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July 2009

Eastern-Europe - Monthly political report

Two important elections were held in July: the Bulgarian and the Moldovan elections can be considered as milestones. In Albania, the results of the June elections can finally be seen. In Croatia and Lithuania the value added tax was raised and the Lithuanian government is expecting a brutal recession. Latvia and Ukraine reached an agreement with IMF on the further installment of their loans. Montenegro nailed the rectifications of the budget, while in Slovenia the budget was restricted for the following years as well. The government crisis of Romania and Serbia deepened. The weakened cabinet of Macedonia was significantly reshuffled. In Bosnia-Herzegovina the political crisis didn't change one bit. The Russian budget is in an expressively dangerous situation, it may live-up its reserve-funds next year. Some steps were made in the Moscow meeting of the Azerbaijani and the Armenian presidents.

Out of the two important elections held this month, the first was in Bulgaria. The party of Sofia's mayor, Bojko Borisov, GERB, won the elections by a mile but didn't reach an absolute majority. Nevertheless Borisov formed a minority government on his own with the external support of the three other right-wing parties which got into parliament. The socialists shrunk to a mid-size party while the party of the Turkish minority, Movement for Rights and Freedoms strengthened. Several highly renowned experts are part of Borisov's government, for example Minister of Justice Margarita Popova or the former Minister of Finance, Szimeon Gyankov. They will have to decide upon the approximately 1,25 billion euro budgetary rectifications, of which the majority the government plans as reforms of the state. It is expected that they will renounce joint Russian energy investments for example the building of the South Stream pipeline. The other important election took place at the end of the month in Moldavia where new elections had to be held as a result of the unsuccessful April presidential elections. Marian Lupu's popular party which stepped out of the governing Communist Party at the right time became a key party as neither the communists, nor the opposition reached a majority in the parliament. As a result Lupu may even become president; talks concerning a coalition have already begun - first with the opposition parties, then with the communists. The politician would mean not only a generational change but a slow consolidation of the country as well. Meanwhile in Albania the government is currently under formation. The electoral committee announced the final results one month after the elections but this had a greater effect on the country's reputation than on the outcome. The coalition led by Sali Berisha and the left wing Socialist Movement for Integration will govern with a small majority. The government which will take office in autumn has already announced the stopping of state investments and an anti-poverty program based on agriculture. In the opposition Socialist Party, the head of the party, Edi Rama, managed to retain his position successfully however this meant that the party did not accept the official result of the elections. Admitting defeat would have cost Rama his position - similar to the Czech Social Democratic Party where the loss of the October elections would almost certainly lead to the fall of Jiri Paroubek. The more and more unpopular party leader has tried to favor first the Christian Democrats then the hitherto taboo Communists. The party's program is a classic left wing program. At the same time, the smaller parties are reorganizing themselves as well. The former head of the Green Party - which is at the height of its unpopularity - Martin Bursik, will retire from politics, while TOP09 a new conservative party which has formed on the right has just formed a faction in upper house of parliament. The formation led by former ministers Karel Schwarzenberg and Miroslac Kalousek plans to lead a strong right wing, pro-trade, Europe oriented politics.

