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December 10, 2020

Europe

EUROPE: CEE PULSE

BY Andrius Tursa

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( 6 mins)

Following the 6 December general election in Romania, three center-right parties are starting talks on forming a new coalition government. Tensions in Poland’s United Right coalition government are running high amid the ongoing negotiations on linking the EU budget to the rule of law. Surging Covid-19 infections will likely prompt Lithuania’s new government to urgently tighten restrictions in the coming days, while Ukraine is set to impose a two-week lockdown after the winter holidays.

Lithuania

On Tuesday, 8 December, Prime Minister Ingrida Simonyte presented a new government program for parliament’s approval, which is the last step before the new cabinet enters office. In general, the program focuses on long-term development priorities with education reform being at the center. No tax amendments are foreseen in 2021, but new pollution-oriented taxes and changes in labor taxation could be expected in 2022. The government program could be approved already on Friday, 11 December. Once in office, the new cabinet is expected to urgently tighten the Covid-19-related restrictions as daily infections per 1mn residents are approaching the highest level in the EU.

Poland

Deputy Prime Minister and a leader of the ruling Law and Justice (PiS) party Jaroslaw Kaczynski survived a vote of no confidence in parliament today, which shows that the United Right coalition government retains a slim majority in the lower chamber. However, public approval ratings of the ruling PiS have dropped by around 10-12 percentage points compared to the 2019 election result, and tensions within the ruling coalition remain high. The PiS’s junior coalition partner United Poland (SP) – led by ultra-conservative justice minister Zbigniew Ziobro – is critical of the proposed compromise agreement with the EU on linking the EU funds to respecting the rule of law and might demand the resignation of Prime Minister Mateusz Morawiecki (PiS) if the deal is approved. In the backdrop of ongoing talks with the EU, the country’s leading oil refining company PKN Orlen acquired a major regional news publisher from a German company, which is in line with the PiS-led government’s plans to “re-Polonize” the country’s media landscape.

Romania

While the official vote count after the 6 December parliamentary election is still being finalized, a preliminary distribution of seats in both chambers shows that a potential coalition government consisting of the National Liberal Party (PNL), the USR-PLUS Party and the Democratic Alliance of Hungarians in Romania (UDMR) would have 244 mandates in both chambers of parliament, which translates into a 10-seat majority. The government could be supported by 18 deputies representing ethnic minorities. The three parties are expected to start negotiations on forming the new government on Saturday, 12 December.

Lithuania

On Tuesday, 8 December, Prime Minister Ingrida Simonyte presented a new government program for parliament’s approval, which is the last step before the new cabinet enters office. In general, the program focuses on long-term development priorities with education reform being at the center. No tax amendments are foreseen in 2021, but new pollution-oriented taxes and changes in labor taxation could be expected in 2022. The government program could be approved already on Friday, 11 December. Once in office, the new cabinet is expected to urgently tighten the Covid-19-related restrictions as daily infections per 1mn residents are approaching the highest level in the EU.

Poland

Deputy Prime Minister and a leader of the ruling Law and Justice (PiS) party Jaroslaw Kaczynski survived a vote of no confidence in parliament today, which shows that the United Right coalition government retains a slim majority in the lower chamber. However, public approval ratings of the ruling PiS have dropped by around 10-12 percentage points compared to the 2019 election result, and tensions within the ruling coalition remain high. The PiS’s junior coalition partner United Poland (SP) – led by ultra-conservative justice minister Zbigniew Ziobro – is critical of the proposed compromise agreement with the EU on linking the EU funds to respecting the rule of law and might demand the resignation of Prime Minister Mateusz Morawiecki (PiS) if the deal is approved. In the backdrop of ongoing talks with the EU, the country’s leading oil refining company PKN Orlen acquired a major regional news publisher from a German company, which is in line with the PiS-led government’s plans to “re-Polonize” the country’s media landscape.

Romania

While the official vote count after the 6 December parliamentary election is still being finalized, a preliminary distribution of seats in both chambers shows that a potential coalition government consisting of the National Liberal Party (PNL), the USR-PLUS Party and the Democratic Alliance of Hungarians in Romania (UDMR) would have 244 mandates in both chambers of parliament, which translates into a 10-seat majority. The government could be supported by 18 deputies representing ethnic minorities. The three parties are expected to start negotiations on forming the new government on Saturday, 12 December.

EUROPE: CEE PULSE 1

Following a surprise resignation earlier this week, former prime minister Ludovic Orban is expected to become a speaker of parliament and continue leading the PNL. Until the new government is sworn in, the cabinet will be headed by a former defense minister, Nicolae Ciuca (independent). As for the next government leader, the PNL is proposing acting Finance Minister Florin Citu (PNL) as its candidate (also supported by UDMR), while the second-largest parliamentary group USR-PLUS is putting forward Dacian Ciolos’ candidacy. However, President Klaus Iohannis may also nominate an independent prime ministerial candidate to strengthen his leverage over the new government. The new parliament is scheduled to hold its first sitting on 21 December.

Ukraine

Yesterday, 9 December, the European Commission (EC) disbursed EUR 600mn in macro-financial assistance to Ukraine, which will help the government address near-term financing needs. However, further financial support from the EU and the International Monetary Fund is contingent on continued structural reforms, including tackling corruption, where progress is stalling. The recently adopted law lifting criminal responsibility for false asset declarations by public officials “does not produce the necessary deterrent and corruption prevention effect,” according to the EC. Going forward, some important signposts to watch is whether the reform-oriented Head of the National Anti-Corruption Bureau (NABU) Artem Sytnyk remains in post and whether the new head of the National Anti-Corruption Bureau – expected to be appointed in Q1 2021 – is considered as independent and impartial.

Even though new Covid-19 cases in Ukraine have started declining, authorities expect a new surge in infections after the winter holidays. As a result, Prime Minister Denis Shmyhal announced a nationwide lockdown between 8-24 January. This will entail a closure of restaurants, bars, non-grocery stores, sports, entertainment and cultural facilities, hostels, schools, and universities. The restrictions will be accompanied by the UAH 12bn (around USD 427mn) economic support package.

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