How to get out of the crisis without reforms? The Belarusian authorities confront growing economic problems. OSW Commentary NUMBER 202/21.03.2016

2015 saw a drop in Belarus’s GDP for the first time in almost 20 years, which is primarily the result of a significant reduction in levels of production and export. As a consequence, there was also a serious depletion of the country’s foreign exchange reserves, as well as a progressive weakening of the Belarusian rouble. The macroeconomic figures from January and February 2016 show that these trends are not only continuing, but they are also becoming even more severe, which confirms that Belarus now finds itself in a prolonged economic crisis. On one hand, the reason for this state of affairs is the protracted economic recession in Russia, which is Belarus’s main economic partner, together with the drastic global decline in prices for fuel, which is a key Belarusian export. On the other hand, meanwhile, an equally important reason for the current crisis is the failure of the Belarusian economic model. President Aleksandr Lukashenko, out of fear that his authoritarian system of government will be dismantled and that public discontent will rise, has categorically rejected the proposals for even partial reforms put forward by some of his entourage, who are aware of the need for the immediate transformation of the country’s anachronistic and very costly economic model, based as it still is on quasi-Soviet management policies.

The debt, the stock market and the state-owned enterprises. The sources of chaos on the Chinese financial markets. OSW Commentary NUMBER 201/16.03.2016

The government’s extensive programme for stimulating the economy has enabled China to maintain high economic growth after the global financial crisis in 2008. However, this success has come at the price of a number of negative economic phenomena and the consequences they have had are the major challenge for the government today. The vast programme of investments in infrastructure, construction and fixed assets, which has been the main source of economic growth over the past few years, has caused a rapid increase in China’s debt from 158% of GDP in 2007 to 282% in 2014. Along with the local governments in charge of implementing the programme, the Chinese sector of state-owned enterprises (SOEs) has been heavily burdened by the stimulation policy. The sector’s profitability has fallen, its indebtedness has increased and management problems have been revealed.

Are Germans wasting their savings abroad? CEPS Commentary, 7 April 2016

Germany is running a current account surplus of about 8% of GDP, which means that about one-third of all German savings (equal to 24% of GDP) has to be invested abroad every year. It has become by now almost a cliché that these huge excess savings are being wasted abroad. But this is a popular misconception based on the divergence between the available data on the (cumulated) current account balance (cCAB) of Germany and its net international investment position (NIIP). A closer look at the data actually suggests that the NIIP is probably not measured correctly and that the observed returns on German investment abroad have remained above most domestic returns.

The Dutch Referendum on the EU-Ukraine Association Agreement: Legal options for navigating a tricky and awkward situation. CEPS Commentary, 8 April 2016

In an advisory referendum held in the Netherlands on April 6th, over 61% of the voters rejected the ratification of the Association Agreement (AA) between the EU and Ukraine. If the Dutch government were to act on the outcome of the referendum, which had a low turnout of 32%, an unprecedented situation would emerge in which an EU international agreement cannot enter into force because a member state is not in a position to ratify it. Although the political character of this referendum and the Dutch Advisory Referendum Act (DRA) and the geopolitical implications of the AA itself have already been the subject of heated discussions in the Netherlands and beyond, the legal implications of this referendum remain unclear.

The EU and the 2016 Terrorist Attacks in Brussels: Better instead of more information sharing. CEPS Commentary, 6 April 2016

The Brussels terrorist attacks of 22 March 2016 provoked widespread political condemnation and public outrage. The events have brought to the fore past discussions regarding the limits of member states’ counterterrorism policies and the extent to which the EU could play a role in shaping more effective responses to these acts of violence.

Macedonia: a superficial democracy in the shadow of crises. OSW COMMENTARY NUMBER 206/31.03.2016

Until 2008, Macedonia was leading the process of EU and NATO integration, and (after Croatia) was the fastest-reforming Western Balkan country. However, since Macedonia’s negotiations on joining the EU and NATO were blocked, in connection with its dispute with Greece, the Macedonian government has moved away from a policy of reform towards reinforcing its autocratic system and consolidating society behind nationalist slogans. Also the EU, which had hitherto been the driving force behind the changes, has due to its internal crises been paying little attention to violations of democratic standards in the Republic of Macedonia, tensions in relations between the Slavic Macedonians and the Albanian minority (which make up over 25% of the population), and the country’s permanent political domestic crises.

The consequences of the Western financial sanctions on the Russian economy. OSW COMMENTARY NUMBER 203/23.03.2016

Although they are not the deciding factor, the Western financial sanctions are nevertheless an important factor affecting the deteriorating economic situation in Russia. They have significantly undermined the opportunities which Russian companies have to attract foreign capital, thus contributing to the deterioration of their financial condition (which is particularly prominent in the case of energy firms subject to sanctions). Therefore, Russian businesses need more support from the state. However, this support is becoming more difficult due to the dramatic fall in oil prices – revenues from oil exports are the main source of budget revenue.

Pro-American non-alignment. Sweden and Finland develop closer military co-operation with the United States. OSW COMMENTARY NUMBER 205/31.03.2016

Russia’s increasingly aggressive policy and its enhanced military activity in the Nordic-Baltic region has led to revaluations in Sweden’s and Finland’s security and defence policies and a rethinking of the formats of their military co-operation. While remaining outside NATO, the two states have been developing closer bilateral defence co-operation and working more closely with the United States, while at the same time developing co-operation with NATO. Sweden and Finland perceive the United States as the guarantor of regional and European security. From their point of view, the United States is currently the country that has both the necessary military capabilities and the political will to react in the event of a conflict between Russia and NATO in the Nordic-Baltic region, in which both countries would inevitably become involved despite their non-aligned status. For Sweden and Finland, intensified co-operation with the United States offers an alternative to NATO membership, which is currently out of the question for domestic political reasons. Meanwhile, the US has also become increasingly aware of the strategic importance of the two states, which, for the purposes of contingency planning, are in fact an extension of NATO’s north-eastern flank.