The campaign is on in Romania as well, however here the main question is the survival of the governing coalition. The cooperation is currently in danger because of the enquiry started with the help of the Social Democrats against Elena Udrea, Minister of Tourism. The Liberal Democrats would like to oust Ecaterina Andronescu, Minister of Education, and Catalin Predoui, Minister of Justice, the later as a result of the continued observation of the EU of the Romanian judicial system. At the same time, legal action has been taken against Monica Ridzi former Minister of Sports and former Prime Minister Calin Popescu-Tariceanu's affairs are under investigation as well. All the while the judges are continually protesting due to their dissatisfaction with their payment system. The government of neighboring Serbia is also unstable. The final vote of several important laws had to be postponed here as well since there would not have been a sufficient majority in parliament. The media law - which would increase the government's influence over the media - kicked up the biggest dust. The delay was the idea of the governing socialists. The liberal coalition G17 Plus is already threatening with leaving the coalition as the new party, Forward Serbia consisting of former radicals is on its way into the government. The Serbian government is clearly making concessions in the recognition of Kosovo, though the official view remains unchanged. For example Serbia suggested for Serbs living in Kosovo not to participate in the November local elections. Ethnic tensions continue as a result of frequent power outings in the Serbian territories. The government announced two big investments: the construction of the new Kosovo power plant and a north-south highway are scheduled to start in autumn. The opposition is criticizing the government because in their view it has made geographically disproportionate adjustments in the budget. In Croatia a big project, the construction of the Peljesac Bridge has been stopped. Prime Minister Jadranka Kosor raised VAT immediately after taking office from 22 to 23% and introduced the 3% solidarity tax for those with high income. The budget was reduced by 780 million Kuna's and a further 2,2 billion was regrouped however changes are yet to come in fall. Meanwhile two - rather commonplace - politicians were nominated by the two big parties for next year's presidential elections, though the nominee of the Democratic Alliance is not certain yet, the other wing of the party is actively working on his removal. Value added tax was raised to 23% in Lithuania as well, though this meant a two point raise here. Alongside this, the social security appurtenances were raised and an upper limit was determined on maternal aid. All this was necessary as the country is facing brutal recession reaching more than 20%. Parliament made a theoretic decision about the nationalization and dissolution of the Leo LT company. President Dalia Grybauskaite didn't change much in the government following her inauguration however she expressed criticism against several ministers. The splitting of the National Resurrection Party didn't cause any serious hitch in the government, Arunas Valinskas, Speaker of the House - head of the party, created a new faction under the name of Oak Tree however the governing conservatives will cooperate with both factions. The party's popularity is basically nonexistent, the splitting of the faction may well mean the end of the just a year old formation. Lithuania undermined Latvia with this setback, nevertheless, as for now it still hasn't applied for a loan from IMF. The Latvian government however had a hard time agreeing upon making further promises to the Monetary Fund in order to obtain the second part of the loan which has been belated since spring. Most likely, the widening of the tax base will not be enough for the reduction of the deficit to 8,5% by next year, thus the VAT may be raised or as a last resort progressive taxing may be introduced. The coalition will debate the question in autumn. The greatest opponent of progressive taxing is the People's Party, which was only willing to sign the letter of intent to the IMF after lengthy resistance. The crack in the coalition is not a good omen for the center-right, especially if the liberal-left cooperation which has come about in the capital will strengthen till next year's elections.

In Montenegro, certain topics were also expressively steered clear of during the negotiation of the budget rectification. For example social funds created for laid-off workers were not changed even though almost all areas of the budget were touched by the rectification. Parliament is doing overtime because of the missed sessions nevertheless the future structure of the committees are still unclear as a result of the arguments of the opposition and the government, though some progress has been made. It would be important to solve this problem as the European Councils' integration questionnaire arrived in Montenegro during the month. Contrary to this, Macedonia would like to receive a provisional date of integration, thus the government has started the acceptance of the necessary laws. The new law concerning party finances has already been accepted. The law concerning the parliament and the judicial reform will follow. Fundamental change has come about in the government, for example Trajo Szlaveszki minister of finance has been exchanged for Zoran Sztavreszki, the economic advisor of the prime minister. The government reshuffle is also a sign of the instability of the coalition. As a result of the failures of the aspirations for integration, the prime minister is receiving more and more critique from both his own surroundings and his coalition partner as well. At least the visa regime will be lifted in Macedonia next year; Bosnia-Herzegovina will miss out on this as well. The EU's decision disappointed the country - which is practically becoming non-existent - however, in reality, the Bosnian politicians are to blame for it. Instead of the local government of Mostar, soon Valentino Inzko, High Representative will decide whether or not to grant the belated payments. In the parliament of the Serbian Republic, the Bosnian representatives are blocking the acceptance of the necessary rectifications for the IMF loan, because the Serbian government would like to decrease the repatriation funds. The majority of the austerity measures in the Federation will be accepted in August. The dismissal of Tarik Sadovic - who is said to have had close ties to radical Muslims - shows that the state government would like to be seen in a somewhat better light in front of the EU. The Ukrainian parliament is similarly indecisive. The opposition Party of Regions is boycotting work until the question of raising old-age pensions and wages is not made part of the agenda. As a result it was impossible to elect new members of the government or negotiate the budgetary supplements which were vetoed by the president. Nevertheless Ukraine received the next part of the IMF loan just as well. The extraordinary parliamentary sessions continue during the summer, however at a high cost. Meanwhile Ukraine got into a new diplomatic conflict with Russia when the government expelled a diplomat - who has been in charge of the more and more challenged black-sea fleet - from the country. Russia couldn't come to terms with President Barack Obama either, regarding the question of the missile defense system and it may run into trouble in Southern-Europe as well, because of the signing of the Nabucco-treaty. Nevertheless it has managed to force Belarus into a partial withdrawal, though the recognition of the two schismatic Georgian provinces is still not on the agenda and it is probable that the tax-union will have to be postponed in order to join the WTO. Russia's budget is teetering over the edge: it is expecting an 8,5% decrease in the GDP this year and their reserves may run out by next year even though the price of energy is rising (strengthening Vladimir Putin's position). The country is expected to turn to loans and the Home Office is already preparing for protests, which by now have become a rarity in Russia. Meanwhile, one year after the war, Georgia fears a new Russian attack, though Joe Biden, American Vice-President has assured President Mikhail Saakashvili of the support of the United States. Biden has held discussions with the more and more splintered opposition as well. The radical opposition still sees demonstrations as a solution however this strategy has run out of wind. The opposition is increasing amongst those who would have accepted the president's proposition for a partial sharing of power (Saakashvili later withdrew his proposal). The working solution would be an early local (and perhaps parliamentary) election next year. Parliament raised the social expenditures of the budget and restricted the right to assemble.

