News & Analysis

Emerging Europe this week

Central Europe

Poland’s government has proposed raising the minimum monthly wage to 2,800 zloty next year, marking a 7.7 per cent increase on the current level. The new figure falls short, however, of its 2019 electoral promise that a minimum wage of 3,000 zloty would be introduced before 2021. On Tuesday the government, led by the Law and Justice (PiS) party, proposed new figures for 2021 of 2,800 zloty (634 euros), rising from the current level of 2,600 zloty (588 euros). The hourly minimum wage would increase to 18.30 zloty (4.14 euros) from 17 zloty (3.85 euros).

The Czech government signed agreements with energy giant CEZ on Tuesday for a planned multi-billion US dollar expansion of the state-owned utility’s Dukovany nuclear power plant. The agreements cover the overall general framework of the project and its initial phase, including a tender in which CEZ will have a preferred list of suppliers by 2022 and sign a contract with one by 2024. The Czech Republic has been a strong backer of nuclear power even as many in the European Union shift to renewable energy, including neighbouring Germany. The Czechs argue nuclear is a carbon-free alternative. The state, which holds a 70 per cent stake in CEZ, last week approved plans to give an interest-free loan for the roughly 1,200 megawatt unit.

The European Commission has meanwhile approved a Czech wage subsidy scheme worth 22.9 billion crowns (approximately 866 million euros) providing support to enterprises affected by the coronavirus outbreak. The scheme was approved under the state aid temporary framework. The scheme is accessible to employers of all sizes and covers wages in the period between March 12 and August 31. It will support around 280,000 firms. The aid amounts to 80 per cent of wage costs (including social security and health insurance contributions), capped at 39,000 crowns (approximately 1,475 euros) per month.

Bulgaria will spend another 1.16 billion leva (596 million euros) to help its coronavirus-blighted economy, support frontline medics and protect vulnerable groups in the European Union’s poorest member state, the prime minister said this week. Boyko Borissov, under pressure from protesters and opposition politicians calling on him to quit over corruption in Bulgaria, says he cannot allow political “chaos” in addition to an economic downturn hitting jobs and incomes. “I am sorry that the political class does not see what months are ahead of us … I would understand if someone has a better plan,” he told reporters.

The EU’s crop monitoring service MARS cut its 2020 soft wheat yield forecast again this week to take account of rain damage in parts of Central Europe but lifted estimates for most spring crops which benefited from good weather conditions. In a monthly report, MARS pegged the average soft wheat yield in the European Union at 5.54 tonnes per hectare (t/ha), down from 5.60 t/ha last month and 6.00 t/ha in 2019. The soft wheat yield decline is mainly due to sharp downward revisions for Romania, Bulgaria and Hungary associated with a unfavourable season worsened by heavy rain around ripening, MARS said.

Plans for a new rail crossing between Germany and Poland have been given the green light. The bridge will span the river Oder between Küstrin and Kostyrzyn and is part of a wider upgrade under the Berlin-Kostrzyn-Gorzów railway modernisation programme. The 266m long crossing will replace a derelict, single-track truss built before the Second World War. It will include a 130m high arch whose crown will mark the border between the two countries. Tendering to build the 36 million-euro bridge will begin next month with construction due to start next spring ahead of an opening at the end of 2022.

Eastern Europe

Belarus leader Alexander Lukashenko said he would demand an explanation from Russia after Belarusian security forces detained more than 30 suspected Russian mercenaries near Minsk, Belarusian state media reported on Wednesday. The state-controlled Belta news agency said Belarus had detained the suspected mercenaries after receiving information that more than 200 fighters had entered the country to destabilise it ahead of a presidential election on August 9. It said the men worked for Wagner, Russia’s best-known private military contractor.

Ukraine will make every effort to maximise compensation for a Ukrainian jet shot down by Iran on Jan. 8 but talks with Tehran, which began on Thursday, will not be easy, Ukrainian Foreign Minister Dmytro Kuleba said. Iranian forces say they downed the Ukraine International Airlines Boeing 737 jet after mistaking it for a missile at a time when tensions with the United States had risen. All 176 people on board – including 57 Canadians – were killed. “We will achieve justice, no matter how much time and effort it costs,” Kuleba said in a statement published by the ministry after the two delegations met in Kyiv.

