Report Contents

June 16, 2021

Europe

EUROPE: CEE PULSE

BY Andrius Tursa

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( 4 mins)

Russia is reimposing restrictions as new Covid-19 infections surge across the country. In Poland, the opposition-backed candidate’s victory in local elections in the city of Rzeszow highlights the importance of cooperation for both the opposition and the governing coalition. Romania ‘s government is likely to survive the proposed vote of no confidence, but an internal struggle for the leadership of the ruling National Liberal Party (PNL) may affect the coherence of policies. Finally, the government in Hungary is advancing new populist measures ahead of next year’s parliamentary elections.

Hungary

With the pandemic slipping into the background, the Fidesz-led government is considering additional populist measures aimed at shoring up voter support ahead of the 2022 parliamentary elections. Prime Minister Viktor Orban revealed plans to provide personal income tax rebates to all working families for the entire year of 2021 if the country’s GDP growth reaches 5.5% this year. Estimates suggest that around 1.1mn families could expect an average rebate of EUR 1,150. The proposal reaffirms the government’s intentions to keep spending elevated in the coming year. In addition, authorities floated the possibility of a nearly 20% increase in minimum wage to HUF 200,000 (EUR 570) starting next year, although employer and business associations will likely attempt to scale it down. Both proposals – along with some other populist measures – will be part of a new nationwide poll, which has not legal power but is generally used by the ruling Fidesz to keep its voters engaged and test public opinion on various issues.

Poland

The first-round win by Konrad Fijolek – a candidate jointly supported by all major opposition parties – in the last weekend’s mayoral elections in the city of Rzeszow (southeastern Poland) sent some important messages for both the opposition and the governing parties. Fijolek’s strong performance might strengthen calls for cooperation among opposition parties in national-level elections, an option which has been previously dismissed by Poland 2050 or The Left. In fact, electoral successes at local level have prompted cooperation among ideologically diverse opposition parties in Hungary, whose performance in the 2022 parliamentary vote will be closely watched in Poland. Meanwhile, the ruling United Right coalition parties – who fielded separate candidates in Rzeszow – got a reminder that persisting internal divisions pose significant electoral risks. While a recently signed cooperation agreement between the PiS and the small right-wing group Kukiz’15 provides the ruling camp with additional four mandates in parliament to advance measures outlined in the economic recovery plan, disagreements between the PiS and its junior coalition partner Agreement are reemerging.

Romania

Next week, the opposition Social Democratic Party’s (PSD) will initiate a vote of no confidence in Florin Citu’s (National Liberal Party, PNL) cabinet. The PSD accuses the government of economic and fiscal mismanagement, plunging living standards in the country and poor development of the EUR 29.3bn recovery and resilience plan, which received numerous comments from the European Commission. The motion is unlikely to succeed as it requires an absolute majority of votes (234) in a joint session of both houses of parliament, but the two opposition parties hold only 203 mandates. In terms of government stability, the intensifying struggle for the leadership of the ruling PNL between Prime Minister Citu and speaker of parliament Ludovic Orban is a greater risk, which may affect the coherence of policies between the government and parliament. Internal tensions will likely peak in mid- September, when PNL is scheduled hold party leader elections.

Russia

The country is facing another wave of the pandemic. The seven-day rolling average of new cases surged by more than 40% during the past week, reaching the highest level since February. Moscow and the surrounding region is the main hotspot, accounting for more than half of all new cases. The latest surge in infections could be linked to a number of factors, including the slow progress of the vaccination program (only 10% of the population is fully vaccinated), the spread of new strains, seasonal factors as well as poor public adherence to sanitary measures, as 55% of population is not afraid of contracting the virus. The surging infections forced Moscow and several other regions to significantly tighten restrictions, including the closure of food courts, remote work orders or shortened working hours in various services. Considering the rapidly deteriorating situation, additional and longer-lasting restrictions are likely to be introduced in more regions in the coming weeks. So far, the government has not announced any new economic support measures for affected businesses. In fact, the finance minister suggested earlier this month that the government would soon phase out post-pandemic recovery stimulus due to the risk of economic overheating, manifesting in above-target inflation levels. However, such plans may now be postponed given the resurging pandemic.

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