Germany’s engagement in the resolution of the Syrian conflict. OSW COMMENTARY NUMBER 194/25.01.2016

German Tornado Recce aircraft have been engaged in reconnaissance operations over Syria since January 2016. In December 2015 the German government and parliament decided that up to 1,200 Bundeswehr soldiers would take part in the international coalition fighting Islamic State in Syria. This decision marks a new chapter in Germany’s activity in the Middle East. The increasing destabilisation of the southern neighbourhood and the consequences this has for the EU and Germany have forced the German government to increase its level of engagement in the region. Even though Germany is a third-rate player in the Middle Eastern game, it is nonetheless ever more engaged politically and wants to be viewed as a neutral mediator between the competing actors in the region. It has also allocated more funds on regional development co-operation and humanitarian aid. Germany, whose attention has been directed towards Europe’s eastern neighbourhood, is currently turning its attention to the South. The Middle East (and Africa) is taking on increasing significance in German foreign and security policy. This may affect NATO’s eastern flank and the EU’s eastern neighbourhood since part of Germany’s instruments and funds may be redirected to the South.

The Eurasian Economic Union: a time of crisis. OSW COMMENTARY NUMBER 195/27.01.2016

The Eurasian Economic Union (EaEU), a project forced through by Russia which links it to Kazakhstan, Belarus, Armenia and Kyrgyzstan, is currently struggling with serious problems. The economic crisis in Russia – mainly caused by the fall in the price of oil on world markets and exacerbated by sanctions imposed by Western countries in connection with the Ukraine conflict – is affecting these uncompetitive post-Soviet economies which are dependent on Russia. This has resulted in increased economic and political tension among the members of the EaEU. From Russia’s point of view, however, the EaEU project remains useful, because it is not economic integration that is Moscow’s priority. The Union remains its most important instrument for implementing the Kremlin’s geo-political objectives, in particular maintaining its sphere of influence and preventing post-Soviet countries from integrating with the West, as well as restricting their rapprochement with China. Moscow is pushing for the EaEU to include new countries, strengthening its tools for political dominance within the Union, and promoting its project on the international stage. However, the future of this project will depend on both the continued determination of the Kremlin, and whether the other countries can change the rules for integration by taking advantage of the current crisis.

Is Horizon 2020 really more SME-friendly? A look at the figures. CEPS Commentary, 17 February 2016

Small- and medium-sized enterprises (SMEs) play a key role in the EU economy.[1] According to the latest “SME performance review” published by the European Commission,[2] in 2014 there were 22 million SMEs active in the non-financial business sectors, generating more than €3.7 trillion in added value and employing approximately 90 million people. SMEs’ contribution to the European economy becomes even more apparent if one considers that 99 out of every 100 enterprises active in the EU non-financial economy are SMEs, and that these firms account for about 67% of the total employment and some 60% of the overall added value produced in Europe. Against this background, enhancing the competitiveness of European SMEs is essential in order to foster the competitiveness of the EU economy as a whole. And since the competitiveness of European SMEs in the global arena largely depends on their ability to innovate,[3] unlocking the innovation potential of SMEs becomes pivotal to fostering growth and jobs in Europe.

Banking crisis yet again and how to fix it. CEPS Commentary, 15 February 2016

Almost out of the blue, a combination of diverse factors has elicited a run on bank stocks and junior and senior debt, raising the spectre of a renewed systemic bank crisis within the European Union. The policy response cannot come from the European Central Bank but, instead, must consist of regulatory responses capable of dispelling the uncertainty over future prudential capital requirements while also temporarily suspending the rules on state aid cum bail-in that had ignited the crisis.

Regulation on ‘cross-border portability’ of online content services: Roaming for Netflix or the end of copyright territoriality? CEPS Commentary, 15 February 2016

In a communication to the Parliament and the Council entitled “Towards a modern, more European copyright framework” and dated 9 December 2015,1 the European Commission confirmed its intention to progressively remove the main obstacles to the functioning of the Digital Single Market for copyrighted works. The first step of this long-term plan, which was first announced in Juncker’s Political Guidelines2 and the Communication on “A Digital Single Market strategy for Europe”,3 is a proposal for a regulation aimed at ensuring the so-called ‘cross-border portability’ of online services giving access to content such as music, games, films and sporting events.4 In a nutshell, the proposed regulation seeks to enable consumers with legal access to such online content services in their country of residence to use the same services also when they are in another member state for a limited period of time. On the one hand, this legislative proposal has the full potential to resolve the (limited) issue of portability, which stems from the national dimension of copyright and the persisting territorial licensing and distribution of copyright content.5 On the other hand, as this commentary shows, the ambiguity of certain important provisions in the proposed regulation might affect its scope and effectiveness and contribute to the erosion of the principle of copyright territoriality.

