Teneo logo

September 16, 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

Report Contents

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
( 6 mins)

The strong performance of the ruling United Russia party in the country’s regional elections suggests it is well-placed to retain its dominance of the State Duma after the 2021 parliamentary elections despite falling its approval ratings. Moscow’s financial and military backing will help Belarus’ President Alexander Lukashenko to remain in power in the near term, but signals for a controlled power transition in the longer run (potentially via constitutional changes) should be watched. The Polish government is starting a new political season with a cabinet reshuffle and a refreshed policy agenda. Finally, Ukraine remains the hotspot of Covid-19 in Central and Eastern Europe (CEE), while potential setbacks in tackling corruption threaten its continued cooperation with the IMF.

Belarus

The main takeaway from the 14 September meeting between President Alexander Lukashenko and his Russian counterpart Vladimir Putin is Moscow’s readiness to back the Lukashenko regime financially and militarily, at least in the near term. While Russia’s backing helps the Lukashenko to remain in power for now, it does not guarantee the regime’s stability in the longer term. One signpost to watch is the proposed constitutional reform in Belarus, which Putin considers as “logical, timely, and expedient.” The constitutional reform could become a vehicle for a managed power transition away from the Lukashenko-dominated authoritarian regime to a more parliamentary system. A controlled transition of the political leadership would be welcome in the Kremlin, which would like to avoid a popular overthrow of an increasingly illegitimate authoritarian leader – likely followed by a period of political instability – at its doorstep. At the same time, the drafting of the new constitution might allow Moscow to shape the country’s new institutional setting, potentially linking the country closer to Russia in light of the 1999 Union State agreement.

Poland

Political activities are picking up after the summer break. Today, 16 September, the parliament starts its autumn session, while the ruling Law and Justice (PiS) party is actively working to reshuffle the cabinet and refresh its policy agenda. Following disagreements with one of its junior coalition partners during the presidential election campaign earlier this year, the ruling PiS sought to expand the governing coalition by opening talks with the center-right Polish People’s Party (PSL). However, the negotiations have failed, and the PiS-led coalition looks set to continue governing with a slim majority in the lower house of parliament (Sejm) and the opposition-controlled upper house of parliament (Senate). Internal disagreements between coalition partners, or even within the PiS itself, will pose the main risk for government stability as the opposition remains fragmented.

Prime Minister Mateusz Morawiecki is expected to remain in office, but the overall number of ministries is likely to be reduced, potentially at the expense of the two junior coalition partners. With no major elections scheduled until 2023, the PiS is well-placed to continue with its policy agenda. Some of the most controversial initiatives include the continued reform of the judiciary and the proposed “repolonization” of the country’s media landscape, which promise to keep tensions with the EU high. Moreover, the draft 2021 budget includes revenue from the retail tax, which was cleared by the European Court of Justice back in May 2019. While the structure of the tax has not been revealed yet, it could disproportionally target large food retailers, most of which are foreign-owned. Finally, the PiS’s plans to gradually reduce the country’s reliance on coal-fired electricity generation will likely lead to a strong backlash from the influential mining unions.

Russia

The ruling United Russia (UR) party and its supported candidates convincingly won most electoral battles in various level votes that ended on Sunday, 13 September. According to preliminary results, incumbents claimed first-round victories in all 18 gubernatorial elections, and the UR won majorities in 11 regional parliaments. While the ruling party lost its outright majorities in the Novosibirsk and Tomsk city councils, where the opposition managed to strengthen its positions, it will likely retain control over these cities too. In general, the election results suggest that the ruling UR party is well-positioned to maintain its two-thirds majority in the 450-seat State Duma after the 2021 parliamentary elections as well. The Kremlin’s traditional electoral tactics of barring the most potent opposition figures from electoral races appear to be effective, while the modified voting procedure leaves even more room for electoral irregularities. Moreover, various new spoiler parties further divide the already fragmented opposition votes. The expected leadership changes in the ruling UR, as well as a focus on social policies in the coming months, could also stem the gradual fall in the party’s approval ratings. In terms of risks, spontaneous and leaderless protests over various local/regional issues will remain a concern for the Kremlin as they are difficult to predict and contain. Also, a potential return of Alexei Navalny to Russia’s political scene could galvanize the opposition and trigger fresh public protests.

Ukraine

The number of Covid-19 infections continues to rise, with the seven-day average of new cases reaching around 2,800 – still the highest figure in CEE excluding Russia. To cope with the pandemic, the government relies on the so-called “adaptive quarantine” scheme, which divides the country’s regions into four epidemiological zones (green, yellow, orange, and red) with corresponding restrictions on public and economic activities. Around 30 regions are now in the “red zone,” which mandates the closure of restaurants, schools, most retail activities, and public transport. Another 60 of the country’s regions – including the capital Kyiv – are in the “orange zone,” which requires suspension of all planned hospitalizations for at least 14 days, partially restricts the operation of retail, accommodation, catering, public transport, and other activities. Unless the situation improves, Kyiv could move into the “red zone” over the coming weeks, dealing another blow to the country’s economy, which is already projected to decline by 7.7% in 2020 by the International Monetary Fund (IMF).

Meanwhile, President Volodymyr Zelensky faces intense pressure from domestic political and business groups to dismiss the head of the National Anti-Corruption Bureau of Ukraine (NABU), Artem Sytnyk, after the country’s constitutional court ruled that his appointment back in 2015 was unconstitutional. However, the IMF on 10 September said that the independence of NABU was a key component of structural reforms and a “prerequisite” under the current 18-month USD 5bn stand-by agreement with the fund. The dismissal of Sytnyk – who is considered as a competent reformer – would signal a further setback in Ukraine’s fight against systemic corruption and endanger continued support under the current IMF program.

More by Andrius Tursa