Photo: Photopehota CC BY-NC-SA 2.0

Economic reform in Eastern Europe and the former USSR is stagnating suggests the latest Transition Report from the European Bank for Reconstruction and Development (EBRD).  However, as debates at a joint EBRD/UCL-SSEES launch event highlight, the responses needed may not be straightforward, reports Randolph Bruno. 

The idea that some countries are Stuck in Transition – to take the title of the EBRD’s 2013 Transition Report – has resonated for some time in the literature. It is now it is time to take stock and ask whether transition is really over – at least for some countries.

The 2013 EBRD Transition report tries to address this by asking two main questions. Firstly, why has convergence slowed? The standard of living of the best performing countries in Eastern Europe is still around 60-70% of the average for rich Western European countries. Secondly, can economic institutions be improved if there are constraints on political reform– a question which could also be asked in a very similar fashion of Western European countries. As far as the first question is concerned, the data clearly shows an end to the productivity catch-up (moving closer to the EU average) observed at the turn of the millennium.

Why should this be the case? One possible answer is stalled political reform. The up-to- EBRD transition indicators in the Report show political reforms plateau-ing and this is worrying. The attitude of the citizens in transition states shifted in 2006-2010, basically dropping the consensus that the market economy is a good mechanism for allocating resources.

Reforms matter

However, the main element is the increase in the so called Total Factor Productivity – productivity derived from the increase in efficiency not accounted by factors of production such capital and labour. In other words, the injection of new capital or new labour has a very limited impact on productivity whereas new technology and innovation play a major role.

The EBRD downgrades of the top reformers’ rankings are concentrated in the EU countries and with the current policy convergence will slow. However, the other side of the coin is that if economic reforms are improved convergence will improve. On this point the EBRD Transition Report is very clear: keep going with reform –or re-start reform- and this can make a substantial difference. Still more worryingly, in some cases (for example in Belarus) reforms have been reversed. (more…)

Photo Ivan Bandura CC-BY 2.0

The return of sustained protest to the streets of Ukraine has hugely raised the political stakes comments Andrew Wilson. 

The protests in Kiev are now two weeks old. They began after the Ukrainian government first decided to suspend negotiations with the EU on 21 November, but have gained new intensity after President Yanukovych left the Vilnius Summit on 28-29 November empty-handed, without signing the key Agreements. But the attempt at violent dispersal of the crowds on his return, on Saturday 30 November, only led to bigger demonstrations on the Sunday.

At the time of writing (Monday the 2nd), the protestors were looking more embedded – literally so, as several buildings have been occupied and barriers set up in the centre of Kiev. The stakes are especially high because the OSCE Ministerial Council is due to be held in Kiev on 5-6 December – the opposition want to keep the protest going until then, the authorities want to stamp them out. The ruling party is losing key members and morale.

What happens next?

One of the most depressing features of Ukraine’s many failures after the Orange Revolution in 2004 was that people lost the will to protest. Political demonstration even became an entirely artificial affair, with being-paid-to-protest becoming big business in Ukraine. So the return of real protests changes things dramatically. Participants at the first big demo held up signs saying “we are not paid”. The authorities are relying on the tired and discredited narrative that this is an artificial protest, ‘”paid for” by domestic oligarchs or foreign powers. At least in Kiev, everyone knows this is false. (more…)

When they joined the EU Central and East European states committed themselves to meet EU norms on international development aid. Small budgets, weak social support and limited political commitment have so far limited the impact of aid from CEE. However, it is too early to dismiss them as ‘premature donors’ argue Simon Lightfoot and Balazs Szent-Ivanyi.

Eastern Europe (CEE) states becoming donors of international development aid. It is also the year that three CEE states – the Czech Republic, Slovakia and Poland – joined the OECD’s Development Assistance Committee (DAC).  DAC membership is symbolically important of joining the ‘donor’s club’, but it also commits members to certain norms and practices in aid spending.  Both events make this an opportune time to review the progress CEE states have made towards meeting global aid norms.