Gas demand for power generation peaked as early as 2010. CEPS Commentary, 12 February 2016

The outlook for natural gas demand is often considered bright, especially for gas used to generate electricity. This is because gas is the cleanest of all fossil fuels. The carbon intensity of modern gas-fired power stations is less than 50% that of modern coal plants. Moreover, gas-fired units are well-suited to follow rapid swings in supply and demand due to their flexibility. In the future, these balancing tasks will become more and more important given the intermittent character of the supply of wind and solar power. Gas seems to hold out the promise of being a key pillar of the energy transition and the perfect partner of renewables. Given the EU’s long-term climate policy goals, however, there is strong evidence that demand for gas for purposes of power generation peaked as early as 2010.

Which fiscal union for the euro area? Bruegel Policy Contribution ISSUE 2016/05, February 2016

At the current level of political and societal integration, a large federal budget is unrealistic in the euro area. The authors make three recommendations that would lead national fiscal policies to be more stabilising with respect to the economic cycle, while achieving long-term sustainability. They also recommend a move towards a European unemployment insurance scheme targeted at ‘large’ shocks, and a minimum set of labour-market harmonisation criteria.

The negative rates club. CEPS Commentary, 19 February 2016

For the better part of a decade, central banks have been making only limited headway in curbing powerful global deflationary forces. Since 2008, the US Federal Reserve has maintained zero interest rates, while pursuing multiple waves of unprecedented balance-sheet expansion through large-scale bond purchases. The Bank of England, the Bank of Japan and the European Central Bank have followed suit, each with its own version of so-called quantitative easing (QE). Yet inflation has not picked up appreciably anywhere.

Irregular Migration, Trafficking and Smuggling of Human Beings: Policy Dilemmas in the EU. CEPS Paperback, 22 February 2016

The expert contributors to this edited volume, representing a multidisciplinary selection of academics, examine the treatment of irregular migration, human trafficking and smuggling in EU law and policy. The various chapters explore the policy dilemmas encountered in efforts to criminalise irregular migration and humanitarian assistance to irregular immigrants. The book aims to provide academic input to informed policy-making in the next phase of the European Agenda on Migration. In his Foreword, Matthias Ruete, Director General of DG Home Affairs of the European Commission, writes: “This initiative aims to stimulate evidence-based policy-making and to bring fresh thinking to develop more effective policies. The European Commission welcomes the valuable contribution of this initiative to help close the wide gap in our knowledge about the smuggling of migrants, and especially the functioning of smuggling networks.”

The EU deal to avoid Brexit: Take it or leave. CEPS Special Report No. 131/February 2016

Beyond the drama of the European Council summit of 18-19 February 2016, what became clear was the fundamental desire on the part of the leaders of all 28 EU member states to agree a deal on the British government’s demands for a renegotiated settlement on the UK’s relationship within the European Union. The deal has provided David Cameron with the political capital he needed to call a date for the in/out referendum and to lead a campaign for the UK to stay in the EU. Yet, for all the technical reforms packed into it, the deal is neither a crowd pleaser nor a vote winner. It does, however, mark a watershed acknowledgement that EU integration is not a one-directional process of ‘ever closer union’. In this CEPS Special Report, Stefani Weiss and Steven Blockmans analyse the substance of the “Decision of the Heads of State or Government, meeting within the European Council, concerning a New Settlement for the United Kingdom within the European Union” and shed light on its legal character. They contextualise this EU deal to avoid Brexit, and draw on the conclusions reached in a simulation of European Council negotiations between representatives of think tanks in the European Policy Institutes Network (EPIN), conducted by CEPS and the Bertelsmann Stiftung in October 2015.