The neighboring Azerbaijan is preparing for local elections (in December) as well. This time the opposition will probably refrain from the boycott of the events, however the victory of the governing party is nevertheless assured; only the mock opposition's attempts to form an alliance received publicity during the month. At the July meeting of the Azeri and Armenian president in Moscow, something finally seemed to have started. After the newest threats of President Ilham Alijev, the two countries would be willing to compromise, for example to withdraw troops or to invite the Karabakh leaders to negotiate. Naturally as of now no official papers were signed about this. The Armenian Ministry of Foreign Affairs is constantly receiving allegations of giving too many concessions (according to certain opposition parties) to the Armenians and the Turks even though no advances have been made concerning the question of opening towards Turkey since April. The Armenian budget remains optimistic for next year as well. Minister of Finance, Nerzesz Jericján is expecting growth and would like an expansive fiscal policy. Currently the deficit is being financed through loans coming from two sides. The Estonian government is optimistic as well, in the sense that according to Prime Minister Andrus Ansip, no further rectifications will be necessary this year (the Ministry of Finance, however designated general savings). So far, the minority government has successfully accepted the raise of the income tax and the VAT, though according to Indrek Teder, Chancellor of Law, this is against the constitution. Negotiations are under way on putting a cap on family benefits as well. The nominations for the post of Tallinn's mayor have started as well. The governing Reform Party nominated faction leader Keith Pentus whose opponent will almost certainly be the head of the opposition Centrum Party, incumbent head of the city Edgar Savisaar. Meanwhile in Slovenia the parliament decided upon a limit for the whole budget for the following two years. Preceding this action it also accepted the rectifications of the budget, which raised the deficit aims. It is not known yet whether the whole budgetary programming system will have to be changed, but it is not impossible. Two investigative-commissions were set up by parliament at the suggestion of the opposition, probing the affair of the leader of the governing party Zares, Gregor Golobic and the high-way constructions.

Crisis management is under way in Poland as well; here next year's budget is currently being prepared. Though talks of a tax raise have been rejected by the government several times it is still not impossible that the government will be forced to make this step as tax-revenues have fallen drastically this year. As a result the pro-government Peasants Party has criticized the prime minister greatly. According to the head of the party, Waldemar Pawlak, the government refrained from a tax-raise in order to receive better ratings in the publicity-polls. Pawlak also denounced the fact that the junior coalition party has been forced out of certain territories. Prime Minister Donald Tusk has once again gotten in a conflict concerning foreign affairs with President Lech Kaczynski over the question of the ambassadorial appointments, what more, the president has vetoed the much debated law on media. Tusk cannot expect help from the opposition to override the veto since he broke the agreement made with them at the acceptance of the law last month. In Slovakia there has been talk of augmenting the duration of unemployment benefits, however for now this is just a plan. Two major social insurance companies were united though, in order to minimize expenses. The leading topic of the month was still the law concerning state-language against which the Hungarian Coalition Party is planning a demonstration. Meanwhile the other Hungarian party, Híd (Bridge) has been formed as well, with the leadership of Bugár Béla and vice-presidential places left open for politicians of Slovak nationality. The parliament may order an investigation into the issue of the sale of the environmental quota however it is more likely that the government will annul the questioned treaty anyhow.

 In August, most parliaments are in summer recess however there will certainly be summer sessions in Ukraine, Albania and Bulgaria. The new Moldovan governing-coalition will be formed and the president's person will be decided upon as well. It will turn out whether the Romanian governing-coalition will decide to split-up even before the elections. The campaign will start in the Czech Republic. Bulgaria may turn to the IMF. At the end of the month several important laws will be decided upon in Serbia.

EASTERN EUROPEAN OBSERVER, providing detailed coverage of political events in 23 countries each week, can be ordered both in English and in Hungarian by sending an email to info@visionpolitics.hu