Before we do that it is worth asking whether these countries are ready to become donors.  They classify as high income countries and are number are OECD members, so economically the answer must be yes, despite the impact of the financial crisis on some CEE states. But socially, the self perception of these societies is that they see themselves are poor and awareness of development issues is low, so the answer here is more complicated. And politically, aid is not seen as a salient issue, so there is little political capital gained by ‘selling aid’ to the public.

All of these factors affect the quantity, quality and allocation of the bilateral aid given by the CEE states. On becoming EU members, the CEE states were set quantitative targets for aid as a percentage of GDP. They committed to providing 0.15% by 2010 with the ultimate goal of 0.33% by 2015. No country met the 0.15% target and most are unlikely to meet the 0.33% target. However, given the economic problems of the Eurozone, a number of the other DAC members are similarly unlikely to meet their own targets for aid, with aid levels in Greece and Italy particularly badly hit.

But quantitative targets, while important, do not tell the whole story. (more…)

Photo: Burrows/Wikimedia commons

The EU must find a response to the increasingly aggressive nationalist turn of Hungary’s current government write Erin Marie Saltman and Lise Herman.

What does the European Union do about a member state that has recently been referred to as the ‘cancer in the middle of Europe’?

Hungary has come under increasing scrutiny from European Union bodies and international watchdogs since the 2010 national elections, when the Fidesz government won a two-thirds majority in parliament. Since then the right-wing government has installed large overhauls of the country’s foundational institutions, including a new constitution, fundamentally changing the functioning of the media, the judiciary, the Central Bank and the education system. Many of the government’s changes have mirrored propositions first put forth by Hungary’s radical right party, Jobbik.

These changes have been criticized by the European Union and international actors for reinstating undemocratic and authoritarian elements into Hungary’s governing foundations. While the Fidesz government has re-tailored some of their new legislation to appease international critics, they remain largely defensive of the new direction Hungary is taking. As a consequence, European institutions are having to confront the real challenge of defining their supranational power over members. (more…)

Photo: Michal Osmenda via Wikimedia Commons

Poland has emerged as a major player in EU politics. The question now is what it wants to do with its new found clout, writes guest contributor Roderick Parkes.

There’s much to be learnt about power in the EU just by walking around its capitals. Parisians don’t walk so much as proceed; Berliners stare; Londoners apologize when bumped into, then look resentful. As for Varsovians, they simply don’t make space for others.

Conclusions? The French view power in terms of self-aggrandisement; the Germans, in terms of scrutiny and mutual control; the British, as a furtive game of playing states off against each other. As for the Poles, everyone knows why they don’t budge: they have an inferiority complex and a strong dose of territorial angst.

Except, of course, that these days they do budge. Polish street etiquette is improving markedly, and a stroll from Nowy Świat to Ulica Warecka is no longer a full-body contact sport. That’s good news for visiting Brits, who no longer have to apologize as they are trodden underfoot.

 It’s good news, too, for the EU: it speaks of a growing sense of ease among Poles as the country’s weight in the bloc has grown. The question now is what Poland wants to do with its new-found clout. (more…)

Photo: Anna Woźniak via Flikr  CC BY-SA 2.0

Vlad Filat, until recently Liberal Democrat Prime Minister of Moldova, is locked in a power struggle with Vladimir Plahotniuc, the country’s one and only oligarch. This war of attrition threatens the Eastern Partnership’s ‘success story’ and with it Moldova’s reform project says Andrew Wilson.

Not every policy detail may have been perfect in Moldova since 2009, but at least the narrative seemed right. Eastern Europe’s only ruling Communist Party fell from government. The changeover was mythologised as the ‘Twitter Revolution’ – a precursor of the ‘Arab Spring’ and ‘Moscow Winter’ – although in fact it was a prosaic process of elections and parliamentary arithmetic. The Communists were replaced by the smooth-sounding Alliance for European Integration, which was soon getting rave reviews for its reform efforts from the EU. Tiny Moldova leapfrogged the other five states in the Eastern Partnership and seemed to be first in the queue to sign an Association and Deep and Comprehensive Free Trade Agreement at the Vilnius summit in November 2013.