Measuring ageing and the need for longer working lives in the EU. CEPS Working Document No. 417/February 2016 Wednesday, 24 February 2016

This study considers different ways of measuring the ageing of societies and their implications for public policy. The first part characterises the ongoing ageing of the population in the EU28 by relating it to past and future longer-term demographic trends for broad groups of countries. It goes beyond traditional chronological measures to include recently suggested prospective measures of ageing. The second part of the study is concerned with economic dependency ratios; a more relevant measure for summarising the economic challenges related to ageing. Three main findings emerge: first, prospective indicators of ageing reveal the challenge of population ageing to be less onerous than traditional chronological measures would suggest. Their relevance, however, will depend on the degree to which policy changes can respond to the changing age structure of the population. Second, substantial increases in the length of working lives are necessary to maintain current economic dependency ratios. Taking a year-2000 perspective view of the economic challenges of ageing shows that substantial progress has been made. Third, looking towards 2050, education will have limited direct impact on the scale of the ageing challenge.

A European Border and Coast Guard: Fit for purpose? CEPS Commentary, 24 February 2016

In December 2015, The Commission proposed to set up a European Border and Coast Guard (EBCG) as one of the key responses to the 2015 ‘refugee crisis’. The initiative intends to give Frontex, the EU’s current border agency, more competences, staff and equipment, and to rename it the EBCG. The new EBCG would work together with the member states’ national border and coast guard authorities.

Getting the most from public R&D spending in times of budgetary austerity. Bruegel Working Paper 2016/01, February 2016

This working paper reviews the evidence on the impact of public R&D spending. The authors first look at the evidence from micro-analysis of the impact of public intervention on private R&D and innovation, with a focus on the latest results from crosscountry micro-research performed within SIMPATIC. To analyse the impact of public R&D on growth, the micro-results on private R&D investment effects are complemented with a macro-perspective. To this end, the authors look at how public R&D performs in affecting GDP growth and jobs in applied macro-models most commonly used in EU policy analysis. They focus particularly on the NEMESIS model in development within the SIMPATIC project. The authors conclude with some policy recommendations from the reviewed micro and macro SIMPATIC evidence for designing public R&D projects and programmes.

Odessa Oblast: Governor Saakashvili’s superficial changes. OSW COMMENTARY NUMBER 196|February 2016

Two years after the Revolution of Dignity, Odessa Oblast, one of Ukraine’s key regions in economic and political terms, is still strongly polarised as regards its residents’ views on the future of their country. The political circles rooted in the Party of Regions have maintained their influence to a great extent due to increasing dissatisfaction with the central government’s activity and with the economic crisis which has strongly affected the public. Politicians linked to the ancien régime remain the most important political players. Some pro-Ukrainian circles had pinned their hopes for change in the region on the nomination of the former Georgian president, Mikheil Saakashvili, for governor of Odessa Oblast on 30 May 2015. At the beginning of his rule this politician made widely publicised promises to combat corruption, to improve the quality of the administration services, to develop infrastructure and to attract foreign capital. However, more than half a year has passed since he assumed office, and it is difficult to speak about any spectacular successes in reforming the region. Saakashvili has above all become a player on the national forum, supporting the presidential camp in their struggle with Prime Minister Arseniy Yatsenyuk and the oligarch Ihor Kolomoyskyi, among others. However, his nomination has made Odessa Oblast more important for Ukraine, above all in political and symbolic terms. This is because Odessa Oblast is the best manifestation of the condition of the Ukrainian state two years since the Revolution of Dignity – rudimentary reforms or no reforms at all, strong resistance to any changes from the administration, strong local political-business connections, the lack of consolidation among post-Maidan groups and corruption inherent in the system.

‘The oil friendship’: the state of and prospects for Russian-Chinese energy cooperation. OSW Commentary NUMBER 197|17.02.2016

The oil sector has been the major element of Russian-Chinese energy cooperation. The years 2013–2015 saw a significant increase in the volume of crude oil exported by Russia. In 2015, China became the main importer of Russian oil; Russia became the second largest supplier of oil to the Chinese market, after Saudi Arabia. From Beijing’s perspective, supplies of Russian oil are of strategic importance because the main supply routes are overland routes. Russia, for its part, is interested in boosting its export because of its deteriorating position on the European market, which hitherto has been considered a strategic market.