May 21, 2020

EUROPE: CEE PULSE

BY Andrius Tursa

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( 4 mins)

Incumbents in Croatia and Poland are seeking to bring elections forward before the economic consequences from Covid-19 are fully felt by the voters. Hungary is preparing to lift the controversial state of the emergency, while Ukraine’s president Volodymyr Zelensky is marking his first year in office. Finally, Russia is struggling to balance between containing Covid-19 and limiting the economic fallout.

Croatia

On Monday, 18 May, parliament voted in favor of its dissolution, thereby paving the way for an early general election on 5 July, instead of the regular poll scheduled for the autumn. The move was initiated by Prime Minister Andrej Plenkovic (Croatian Democratic Union, HDZ), who is seeking to capitalize on the recent surge of his party in the polls after the successful containment of Covid-19 in the country. The election will see a close fight between the ruling HDZ and the opposition Social Democratic Party, with the former holding a slightly higher chance of leading the next coalition government.

Hungary

The country’s most affected regions by Covid-19 – the capital Budapest and the surrounding Pest county – started easing restrictions on 18 May. This comes two weeks later than in other parts of the country, and this regional approach to economic reopening is likely to continue. Prime Minister Viktor Orban (Fidesz) declared a first-round victory in the country’s fight with the disease and said that the government would lift the controversial state of emergency in late May. This could come with charged political rhetoric seeking to discredit the government’s critics at home and abroad. In the meantime, the government is taking steps to weaken local governments, many of which are run by the opposition. A new draft bill proposes to shift the control of special economic zones for investments greater than HUF 5bn (EUR 14mn) from local administrations to county-level assemblies invariably controlled by Fidesz. This would limit the tax revenue of local administrations and prevent them from taking credit for attracting new investments.

Poland

The date and modalities of the postponed presidential election remain unclear as the opposition-controlled upper house of parliament (Senate) is still considering amendments to the bill proposing a mixed vote (in-person and postal). The main opposition party Civic Coalition has used this delay to replace its presidential candidate Malgorzata Kidawa-Blonska with the mayor of Warsaw Rafal Trzaskowski, who still needs to submit 100,000 voter signatures supporting his candidacy to enter the race officially. This may prove a challenge as some of the ruling coalition deputies are proposing to allocate just a few days for signature collection. Meanwhile, after a spike in approval ratings at the outset of the Covid-19 outbreak, incumbent Andrzej Duda is now gradually losing voter support amid rising public discontent with the deteriorating economic and labor market situation. This may prompt the ruling Law and Justice party to roll out new economic and social support measures and set the election date as soon as possible (possibly in late June).

Russia

Authorities are balancing between containing the further spread of Covid-19 and mitigating the economic fallout of the disease. Estimates based on the latest government data show that the country’s nominal GDP contracted by 28% in April as compared to the same month in 2019. The steep economic slowdown is pressuring regional administrations to reopen their economies. According to Prime Minister Mikhail Mishustin – who has recently returned to his post after overcoming Covid-19 – 27 regions (out of 85) are now well-positioned for the gradual relaxation of containment measures. However, the risk of premature reopening is pertinent, and some regions, such as Sverdlovsk and Smolensk, were already forced to retighten lockdown measures after an increase in infection rates. In the meantime, local media is reporting about the government’s proposal for a three-year economic recovery plan, which foresees the country returning to full growth in the second half of 2021.

Ukraine

Yesterday, 20 May, President Volodymyr Zelensky marked the anniversary of his first year in office. Progress on his key electoral promises – tackling corruption, ending the war in Donbas, extending the partnership with the IMF, or dispelling allegations about his links with local oligarchs – has been modest. Moreover, Zelensky’s capacity to advance structural reforms during the second year in office has been weakened by substantially lower ratings and divisions in the ruling Servant of the People party, which has now effectively lost its majority in parliament. On a positive note, Ukraine is expected to finalize an 18-month agreement with the IMF in the coming weeks, and there are active efforts to advance the peace talks in eastern Ukraine. In early June, foreign minister Dmytro Kuleba and president’s chief of staff Andriy Yermak are expected to discuss the peace process with German foreign minister Heiko Maas, which follows Russia’s chief negotiator Dmitry Kozak’s surprise visit to Berlin in mid-May. According to Zelensky, another Normandy Four summit will be held after the pandemic.

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