TRAC: a market-based tax on capital flight as an alternative to Grexit. CEPS Commentary, 7 May 2015

In this CEPS Commentary, Daniel Gros turns his attention to the main outstanding problem facing Greece today, namely capital flight. Fearful that the country will leave the euro, depositors are withdrawing cash from their bank accounts – thereby making this event more likely. He outlines a proposal in which outgoing payments from Greek banks in the form of cash or via the TARGET system would be limited to the amount of incoming payments, i.e. revenues from exports or tourism, via an auction system. Greece could remain formally a member of the euro area, but the price for cash withdrawals would encourage depositors to wait and stimulate exports.

Combating corruption in Ukraine – the beginning of a long march. OSW COMMENTARY Number 170, 06.05.2015

From a public opinion point of view, corruption has been the gravest problem of today’s Ukraine, excepting the armed conflict in the east of the country. The government might be able to delay certain key reforms such as the constitutional reform or the reform of local government structures, however, without stepping up measures to combat corruption they would face the risk of losing social support which has already been weak. There is no single strategy for combating corruption in Ukraine. What has been implemented is a series of often contradictory concepts and actions (initiated by the president’s office, the government, civil society institutions, or launched to meet the requirements of donors). The successes of the new government have included efforts aimed at fighting corruption at the middle level of government and the introduction of legislative changes in compliance with international practice. The main weaknesses, on the other hand, have been the lack of efficient mechanisms to implement the adopted legislation to ensure that an individual charged with corruption (regardless of political connections) could be effectively tried and the money received as bribery could be returned to the state. Similarly, the judiciary system has not been prepared to actively handle corruption cases.

NATO’s presence in the Baltic states – reassurance of allies or deterrence for Russia? OSW COMMENTARY Number 169, 29.04.2015 2015-04-29

In late March and early April, the US Air Forces in Europe (USAFE) held an exercise in Estonia, during which US F-16s destroyed ground targets in an Estonian firing range. Around the same time the Americans held a drill with the Swedish and Finnish Air Forces over the Baltic Sea. The United States has been playing a leading role in the process of strengthening NATO’s presence in the Baltic states. As far as the Western European allies are concerned, Germany will follow in the footsteps of Denmark and the United Kingdom, both of which made significant military contributions to the strengthening of the allied presence in 2014, and will deploy the largest number of troops in 2015. Non-aligned Sweden and Finland, key for the performance of NATO operations in the Baltic states, have been emphasising their military and political readiness to co-operate with NATO in the event of potential crises or conflicts. Comparing NATO ‘s military presence in the Baltic states before and after the outbreak of the Russian intervention in Ukraine, it is clear that NATO has stepped up its engagement considerably. However, its scope is still relatively small, given the much larger military potential and mobilisation capacity of Russia. Moreover, the message sent by NATO’s actions may be diminished by the political, military and financial constraints faced by the allies and Sweden and Finland. It seems that the greatest risk to the military security of the Baltic states currently appears to be the possibility that Russia could wrongly assess the reliability of NATO’s security guarantees.

The EU's migrant strategy: a welcome new impetus. EPC Commentary, 19 May 2015

The publication of the Commission's agenda on migration comes at a difficult time: first and foremost in humanitarian terms on account of the recurrent and intolerable tragedies taking place in the Mediterranean, which demand a rapid response; and secondly, in political terms, if we consider both the economic situation (the crisis) and the political situation (the rise of far-right and anti-European parties) which makes all debate and action in this field rather tricky. In this context, the Juncker Commission faced a sensitive challenge because it needed to act quickly but had only limited room for manoeuvre. While certain guidelines had already been revealed at the European Council meeting on 23 April, the publication of the agenda has provided the Commission with an opportunity to recall and to specify the actions it wishes to undertake in the immediate, medium, and long terms. There are three aspects to the agenda worth highlighting: its innovation, its confirmation, and its long-term vision.

The Eastern Partnership Riga Summit should not be a non-event. EPC Commentary, 20 May 2015

The upcoming 21-22 May Eastern Partnership (EaP) Riga Summit will take place against the backdrop of the new geopolitical reality in the EU’s Eastern neighbourhood, in the aftermath of Russia’s annexation of Crimea and ongoing war in Eastern Ukraine. Given the extremely complex geopolitical context, the importance of the Summit and the message it delivers to the partner countries – particularly to Ukraine, Georgia and Moldova, which have made European integration their foreign policy goal – cannot be underestimated. The Summit needs to send a strong, unambiguous signal reconfirming the EU’s commitment to the EaP, and offer a clear roadmap for the future. If the Summit turns out to be a non-event, with an empty declaration, it risks being perceived as rewarding the bullying policies of Russia.

The case for a European unemployment benefit scheme. CEPS Commentary, 19 May 2015

In this CEPS Commentary, Ilaria Maselli and Miroslav Beblavý argue that the European economic governance system needs to be equipped with a supranational automatic stabiliser that would kick-in automatically in the event of an economic downturn, to avoid unduly burdening national public finances. In their view, the option of creating an unemployment benefit system for the euro area should be given serious consideration. The possible variations of such a system and their implications will be the subject of in-depth study at CEPS over the coming year.

Why Greece is different. CEPS Commentary, 22 May 2015

With Greece’s economy tanking again, the country’s government is convinced that it is the victim of the wrong treatment in the form of excessive austerity and is calling for a renegotiation of the bailout deal it made with its international creditors. In Daniel Gros’ view, however, this narrative overlooks the fact that the approach worked in other peripheral countries: Portugal, Ireland, Spain and even Cyprus, are all visibly recovering. As he points out in this CEPS Commentary, it was their strong export performance which allowed these countries to escape the austerity trap and he accordingly urges Greece’s policy-makers to focus their attention on stimulating exports rather than only discussing the budget.

