A Convergence Process in Household Credit in Central and Eastern Europe. ECRI Commentary No. 16, 30 October 2015

The liberalisation of Eastern Europe’s market during the 1990s and the 2004 EU enlargement have had a great impact on the economies of Central and Eastern Europe (CEE). Indeed, prior to these events, the financial system and household credit markets in CEE were underdeveloped. Nonetheless, it appeared to numerous economists that the development of the CEE financial system and credit markets was following an intensely positive trend, raising the question of sustainability. Many variables impact the level and growth rate of credit; several economists point out that a convergence process might be one of the most important. Using a descriptive statistics approach, it seems likely that a convergence process began during the 1990s, when the CEE countries opened their economies. However, it also seems that the main driver of this household credit convergence process is the GDP per capita convergence process. Indeed, credit to households and GDP per capita have followed broadly similar tendencies over the last 20 years and it has been shown in the literature that they appear to influence each other. The consistency of this potential convergence process is also confirmed by the breakdown of household credit by type and maturity. There is a tendency towards similar household credit markets in Europe. However, it seems that this potential convergence process was slowed down by the financial crisis. Fortunately, the crisis also stabilised the share of loans in foreign currency in CEE countries. This might add more stability to credit markets in Eastern Europe.

The AKP rebooted – What next for Turkey? EPC Commentary, 30 October 2015

Turkey is headed to its second parliamentary election in five months with snap polls slated for November 1. The election will take place in a highly charged atmosphere with escalating violence and financial volatility. The renewed conflict between Turkey and the terrorist Kurdistan Workers' Party (PKK) is spreading throughout the country with the rise of ethnic tensions posing a big threat to internal harmony. Even a peace rally in the capital Ankara was hit by suicide bombers marking the deadliest terror attack in Turkey's history. Turkey, which has always been the most stable country in a turbulent region, risks its security being seriously jeopardised unless the violence is urgently stopped and the political ambiguity is ended through a stable government.

A close call before Paris. CEPS Commentary, 2 November 2015

Following the final negotiating session in Bonn, October 19-23, and in the run-up to COP21 in Paris, which is expected to culminate in a new global climate agreement in December, Andrei Marcu offers his assessment of this immensely complicated and important project and its chances to succeed. In his view, the latest version of the text allows all countries to feel ownership and can succeed if sufficient political will can be summoned.

Awkward partner once again? Repercussions for Europe of Poland’s elections. EPIN Commentary No. 27, 3 November 2015

A clear majority of Poles voted to end eight years of Civic Platform (PO) government on October 25th when they brought the national-conservative Law and Justice Party (PiS) back to power. This outcome might be difficult to understand for Poland’s West European partners and may also confuse some EU officials who have observed developments in Poland since it joined the EU in 2004. The implications of these elections for relations with Germany and France, and for Poland’s own EU policy, are a source of concern. Do the results herald a return to the country Poland was during its early years as EU member? In this EPIN commentary the author attempts to throw light on the reasons behind the return to power of Law and Justice Party and considers the wider implications for the EU and European cohesion.

Greece as an example of “post-politics” in the eurozone. EPIN Commentary No. 28/9 November 2015

The negotiations between Greece and the EU and IMF tested the unity, limits, stamina and financial interdependence of eurozone member states. Greece emerged wounded from the fray, but Prime Minister Alexis Tsipras has established beyond doubt his dominance in Greek politics, in defiance of partisan competitors at home and his counterparts’ wishes in the rest of Europe. In this EPIN Commentary the authors argue that – beyond the political significance of SYRIZA’s third electoral victory in seven months – this vote of confidence brings certain characteristics of both Greek and EU politics into sharper relief. The high-risk political activism undertaken by Syriza’s leadership in the first half of 2015 has (re)opened the debate about what kind of EU we live in, and contributed to the creation of another type of discourse in Europe – one that has so far been the preserve of established elites.

The Economic Impact of Sanctions against Russia: Much ado about very little. CEPS Commentary, November 2015

The decision process leading to the imposition of sanctions against Russia in response to its annexation of Crimea and its subsequent military intervention in Eastern Ukraine has been very difficult for the EU, with some member states claiming that they have been particularly hard hit because exports to Russia are important to their economies. This commentary shows, however, that the economic cost in terms of lost exports, and thus potentially jobs, has in reality been negligible.

Seeing the bigger picture: The refugee crisis and the link to CFSP. EPC Commentary, 16 November 2015

The EU’s current approach in dealing with the refugee crisis is not working. Closing borders is certainly not addressing the challenge. The United Nations (UN) recorded more than 218,000 arrivals to Europe in the month of October, almost as many as during the whole of 2014. There is no way of managing these flows – and the crisis itself – if we do not concentrate on the bigger picture.