Cutting the Gordian knot? Assessing the outcomes of the March EU-India Summit. EPC Commentary, 8 April 2016

After a four-year suspension, the 13th EU-India Summit took place in Brussels on 30 March 2016. While several deep-rooted constraints could not be overcome, the Summit’s deliverables reflect a gradually changing and cautiously optimistic mood in the historically challenging interaction between Brussels and Delhi.

The EU cannot remain a passive observer of the Karabakh conflict. EPC Commentary, 7 April 2016

When Federica Mogherini visited the South Caucasus in March, she was quoted as saying that the Nagorno-Karabakh conflict was a top priority for the EU. Facts, however, do not seem to match the words of the EU High Representative for Foreign Affairs and Security Policy. As violent clashes in the conflict zone unfolded over the past week, the EU was a passive observer, with few visible signs of engagement apart from a cursory phone call urging Armenia and Azerbaijan to show restraint. The escalation has shown how quickly and dangerously the situation can develop, and the unassailable nature of the Line of Contact (LoC). If the diplomatic efforts to resolve the conflict show no progress, a repetition is very probable. Furthermore, it is likely the next incident will be more devastating in human and material costs than this recent one, and may not be contained so quickly. The EU needs to be part of the renewed diplomatic effort.

Moldova: from oligarchic pluralism to Plahotniuc’s hegemony. OSW Commentary Number 208/07.04.2016

Moldova’s political system took shape due to the six-year rule of the Alliance for European Integration coalition but it has undergone a major transformation over the past six months. Resorting to skilful political manoeuvring and capitalising on his control over the Moldovan judiciary system, Vlad Plahotniuc, one of the leaders of the nominally pro-European Democratic Party and the richest person in the country, was able to bring about the arrest of his main political competitor, the former prime minister Vlad Filat, in October 2015. Then he pushed through the nomination of his trusted aide, Pavel Filip, for prime minister. In effect, Plahotniuc has concentrated political and business influence in his own hands on a scale unseen so far in Moldova’s history since 1991. All this indicates that he already not only controls the judiciary, the anti-corruption institutions, the Constitutional Court and the economic structures, but has also subordinated the greater part of parliament and is rapidly tightening his grip on the section of the state apparatus which until recently was influenced by Filat.

Russia’s ‘Middle East’: the escalation of religious conflicts in the Northern Caucasus. OSW Commentary Number 207/04.04.2016

The eastern part of the Northern Caucasus (Dagestan, Chechnya and Ingushetia) is becoming an increasingly distinct region in cultural, civilisational and social terms when compared to the rest of the Russian Federation. The situation on the ground there bears greater resemblance to the Middle East than to Russia: Islam is the key factor organising socio-political life, and conflicts inside the Muslim community, often involving bloodshed, are the driving power of developments in the region. The conflict is between the two main branches of Islam in the Northern Caucasus: Sufism linked to the official clergy and government, and Salafism which is gaining more and more supporters among young people in the Caucasus. Tension, including clashes over mosques, attacks, mass detentions, etc. has been observed mainly in Dagestan and Ingushetia.

The shadow of Chornobyl. Ukraine thirty years after the disaster. OSW COMMENTARY NUMBER 210/22.04.2016

Thirty years after the Chornobyl nuclear power plant disaster, its aftermath and consequences are still a permanent element of the economic, environmental and social situation of Ukraine, Belarus and some regions of Russia. Ukraine, to which the scope of this text is limited, experienced the most severe shock because, among other factors, the plant where the accident took place was located just 100 km away from Kyiv. Its consequences have affected the course of political developments in the country, and have become part of the newly-shaped national identity of independent Ukraine. The country bore the huge cost of the clean-up effort but did not give up on nuclear energy, and today nuclear power plants generate more than half of its electricity. The system of social benefits for people recognised as disaster survivors, which was put in place by the Soviet government, has become a huge burden on the country’s budget; if implemented fully, it would account for more than 10% of total public spending, and is therefore being implemented to only a partial extent. This system has reinforced the Ukrainian people’s sense of helplessness and dependence on the state. The disaster has also become part of the ‘victim nation’ blueprint of the Ukrainian national myth, which it has further solidified. The technological and environmental consequences of the disaster, and hence also its economic costs, will persist for centuries, while the social consequences will dissipate as the affected generation passes away. In any case, Chornobyl will remain an important part of the life of the Ukrainian state and society.

EU visa-liberalisation for Turks: just around the corner? EPC Commentary, 3 May 2016

At the 18 March EU-Turkey Migration Summit EU leaders pledged to lift visa requirements for Turkish citizens travelling to the Schengen zone by the end of June 2016 if Ankara met the required 72 benchmarks. On 4 May the European Commission will decide whether or not Turkey has done enough. The stakes are high because Turkey has threatened to cancel the readmission agreement, which is central to the success of the migration deal, if the EU fails to deliver.

Vučić’s plebiscite almost slipped on arithmetics. EPC Commentary, 29 April 2016

As largely anticipated, the incumbent Prime Minister of Serbia, Aleksandar Vučić, secured another four years in power at the snap elections that took place on 24 April. However, the results suggest that Vučić has overplayed his hand with this personal plebiscite: simple arithmetics unmasked his exaggerated hope to wipe out the opposition and consolidate political dominance. This might bode well for political pluralism but voters’ preferences and the affixed party options caution against taking Serbia’s commitment to European integration for granted.