 By 2013, however, reviews were getting more mixed. Since the beginning of the year, Moldova has plunged into the kind of political infighting reminiscent of Orange Ukraine at its worst. After a previous crisis over the presidency was solved in 2012, it had seemed the current parliament would sit out a full term until the next elections are due in 2014. Today, Moldova has to sort out three simultaneous problems: it has no stable government, new elections are threatened and it is limping toward the November summit. It might collapse over the finishing line or just before; it might have a sudden burst of energy in the finishing strait; or it might fail a last-minute dope test.

So what went wrong? In reality, the three-party Alliance for European Integration was badly designed at birth; more exactly, at its rebirth. The first incarnation of the AEI in 2009-2010 struggled with a minimal majority over the Communists. That majority was improved at new elections in November 2010, but the elections also gave Russia the chance to push hard for an alternative alliance between the Communists and the pivotal Democratic Party (which includes many ex-Communists). Vladimir Putin sent his right-hand man, Sergei Naryshkin, to Chisinau to seal the deal. He didn’t succeed but encouraged the Democrats to secure a high price for not defecting back to the Communists, with the signing of a secret agreement in December 2010, leaked in 2012, to partition not just ministries but also supposedly neutral state institutions and revenue streams among the AEI’s three component parties.  (more…)

Photo: Иван via WikiMedia Commons

Bulgaria’s Prime Minister Boiko Borisov submitted his government’s resignation last Wednesday following a week of angry demonstrations over high electricity prices, corruption and declining living standards.  The  protests and their aftermath form part of a bigger European crisis, says Eric Gordy.

The main difference between public disorder in Bulgaria and everywhere else in Europe is that in Bulgaria the government responded. Although the immediate catalyst for protests was the state’s failure to control growth in the price of electricity, the core causes are shared in every European state: dissatisfaction resulting from the forced dismantling of social support services brought on by the European debt crisis, and a sense that policymakers are orienting their activity not to the needs of the public but to the service of large European banks.

These forces are accompanied by the perception that national governments have neither the capacity nor the will to address the consequences of a fiscal and social policy that are widely seen as imbalanced against the public interest. In Greece, Hungary and Italy the contribution of public dissatisfaction to the rise of antidemocratic movements of the extreme right is already apparent.

While conservative political leaders in the EU, particularly from Germany and the UK (and until last year, France) have largely been successful in pushing for a shift of priorities to debt service and “austerity,” the consequences of this should concern everybody in Europe. In the period after the end of the First World War, there was a similar euphoric and triumphalist announcement that liberal democracy could declare its inevitable victory across the continent.

Inattention to the responsibilities of states to their publics on the part of that generation of liberal democratic elites led to a rapid and general decay of constitutional systems and an accelerating tendency of governments to neglect of social responsibilities.

If we take one lesson from the failures of democratic order in the 1920s and 1930s, it should be that governments that fail to address social needs will be challenged by forces, some of them extremist ones, that promise to do so.

Eric Gordy is Senior Lecturer in South East European Politics at UCL-SSEES.

This post was first published in the comment section of the  UCL European Institute and is reproduced with permission.

Note: This article gives the views of the author(s), and not the position of the SSEES Research blog, nor of the School of Slavonic and East European Studies, nor of UCL.

Newly released data from the 2011 Census reveals some interesting patterns about London’s Central and East Europeans, finds Allan Sikk

I’ve been waiting for some time for the UK 2011 census data to come out to give me a chance to look at the distribution of  Londons ‘New Europeans’ – people from the ten accession countries that joined the EU in 2004-7 – and to use the R open source statistics package to visualise data geographically.

Image: Allan Sikk

Overall, people born in the EU accession state make up 4.5% of the population of London. However,  but the picture is quite diverse across boroughs and across individual ‘sending’ countries. (more…)