International Monetary Fund (IMF) staff and the Moldovan authorities this week reached a staff-level agreement on an economic reform programme to be supported by three-year Extended Credit Facility and Extended Fund Facility (ECF/EFF) arrangements. Access under this arrangement is proposed to be set at 558 million US dollars (232 per cent of Moldova’s quota in the Fund). The staff level agreement is subject to approval by IMF management and the executive board. Considerations of the new programme by the executive board is expected in September, subject to the Moldovan authorities’ implementation of a number of prior actions, including in areas of central bank independence, financial sector oversight, and fiscal transparency.

The United States is criticising a number of eastern and central European nations for failing to compensate Holocaust victims and their families and communities for property seized during Nazi occupation in World War II as the numbers of survivors dwindles due to age. In a report issued Wednesday, the State Department called out Bosnia, Belarus, Ukraine and particularly Poland for not having acted on restitution claims. Croatia, Latvia and Russia were also taken to task in the report, which is likely to draw angry responses from the governments identified.

North East Europe

The Estonian government has drafted a proposal that would ascribe security credentials to equipment vendors looking to supply 5G technology. The suggested regulations have already been harshly criticised by operators for being overly political. Public broadcaster Eesti Rahvusringhaaling (ERR) reported that if the proposal is adopted, vendors will receive a security ranking based on criteria such as being listed on a public stock exchange or being based in a European Union (EU) country. Vendors would only receive clearance to supply specific technologies if they achieve the corresponding ranking. Elisa Estonia CEO Sami Seppanen has argued that all vendors are required to manufacture components to effectively the same international standards, and that most operators already use components manufactured in China.

The United States will do everything it can to ensure Russia’s Nord Stream 2 gas pipeline project does not pose a security threat to Europe, but needs more tools to do so, US Secretary of State Mike Pompeo said on Thursday. Russia aims to use the pipeline to double the amount of gas shipped to Germany, using a route under the Baltic Sea that will bypass Ukraine and deprive it of potentially billions of dollars in transit fees. Washington worries the pipeline extension could increase Moscow’s political and economic grip on Europe. “We need further tools. We’re prepared to use those tools should you provide them to us,” Pompeo told the Senate Foreign Relations Committee.

South East Europe

The Council of Europe Development Bank (CEB) has approved a 35 million euros loan to support Kosovo’s ongoing efforts to provide health care to those affected by the Covid-19 pandemic. The CEB has also approved a grant of one million euros from the Social Dividend Account as an interest-rate subsidy for the loan. “The CEB loan will cover a part of the emergency healthcare costs and will enable the establishment of specialized units in selected hospitals and the purchase of treatment and diagnostic equipment, such as oxygen delivery systems, ultrasound, and tomography devices as well as protective and medical supplies, testing kits and diagnostic reagents. The loan will also provide for hardship incentives to healthcare and pharmacy employees, training of medical staff, and the mobilisation of additional healthcare personnel,” the CEB said in a statement this week.

North Macedonia’s Komercijalna Banka said on Wednesday that its non-consolidated net profit rose to 743.3 million denars (12 million euros) in the first half of 2020 from 675.1 million denars in the same period of 2019. The bank’s net interest income was flattish at 1.4 billion denars in the first six months of the year, Komercijalna Banka said in an interim financial statement filed with the stock exchange in Skopje.

Albania’s ruling party this week pushed through changes to voting rules ahead of next year’s elections, flouting European Union recommendations and potentially complicating the nation’s chances of starting accession talks soon. Lawmakers from the Socialist part of PM Edi Rama backed changes to the constitution banning pre-election coalitions. The change prevents smaller parties from joining forces to campaign together while still staying apart, which hurts their chances running against the dominant Socialists. The country’s main opposition groups have boycotted parliament since 2019.

