrible. OSW Commentary No. 63, 2011-10-14

When Slovakia’s parliament rejected the European Financial Stability Facility (EFSF) reform on 11 October it undermined Slovakia’s reputation as a credible partner within the EU. Moreover, Prime Minister Iveta Radicova combined the vote on the strengthening of the EFSF – a key anti-crisis mechanism in the Eurozone – with a vote of confidence for her cabinet. This eventually led to the collapse of the government. Before Slovakia’s decision, the strengthening of the EFSF had been endorsed by the national parliaments of all the eurozone countries. Slovakia, which had opted to be the last one to carry out the ratification procedure, adopted the EFSF reform only in a re-vote on 13 October, due to the support of the opposition left-wing party. However, problems with ratification have cast a shadow over the achievements of Slovakia which as one of the freshest members of the eurozone had been actively seeking to influence the creation of EU mechanisms for dealing with the debt crisis. For the past eighteen months the Slovak government, formed by conservative and liberal parties, has consistently called for the controlled bankruptcy of Greece, a tightening of the rules of the Stability and Growth Pact, and for the private sector’s participation in financing the rescue packages for indebted states. It was in part down to Slovakia that these proposals, previously regarded as extreme, were introduced into the mainstream EU debate. The constructive position presented by Slovakia’s diplomacy in recent months has brought Bratislava tangible results, such as the reduction of its contribution to the permanent anti-crisis fund, the European Stabilisation Mechanism (ESM). Thus Slovakia, which adopted the single currency on 1 January 2009, has become an informal spokesman for the new, poorer members of the eurozone.

Big business in the Russian economy and politics under Putin's rule; The Russian power industry shortly before reforms; Ukrainian metallurgy: the economic link in the oligarchical system. OSW Study 5/2002

Big business in Russia: The pace of ownership transfer in the Russian economy has speeded up considerably over the last year. There has been a significant rise in the number of acquisitions of whole enterprises, and large blocks of shares in individual firms and plants. Similarly the number of mergers, bankruptcies and take-overs of failing firms by their strongest competitors has grown. The Russian power industry: This study is an overview of the current condition and principles on which the Russian power sector has been functioning so far. This analysis has been carried out against the background of the changes that have been taking place in the sector since the beginning of the 1990s. This text also contains a description of guidelines and progress made so far in implementing the reform of the Russian power industry, the draft of which was adopted by the government of the Russian Federation in summer 2001. However, the purpose of this study is not an economic analysis of the draft, but an attempt to present the political conditions and possible consequences of the transformations carried out in the Russian power sector. The final part attempts to evaluate the possibilities and threats related to the implementation of the reform in its present shape. Ukrainian metallurgy: The metallurgic sector, like the east-west transit of energy raw materials, is a strategic source of revenue for Ukraine. Over the last ten years, this sector has become Kiev's most important source of foreign currency inflows, accounting for over 40 per cent of its total export revenues. The growth of metallurgic production, which has continued almost without interruption since the mid-1990s, has contributed considerably to the increase in GDP which Ukraine showed in 2000, for the first time in its independent history.