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June 3, 2020

EUROPE: CEE PULSE

BY Andrius Tursa

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( 4 mins)

As countries in Central and Eastern Europe are gradually returning to the “new normal”, governments are focusing on economic recovery measures, some of which highlight the trend of rising economic nationalism. Ukraine’s recovery strategy explicitly prioritizes domestic companies and taxpayers, while deputies in the Czech Republic are debating an obligation for grocery stores to sell a specific share of local foodstuffs, and Poland is considering launching a state-run grocery retail chain. Meanwhile, Russia’s new economic recovery plan to 2021 is expected to focus primarily on infrastructure, SMEs and targeted social support.

Czech Republic

The parliament has exempted small businesses from social security payments until the end of August and approved bonuses to small family-owned enterprises. The cabinet has also approved a VAT reduction for accommodation services as well as cultural/sports events and is considering the removal of the property acquisition tax to boost the real estate sector. Some of the legislative proposals – such as allowing companies to deduct their 2020 losses from 2018-2019 profits or a requirement for grocery retailers to carry a specific share of Czech foodstuffs – are generating heated debate. The easing of Covid-19 restrictions also means the return of regular anti-government demonstrations organized by local protest movement “A Million Moments for Democracy“.

Poland

On 2 June, the lower house of parliament (Sejm) approved a bill setting electoral rules for the 2020 presidential election. The bill has been swiftly signed by President Andrzej Duda, and the Sejm speaker Elzbieta Witek (Law and Justice, PiS) is expected to set the new date for the vote later this week. The bill allows all candidates registered for the 10 May poll to re-enter the race, while new participants – most notably opposition Civic Platform’s candidate Rafal Trzaskowski – will have to collect 100,000 voter signatures within a period specified by Witek. There is a risk that Witek will allocate just a few days to accomplish this task, thereby seeking to prevent Trzaskowski from entering the race. In the meantime, the government is considering launching a state-run grocery chain with the aim of supporting local food producers and keeping food prices low for consumers.

Russia

On 2 June, the government outlined a RUB 5trn (USD 73bn) national economic recovery plan to tackle economic fallout from the Covid-19 crisis. The draft version entails around 500 measures, which will be implemented in three stages until the end of 2021. The largest beneficiaries are expected to be the infrastructure sector, vulnerable social groups, and SMEs, although details remain scarce and sector-specific measures will be developed by the government until the end of June. The launch of the recovery plan should coincide with the vote on the constitutional amendments scheduled for 1 July. The “all-Russian vote” will be held in-person and, with the number of new Covid-19 infections in Russia remaining relatively high, there is a risk that the poll will heighten public health risks and negatively affect turnout. As a result, electoral authorities have already suggested that the voting procedures could be simplified, which may lead to electoral irregularities. Finally, economic pressures will likely prompt Russia’s cooperative stance in the upcoming OPEC+ talks on extending oil production cuts.

Ukraine

The government is working on an economic recovery program based on the principle of “sound economic nationalism” to support domestic companies and taxpayers, according to Prime Minister Denis Shmygal (independent). The cabinet head noted that Ukraine will use a full range of WTO and GATT (General Agreement on Tariffs and Trade) instruments to protect its enterprises. As an example of this, in late May the country has already imposed a 51.5% anti-dumping duty on seamless pipes imported from China, Ukraine’s largest trade partner. In the meantime, efforts to advance conflict resolution in Donbas are continuing, with Germany undertaking the role of a key mediator. On 2 June, the Ukrainian delegation discussed progress with the German defense minister Annegret Kramp-Karrenbauer in Berlin. This follows Russia’s chief negotiator Dmitry Kozak’s surprise visit to Germany in mid-May. Another Normandy Four (France, Germany, Russia and Ukraine) foreign ministers’ meeting is expected soon.

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