Serbian President Aleksandar Vučić has defended an investigation into alleged money laundering and terrorism funding launched against dozens of rights groups and independent journalists critical of his government’s policies. The finance ministry has requested bank information since the start of 2019 from 20 individuals and 37 nongovernmental organisations and institutions known for their work on human rights, transparency, and exposing corruption. The ministry’s order cites the need “to determine whether the listed organizations and individuals have anything to do with terrorist financing or money laundering.”

The veterans affairs minister in one of Bosnia and Herzegovina’s federal regions has died from the coronavirus. Salko Bukvarević, 53, a cabinet member in Bosnia’s Muslim-Croat entity, died on July 29 from Covid-19 at a hospital in Sarajevo, where he had been admitted last week. Bukvarevic had been put on a respirator on July 27. He had served in the government of the Bosniak-Croat Federation since 2015. The region’s prime minister, Fadil Novalic, was also hospitalized with the coronavirus but was released on July 28 following two weeks of treatment.

Meanwhile, Bosnia and Herzegovina’s consumer price index (CPI) decreased by 1.5 per cent year-on-year in June, after dropping by 2.1 per cent a month earlier, the country’s statistical office said this week. On a monthly comparison basis, Bosnia’s consumer prices edged up 0.1 per cent in June, after losing 0.8 per cent in May. Prices of food and non-alcoholic beverages rose by 1.1 per cent on the year in June, prices of alcoholic beverages and tobacco increased by 5.5 per cent, whereas prices of housing, water, electricity, gas and other fuels fell by 0.7 per cent.

In a bid to save the country’s vital summer season, Montenegro tourism chiefs have asked the country’s National Coordination Body for Infectious Diseases to put Russia on a list of countries whose citizens can enter if they have tested negative for the novel coronavirus. Russians accounted for 29.1 per cent of all overnight stays in Montenegro last year, ahead of citizens of neighbouring Serbia, Bosnia and Kosovo. But Russia, like Serbia, is currently on a ‘red list’ of countries whose citizens are denied entry to Montenegro.

Central Asia

Work has started in the Kyrgyz Republic to overcome the legacy of uranium mining in Central Asia with a ground-breaking ceremony in Shekaftar, a former industrial centre during the Soviet period near the border with Uzbekistan. The first remediation works will focus on the closure of six shafts in Shekaftar and the relocation of five waste-rock dumps to an existing dump at a more remote location. Once a thriving community based on uranium mining, today the town has an unemployment rate of 70 per cent. The work is funded by the Environmental Remediation Account for Central Asia (ERA), established and managed by the European Bank for Reconstruction and Development on behalf of the international donor community.

Uzbek President Shavkat Mirziyoyev has agreed with his cabinet’s proposal to extend a nationwide lockdown beyond August 1, his office said on Thursday. Mirziyoyev’s office did not say by how long the Central Asian country would extend its second lockdown, introduced after a surge in the Covid-19 cases.

Kazakhstan is suing a New York financier, alleging he conspired with a Moldovan businessman to fraudulently secure an arbitration award of over 500 million US dollars against the country. The Kazakh government aims to hold emerging markets investor Daniel Chapman and his companies liable for all damages it has suffered as a result of lawsuits filed against it by Moldovan tycoon Anatolie Stati, his son and their companies, who are seeking to foreclose on a stake in a giant Kazakh oilfield. Stati has won an arbitration award against Kazakhstan and has filed enforcement lawsuits in Britain, the European Union and the United States, briefly freezing 22 billion US dollars in assets owned by Kazakhstan’s National Fund. Although that freeze has been lifted, over six billion US dollars in other Kazakh sovereign fund assets remain frozen, mostly in the Netherlands.

Authorities in Turkmenistan’s capital have come up with a novel solution for avoiding the appearance of epidemiologically perilous crowds: remove ATM machines. Amsterdam-based Turkmen.news reported this week that cash machines have been removed from a pair of bazaars and several popular shopping malls. This policy has the additional benefit, from the government’s perspective, of ending the sight of dozens or hundreds of people waiting in line from early in the morning to get a hold of hard-to-find and gradually devaluating manat. RFE/RL’s Turkmen service, Radio Azatlyk, claimed that a 65-year-old woman was even killed in a brawl at one ATM in the Farab district of the Lebap province.

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