Report Contents

July 15, 2021

Europe

EUROPE: CEE PULSE

BY Andrius Tursa

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( 5 mins)

Russia will likely continue to rely on vaccination rather than tight restrictions to cope with the still surging pandemic. The strengthening of anti-migrant and anti-LGBTQ sentiment in Lithuania could give rise to new right-wing political parties. In Poland, the government is continuing its attempts to gain greater leverage over private media. The replacement of the finance minister in Romania does not suggest a change in the country’s fiscal course. Finally, Ukraine is on track to receive USD 2.7bn from the International Monetary Fund (IMF) by September.

Lithuania

The country faces a surging inflow of migrants from the Middle East and Africa through its 679km-long border with Belarus. Vilnius blames Minsk for intentionally facilitating illegal migration – in retaliation to Lithuania’s considerable support for the Belarusian opposition – and is actively asking support from the EU to secure the bloc’s external border. This week, the country’s foreign minister Gabrielius Landsbergis went on a working visit to Turkey and Iraq in search of ways to disrupt illegal migration routes. At home, the coalition government led by the center-right Homeland Union- Lithuanian Christian Democrats (TS-LKD) is struggling to deal with the logistical, human rights, and national security aspects of the unexpected crisis. At the same time, the strengthening of anti-migrant sentiment in the country – along with widening societal divisions on LGBTQ issues in recent months – could give rise to new right-wing parties/movements in the country.

Poland

A government led by the conservative Law and Justice (PiS) party is continuing its attempts to gain greater leverage over the country’s media. Last week, a group of PiS deputies proposed a legislative amendment that would revoke radio and television broadcasting licenses from media companies controlled by entities outside the European Economic Area (EEA). While the rationale behind the proposed bill is to shield the country’s media landscape from broadcasters based in the so-called “hostile” countries, such as Russia, it would primarily affect the US-owned TVN Group, a broadcaster of several popular TV channels viewed as critical of the current government. In fact, TVN Group has already reported challenges in renewing its broadcasting license in Poland, which expires in September. The proposed bill – dubbed as “lex TVN” – is also heightening diplomatic tensions between Washington and Warsaw amid the continued delays in approving the new US ambassador to Poland. The adoption of the proposed bill is expected to face significant hurdles in parliament due to diverging opinions both within the PiS and the broader United Right governing coalition – just as the proposed advertising tax earlier this year. However, foreign media outlets critical of the government will continue to face political pressure and regulatory challenges in Poland.

Romania

The resignation of finance minister Alexandru Nazare last week resulted from the continuing struggle for influence within the ruling National Liberal Party (PNL) between Prime Minister Florin Citu and the President of the Chamber of Deputies (lower house of parliament), Ludovic Orban. Nazare was seen as a supporter of Orban, which likely became one of the main reasons for his dismissal. Citu will now serve as an acting finance minister for up to 45 days until a new candidate is nominated. A change in the finance minister post is unlikely to alter the country’s commitment to fiscal consolidation.

Russia

The epidemiological situation is further deteriorating. The Covid-19 caseload is approaching peak levels seen in December 2020, and mortality rates are already hitting record-highs. While Moscow and St. Petersburg remain the main hotspots, the virus is spreading rapidly across the country’s regions. The government’s response remains primarily focused on vaccination rather than tight restrictions on economic and public activities, which would be unpopular ahead of the September legislative election. While an aggressive push for mandatory vaccination in around a quarter of the country’s 85 regions has accelerated inoculations, less than 15% of the country’s population has been fully immunized to date. This suggests that a quick improvement in the epidemiological situation is unlikely. Nonetheless, Russia’s Ministry of Economic Development revised the country’s 2021 GDP growth forecast up to 3.8% from 2.9% on account of a strong economic recovery in agriculture, construction, and manufacturing sectors in April and May.

Ukraine

Today, parliament accepted the resignation of an influential interior minister Arsen Avakov (independent), who unexpectedly stepped down earlier this week. While the motives behind this decision remain unclear, the departure of the controversial and rather unpopular minister could be considered positive for reforms and the government’s reputation. Given his extensive influence and experience, an important signpost to watch is whether and how Avakov chooses to continue his political career. In terms of Ukraine’s relations with the IMF, multiple reform bills advanced through parliament in recent weeks. In addition, statements from government officials suggest that Ukraine is on track to receive by September USD 2.7bn from the fund’s recently announced USD 650bn SDR allocation to support post-pandemic recovery.

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