The Eastern Partnership after Riga: Review and Reconfirm. CEPS Commentary, 29 May 2015

The Riga Summit of 21-22 May reaffirmed the EU’s commitment to the Eastern Partnership, underlined further differentiation between the neighbours and reiterated the importance of people-to-people contacts, finds Hrant Kostanyan in this CEPS Commentary. All in all, however, the Summit was more of a stocktaking exercise than a momentous redefinition of relations with the EU at a time of precarious geopolitics in the east. Politically, it is important now for the EU to defend what it already offered to the eastern neighbours and reconfirm the Eastern Partnership as a defining feature of its foreign policy and fundamental to the EU’s larger Security Strategy review.

Last chance for Europe in the digital saloon? CEPS Commentary, 29 May 2015

With the rise of the digital economy over the past decade and as internet platforms and ‘over-the-top’ players take centre stage, Europe has struggled to compete with other regions. The new Juncker Commission has kept its promise to propose legislative steps towards a connected Digital Single Market, but will the member states buy into this strategy and will it be enough to reignite Europe’s ailing digital economy, asks Colin Blackman in this new CEPS Commentary.

Turkey’s 7 June parliamentary elections – Part I. A pivotal moment for Turkey’s future. EPC Commentary, 3 June 2015

On 7 June, Turks will head to the polls to elect a new parliament. This election is a pivotal moment for Turkey’s future, with two battles being played out. While the first is about securing a majority in parliament, the second is related to President Recep Tayyip Erdoğan and his goal of creating a presidential system of governance. Furthermore, the future of the Kurdish Peace Process and the stability in the southeast of the country will almost certainly hinge on the outcome. Hence, this election is a battle for Turkey's future.

Russia marks the 70th anniversary of the victory over Nazism: What significance does it have in an epoch of global confrontation? OSW Commentary No. 171, 20 May 2015

The Victory Day celebrations held in Russia on 9 May 2015 were special for marking the seventieth anniversary of the end of World War II but the particular international and domestic context they were set in was of yet greater importance. The element which set the celebrations in 2015 apart from those in the preceding years was how the military and moral aspects of Soviet victory over Nazi Germany was made part of the current geopolitical confrontation with the West concerning the Ukrainian crisis. The escalation of the aggressive rhetoric on Europe and the USA and accusations that the West is destabilising the international situation and striving for conflict was accompanied by a display of the increasing military power of the Russian Federation; the display itself was stronger than has been seen in preceding years. This was a clear sign that Moscow is ready to protect its national interests in the area of foreign policy by any means. At the same time, the creation of an atmosphere of threat and stoking patriotic feelings was intended to mobilise the Russian public around the political leadership while the country’s economic problems are deteriorating further.

A captured state? Moldova’s uncertain prospects for modernisation. OSW Commentary No. 168, 22 April 2015

There have been several significant changes on Moldova’s domestic political scene in the wake of the November 2014 parliamentary elections there. Negotiations lasted nearly two months and resulted in the formation of a minority coalition composed of two groupings: the Liberal-Democratic Party (PLDM) and the Democratic Party (PDM). New coalition received unofficial support from the Communist Party (PCRM), which had previously been considered an opposition party. Contrary to their initial announcements, PDLM and PDM did not admit the Liberal Party led by Mihai Ghimpu to power. Moreover, they blocked the nomination for prime minister of the incumbent, Iurie Leancă. Leancă has been perceived by many as an honest politician and a guarantor of reforms. This situation resulted in the political model present in Moldova since 2009 being preserved. In this model the state’s institutions are subordinated to two main oligarch politicians: Vlad Filat (the leader of PLDM) and Vlad Plahotniuc (a billionaire who de facto controls PDM).

Building a Capital Markets Union….or designing a financial system for the euro area? CEPS Commentary, 2 June 2015

In this CEPS Commentary, economists Anton Brender, Florence Pisani and Daniel Gros challenge the foundation on which the European Commission launched a key debate earlier this year on the development of the EU’s financial system, with publication of its Green Paper "Building a Capital Markets Union". While acknowledging that a single capital market could be useful in the European Union, they argue that it is extremely dangerous to conduct one and the same monetary policy in an area with broadly varying financial practices and structures – as the first 15 years of the euro area's history have vividly shown. They conclude that financial integration of the countries in EMU must receive top priority in a process that the rest of the European Union may then subsequently join.

The Kharkiv oblast: a fragile stability. OSW COMMENTARY NUMBER 172/03.06.2015

Kharkiv oblast, which is located in the immediate vicinity of the Donbas region, and which shares a 315-km stretch of Ukraine’s border with Russia, was one of the regions where attempts were made to kindle separatist sentiments during the spring of last year. Some central government buildings were briefly occupied by pro-Russian demonstrators who declared a ‘Kharkov People’s Republic’, but efficient countermeasures by the Ukrainian institutions of force quickly calmed the situation in the region. However, the oblast still remains a target for acts of sabotage, which are probably directed by Russian secret services. Nevertheless, the situation in the region is now stable, both in terms of public sentiment and local politics. The main competitors in the arena of local politics are Hennadiy Kernes, the mayor of Kharkiv, and Arsen Avakov, the current head of the Ukrainian Interior Ministry. Despite many years of hostility, neither of the politicians appears to have initiated a power struggle as yet – Kernes retains his influence on the city council, and Avakov controls the local security services.

The QE placebo. CEPS Commentary, 12 June 2015

After pointing out several surprising coincidences and contradictions that arise in nearly every aspect of the QE debate, Daniel Gros arrives at the conclusion in this CEPS Commentary that evaluating the policy’s effectiveness is more of an art than a science, which leaves plenty of room for distortion and bias.