May 6, 2021

Europe

EUROPE: CEE PULSE

BY Andrius Tursa

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( 6 mins)

Against the backdrop of a swiftly improving epidemiological situation, countries across Central and Eastern Europe (CEE) are easing Covid-19 restrictions. Bulgaria is heading to snap parliamentary elections in July, while a referendum on dissolving parliament and holding an early, general poll could take place in Slovakia. In Poland, the three-party governing coalition is expected to remain in place despite multiple internal frictions. Finally, US Secretary of State Antony Blinken’s visit to Ukraine signals Washington’s support for Kyiv amid tensions with Moscow and slow domestic reforms.

Region

As the pandemic recedes, Poland will reopen hotels at 50% capacity on 8 May, followed by restaurants/bars with outdoor service, outdoor cinemas, and theaters on 15 May. The Czech Republic will allow for the reopening of retail stores as well as primary schools from 10 May. Hungary, which is among the leaders in the European Union (EU) in terms of vaccinating its population, already reopened restaurants/bars with indoor seating, hotels, gyms, and various cultural and entertainment venues to immunity card holders on 1 May. Other countries, including Romania, Slovakia, and Ukraine, are also proceeding with a gradual easing of Covid-19 restrictions.

Of concern are the epidemiological situations in Latvia and Lithuania, both of which have been experiencing a slow, but steady rise in new infections over the past month. A steeper pandemic surge cannot be ruled out as both countries proceed with reopenings despite the situation. Similarly, Croatia is keeping existing restrictions in place until 15 May as infection levels are coming down very slowly. Another concern is the spread of new variants of the virus, with the so-called Brazilian, South African, and now Indian strains of the virus detected in the region.

Bulgaria

As anticipated, the country will hold an early parliamentary election in the summer. The center-left Bulgarian Socialist Party (BSP) did not attempt to form a government and returned the mandate to President Rumen Radev on 5 May. In this situation, the country’s constitution mandates the president appoint a caretaker government, dissolve parliament, and schedule a new general election within two months. Radev already has suggested that the elections likely will take place on 11 July. In the meantime, a caretaker cabinet will have a difficult agenda of managing the pandemic, reviving the EU’s slowest Covid-19 vaccination campaign, and overseeing preparations for the general vote. While a new parliamentary vote in the summer would likely benefit opposition parties, another fragmented parliament and a challenging government formation process can be expected.

Poland

On 4 May, the lower house of parliament ratified the EU’s Own Resources Decision, and the upper house of parliament is expected to follow suit by early June at the latest. Once ratified by all EU Member States, the decision will allow the bloc to issue bonds to finance the post-pandemic recovery fund, from which Poland is entitled to EUR 23.9bn in grants and EUR 34.2bn in loans through 2026. The ratification process once again exposed fault lines within the governing United Right coalition, whose junior member United Poland refused to back the bill due to concerns about the rule-of-law mechanism and further federalization of the EU. As a result, the Law and Justice (PiS) party was forced to seek support for ratification from opposition in parliament in exchange for amendments to the country’s national recovery plan, which was submitted to the European Commission on 3 May.

Despite multiple disagreements, the United Right coalition will remain intact largely due to a lack of viable alternatives. The breakup of the coalition likely would lead to an early election where all three parties would perform worse than in the 2019 vote, according to polls. In addition, the EU-funded, post-pandemic recovery plan provides attractive opportunities to regain public support before the regular election in autumn 2023. Going forward, one signpost to watch is whether the three parties decide to run under a single ticket in the next election. If not, junior members of United Right might pursue increasingly independent policy agendas to differentiate themselves from the PiS. This could deepen internal conflicts and eventually destabilize the government.

Slovakia

On 3 May, a group associated mostly with the center-left opposition parties delivered to President Zuzana Caputova over 585,000 signatures calling for a referendum to shorten the current parliamentary term and hold early general elections. According to law, a referendum can be requested by at least 350,000 citizens. Caputova’s office now has 30 days to check the validity of signatures to either call a referendum or turn to the Constitutional Court for clarification on whether such a request is constitutional. The latter option seems likely amid disagreements among politicians and legal experts on the matter.

Public opinion on holding early elections is split: a survey conducted at the end of April indicates that around 45% of respondents favor a snap poll, while 47% are opposed; the remaining 8% are undecided. However, the initiative has limited chance of succeeding due to the relatively high threshold requiring at least 50% turnout in order to consider the referendum valid. In fact, out of the eight referendums held in the country over the past three decades, only one succeeded (concerning the country’s accession to the EU). Nonetheless, another scandal within the four-party coalition government, and active campaigning by the opposition, still could alter the outlook.

Ukraine

The US Secretary of State Antony Blinken’s visit to Ukraine on 5-6 May has neither resulted in any major agreements, nor established a clear pathway for Ukraine’s NATO accession as Kyiv hoped. Nonetheless, the visit demonstrates Washington’s continued support for Kyiv amid tensions with Moscow and continued fighting in Donbas. Bilateral cooperation could be expected to intensify in multiple areas, including the military. US Congress is considering a bill which would provide Ukraine with up to USD 300mn per year in military assistance – including lethal weapons – from 2022-2026. However, slow reforms in Ukraine remain the key concern for Washington and Kyiv’s other Western partners. The controversial dismissal of Andriy Kobolyev as the CEO of state-owned oil and gas company Naftogaz on 28 April only added to a long list of issues that have raised questions about the commitment of President Volodymyr Zelensky’s administration to delivering genuine reforms. Kobolyev’s removal also prompted the International Monetary Fund (IMF) to recall its senior economist overseeing corporate governance reforms in Ukraine. This suggests that resolution of the issue will be an important precondition for securing the next tranche under the existing USD 5bn Stand-By Arrangement, which expires at the end of 2021.

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