Teneo logo

July 22, 2020

Europe

EUROPE: CEE PULSE

BY Andrius Tursa

Share on twitter
Share on whatsapp
Share on facebook
Share on linkedin
Share on email
Share on reddit

Listen to our reports with a personalized podcasts through your Amazon Alexa or Apple devices audio translated into several languages

en flag
zh flag
de flag
pt flag
es flag
Press play to listen
( 5 mins)

Slovakia’s Prime Minister Igor Matovic is expected to survive a vote of no confidence later this week over accusations of plagiarism. The composition of Croatia’s new cabinet – which must win parliament’s approval by mid-August – suggests policy continuity. Some cabinet changes are expected in Poland as the ruling party gears up to continue with its controversial policy agenda, including the judicial reform and intentions to “repolonize” private media. Meanwhile, Russia’s revamped and extended National Projects scheme outlines the government’s long-term investment priorities. Finally, Ukraine’s new central bank governor is a well-regarded but little-known technocrat, whose actions to a large extent will determine the continuation of the IMF program.

Croatia

This week Prime Minister-designate Andrej Plenkovic (Croatian Democratic Union, HDZ) announced the composition of his new cabinet, which entails 16 portfolios (four less than in previous term). Twelve ministers have served in the previous Plenkovic cabinet, which suggests a high degree of policy continuity. The HDZ-led government, supported by eight national minority deputies and one MP from the Croatian People’s Party and People’s Party-Reformists each, still needs to win approval from parliament by mid-August. While this is unlikely to become an issue, its slim one-seat majority in parliament may present risks to stability in the medium-term. The near-term priorities are expected to be the post Covid-19 economic recovery and the reconstruction of Zagreb after the March earthquake. Reforms of the public administration apparatus and the healthcare sector are expected to follow in the medium-term. On the foreign policy front, membership in the eurozone and Schengen area will remain the key objectives.

Poland

The head of the ruling Law and Justice party Jaroslaw Kaczynski confirmed previous expectations of a cabinet reshuffle after the presidential election. Specific changes have not been announced yet, but it is likely that a few ministries will be merged, and some non-key cabinet members will be replaced in the early autumn. Prime Minister Mateusz Morawiecki is expected to remain in office. Kaczynski has also reiterated intentions to “repolonize” the country’s private media landscape and continue with the judiciary reform without providing more details. This suggests persisting tensions with the EU and, potentially, new challenges in Poland’s relations with the US, whose companies own a few popular TV channels in the country. The development of the mechanism linking the rule of law with the distribution of EU funds is, therefore, an important signpost to watch.

Meanwhile, notable changes are taking place in the country’s political landscape. Presidential candidates in the recent election are attempting to build on the political momentum attained during their campaigns, with independent Szymon Holownia creating a centrist movement Poland 2050 and the main opposition candidate Rafal Trzaskowski (Civic Platform) establishing a liberal civic movement New Solidarity. The main question is whether these new movements will manage to lure voters away from the ruling PiS or simply increase fragmentation within opposition.

Russia

Economic and fiscal challenges brought about by the pandemic prompted Russian authorities to revamp and extend by six years the country’s flagship RUB 25.7bn (USD360bn) National Projects program, which was already running well-behind the schedule and targets initially set to 2024. Putin instructed the government to present a new version of the program by the end of October, which is set to include parts of the post-Covid-19 economic recovery plan announced in June. The renewed National Projects scheme is expected to focus predominantly on digital transformation, infrastructure, healthcare, environment and education. The policy of import substitution is expected to remain in place, especially in sectors where Russia considers holding a competitive advantage. The recent proposal to lower taxes for the IT sector underlines the government’s emphasis on digitalization, while the proposed removal of VAT exemptions for software sales and licensing agreements for all companies in the sector, except those included in a special state registry (mostly consisting of domestic companies), reaffirm the protectionist approach.

Slovakia

After overcoming a crisis triggered by allegations of plagiarism by the speaker of parliament Boris Kollar (We Are Family) earlier this month, the four-party coalition government is facing another challenge over the same issue. Opposition in parliament has filed a motion of no confidence against Prime Minister Igor Matovic (Ordinary People, OLaNO), who has indirectly admitted plagiarizing his 1998 master’s thesis. However, the motion – scheduled for 23 July – is unlikely to succeed as opposition lacks mandates to overthrow the government and none of the ruling coalition parties is expected to vote against its own government. In the meantime, the OLaNO-led coalition is moving ahead with one of its main electoral promises – reform of the judiciary. On 15 July, the parliament amended the appointment procedure for prosecutors, while a constitutional law proposing multiple changes to the court system and increasing scrutiny of judges is in final stages of drafting.

Ukraine

Parliament’s approval of Kyrylo Shevchenko as the new governor of central bank (NBU) is expected to keep the USD 5bn IMF deal on track for now. Shevchenko is an experienced and well-regarded banking executive who pledges to continue cooperation with the IMF and strengthen the country’s banking system. However, he is little known in political circles and could be more dependent on President Volodymyr Zelensky than the former governor. Shevchenko will be judged by his actions and the key signposts to watch are whether he manages to resist political and oligarchic pressures, preserves the reform-oriented members of the NBU and continues with the banking sector cleanup.

More by

EUROPE: CEE PULSE

( 4 mins) Two popular caretaker ministers could attract a significant share of protest votes in Bulgaria‘s parliamentary elections scheduled for 14 November. In Croatia, a small right-wing party will attempt to initiate a referendum on the country’s

Read More »

EUROPE: CEE PULSE

( 5 mins) Political and epidemiological crises are deepening in Bulgaria. In Romania, a dispute within the three-party coalition government over the local infrastructure investment program will likely lead to the replacement of the Prime Minister Florin Citu.

Read More »

POLAND: Will PiS govern until the 2023 general election?

( 3 mins) The departure of the junior coalition partner Agreement from the United Right coalition government and notable difficulties in advancing the controversial “lex TVN” bill in parliament earlier this month raise questions about whether Mateusz Morawiecki’s

Read More »