A partial success of trade cooperation within the ‘16+1’ formula: the case of food exports to China. OSW COMMENTARY #189, 2015-10-29

When in 2012 China approached the countries of Central and Eastern Europe (CEE) with a proposal of cooperation in the ‘16+1’ formula, it declared it was willing to meet the needs of CEE countries. Beijing had been aware of the political importance of the problem of trade deficit (which has been ongoing for years) and launched cooperation with the governments of 16 CEE countries to boost imports from these states. The years 2011–2014 brought an improvement in the balance of trade between China and: Hungary, Latvia, the Czech Republic, Romania, Bulgaria and Croatia. The remaining ten CEE countries recorded an increase in their trade deficits. Changes in CEE countries’ balance of trade with China resulted only slightly from political actions. Instead, they were due to the macroeconomic situation and to a deterioration of the debt crisis in the EU which, for example, caused a decline in the import of Chinese goods in some of these countries. Multilateral trade cooperation was successfully developed in the entire region only in the agricultural and food production sector – the area of greatest interest to China. The pace of bilateral cooperation with specific countries varied, with the fastest being Poland, Latvia, Romania, Hungary and Bulgaria. Actions by governments of CEE countries resulted in Chinese market opening up to hundreds of local companies which, in turn, translated into an increase in the volume of foodstuffs sold by ‘the 16’ to China from US$ 137 million in 2011 to US$ 400 million in 2014. The success achieved in the agricultural and food production sector has demonstrated the effectiveness of trade cooperation in the ‘16+1’ formula. It is, however, insufficient to generate a significant improvement of the trade balance. At present, the sector’s share in the total volume of goods sold to China by CEE states is a mere 3.7%, and any reduction of the trade deficit would require long-term and more comprehensive solutions still to be implemented by the governments of individual CEE states.

The uncertain future of the coal energy industry in Germany. OSW COMMENTARY #188, 2015-10-20

Germany’s current energy strategy, known as the “energy transition”, or Energiewende, involves an accelerated withdrawal from the use of nuclear power plants and the development of renewable energy sources (RES). According to the government’s plans, the share of RES in electricity production will gradually increase from its present rate of 26% to 80% in 2050. Greenhouse gas emissions are expected to fall by 80–95% by 2050 when compared to 1990 levels. However, coal power plants still predominate in Germany’s energy mix – they produced 44% of electricity in 2014 (26% from lignite and 18% from hard coal). This makes it difficult to meet the emission reduction objectives, lignite combustion causes the highest levels of greenhouse gas emissions. In order to reach the emission reduction goals, the government launched the process of accelerating the reduction of coal consumption. On 2 July, the Federal Ministry for Economic Affairs and Energy published a plan to reform the German energy market which will be implemented during the present term of government. Emission reduction from coal power plants is the most important issue. This problem has been extensively discussed over the past year and has transformed into a conflict between the government and the coal lobby. The dispute reached its peak when lignite miners took to the streets in Berlin. As the government admits, in order to reach the long-term emission reduction objectives, it is necessary to completely liquidate the coal energy industry in Germany. This is expected to take place within 25 to 30 years. However, since the decision to decommission nuclear power plants was passed, the German ecological movement and the Green Party have shifted their attention to coal power plants, demanding that these be decommissioned by 2030 at the latest.

Achieving European Policy Objectives through Financial Technology. ECRI Commentary No. 17, 16 November 2015

Alistair Milne argues in this ECRI Commentary that ‘FinTech’ (newly emerging Financial Technologies) can play a crucial role in achieving European policy objectives in the area of financial markets. These notably include increasing access by smaller firms to trade credit and other forms of external finance and completing the banking and capital markets unions. He points out, however, that accomplishing these objectives will require a coordinated European policy response, focused especially on promoting common business processes and the adoption of shared technology and data standards.

Dear Donald … Yours, David. CEPS Commentary, 12 November 2015

The cordial letter of November 10th from the British Prime Minister to the President of the European Council is an important document. It sets the stage for deliberations on whether the UK stays in the EU, or quits in an historic act of destructive disintegration for the EU that condemns the UK to what has fittingly been called “the spectre of geo-political irrelevance”. Overall the letter is looking like a plausible move towards settling the Brussels part of the Prime Minister’s manifest objective to keep the UK in the EU, argues Michael Emerson in this CEPS Commentary. But there is one major part of the debate that is underdeveloped so far: the clarification of the scenarios and consequences of secession. Eurosceptics have not detailed their positions on how to manage the secession, but what is becoming clearer is that all conceivable options are far more problematic than the status quo.

Europe’s self-defence: Tous pour un et un pour tous? CEPS Commentary, 20 November 2015

When addressing the French Parliament following last week’s terrorist atrocities in Paris, French President François Hollande invoked Article 42(7) of the Treaty on the European Union. Never before has this EU’s ‘mutual assistance clause’ been activated by an EU member state. What does it provide and what are its practical implications?

European security after the Paris attacks. CEPS Commentary, 24 November 2015

The November 13th terrorist attacks in Paris have prompted the European Union to activate the mutual assistance clause contained in Art. 42.7 of the EU Treaty. Member states are now entering the unchartered territory of large-scale conflict: will they join a French-led coalition of the willing, or is the military intervention against Daesh being Europeanised? This Commentary explores implications of the Paris attacks on European security and recommends coordinated and comprehensive responses to be taken within the EU framework.

The UK renegotiation from an EU perspective: the dog that hasn’t yet barked? EPC Commentary, 20 November 2015

Given the potential impact on the EU, the UK‘s in/out referendum and the associated reform agenda should be high up the Brussels agenda. But, curiously, so far there has been little obvious activity in Brussels, with few signs that it has the attention of the EU leadership. During the October Summit there was only a very short discussion of the UK referendum, with David Cameron pledging to set out the UK’s specific issues to be addressed (the EU reform agenda) in writing to President Tusk by early November, which he duly did on 10 November.

Don't let them win. EPC Commentary, 24 November 2015

The terrorist threat has returned to Brussels but this time is different: everyone is feeling on edge and life is still far from normal. There are many that show defiance and, slowly, people in Brussels are returning to school and work, but the sense of threat remains. Unfortunately, this is far from unusual for many cities around Europe, as Paris and many others can testify, and is likely to be replicated again and again, here in Brussels and across the continent.