Report Contents

March 25, 2021

Europe

EUROPE: CEE PULSE

BY Andrius Tursa

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( 5 mins)

Most Central and Eastern Europe (CEE) countries are struggling to cope with the so-called third wave of the pandemic. The soaring infection, hospitalization, and death rates have forced Poland’s government to tighten nationwide restrictions starting 27 March. Ukraine might soon follow suit too. The government crisis rumbles on in Slovakia, while the Kremlin critic Alexei Navalny’s deteriorating health could pose additional challenges to Russia’s government.

Region

The (re)surging pandemic remains the main challenge for governments across the region. The situation is particularly challenging in the Czech Republic, Estonia, Hungary, and Poland, where nationwide restrictions are likely to remain in place at least until Easter (4 April). Infections are also surging in Bulgaria, Croatia, Romania, Serbia, and Ukraine, all of which are considering tightening/extending the Covid-19 measures in the near term. The latest health data also show the first signs of the so-called third wave in Lithuania and Slovenia. A few notable exceptions from the negative trend are Latvia, Russia, and Slovakia, where the epidemiological situation is gradually improving.

Poland

On 25 March, the country reported the highest number of new infections (34,151) since the start of the pandemic. The seven-day rolling average of new cases is approaching the previous peak recorded in late November. While the authorities are urgently expanding the number of Covid-19 hospital beds and ventilators, their occupancy is continuing to rise and stands around 75%. It appears that the so-called third wave of the pandemic has not reached its peak in Poland, and the epidemiological situation is expected to deteriorate in the coming days. As a result, the government will further tighten restrictions starting 27 March, which will lead to the closure of all pre-schools and kindergartens, beauty salons, and large household goods stores at least until 9 April. Some smaller retail outlets and post offices will be allowed to operate under strict health and safety conditions. The government has also postponed the rollout of its much-anticipated post-pandemic recovery program New Deal until the epidemiological situation improves.

Russia

Associates of the Kremlin critic Alexei Navalny are voicing concerns about his health condition, claiming that he is suffering from severe back pain and numbness in one of his legs. Navalny’s lawyers are reportedly struggling to contact Navalny, who is being held in a prison colony near Moscow known for extremely harsh conditions and discipline. Russia’s Federal Penitentiary Service’s statement that Navalny’s health is “stable and satisfactory” does not offer much optimism either. Should Navalny’s health deteriorate to a life-threatening condition, or should he pass away in prison, the probability of harsher Western sanctions on Moscow and renewed protests across the country would rise. On the latter point, Navalny’s team is initiating a new round of protests in the spring. The upcoming protest has a dedicated website, where around 250,000 people have expressed their intention to participate as of 25 March. The date of the event should be announced once the figure hits 500,000.

Slovakia

The crisis within a four-party coalition government led by Prime Minister Igor Matovic (Ordinary People and Independent Personalities, OLaNO) continues for a fourth consecutive week. A junior member of the ruling coalition, the Freedom and Solidary (SaS) party, has followed through on its ultimatum to Matovic and has left the cabinet. A few other ministers from other parties have also resigned, hoping to facilitate the resolution of the protracted crisis. Negotiations among the four coalition parties are continuing, and SaS does not rule out remaining part of the government if Matovic eventually leaves the post. While multiple different configurations of the coalition government and the cabinet are possible, the largest parliamentary group OLaNO will likely remain in the leading seat. A technocratic cabinet led by an independent prime minister or a snap general election are also possible but unlikely scenarios.

Ukraine

This week, the country reported the highest figures of new Covid-19 infections, hospitalizations, and deaths since the start of the pandemic. Moderate restrictions have been imposed in Kyiv and seven other regions, but the probability of a third nationwide lockdown is rising. To mitigate the negative economic consequences, the government announced plans to offer one-off payments of UAH 8,000 (USD 285) to affected businesses and employees. A bill on support for entrepreneurs might be adopted during two extraordinary parliamentary meetings on 30 March. Besides, that national government called on local authorities to make similar payments on their level.

Regarding reforms, it is important to watch whether the government fulfills its promise to remove energy subsidies until the end of the month. In addition, reports that the country’s prosecutors have opened corruption probes into former reform-oriented central bank (NBU) officers – namely its former head Valeriya Gontareva and her first deputy Kateryna Rozhkova – are concerning and could be seen as politically motivated by Ukraine’s Western partners. In this context, the appointment of the head of the Special Anti-Corruption Office, as well as attempts to remove the independent Head of the National Anti-Corruption Bureau of Ukraine, remain important signposts that will shape the International Monetary Fund’s decision on further financial assistance to the country.

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