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September 2009

Eastern-Europe - Monthly political report

The autumn political season started with the finalisation of the draft budgets. In this field Latvia is still witnessing the biggest conflicts, but Slovenian and Lithuanian voters will have to face delicate cuts as well. The new Prime Minister was appointed in Moldova, and the Albanian government was formed too. In the Czech Republic early elections were postponed. The EU presented its report on the South Ossetian war. There might follow a step forward in the Karabakh issue, but the Turkish-Armenian protocols stirred up the politics of the region. The conflict between Hungarian and Slovak diplomats continued, while in Macedonia the Albanian minority was outraged by the publication of an encyclopedia. Bosnia and Herzegovina drifted further towards collapsing, in spite of the efforts of the High Representative. In Russia Dmitry Medvedev, in Crotia Jadranka Kosor started to promote their profiles. The USA took the rocket shield plans off the agenda. As a consequence of the month's events, the Romanian governing coalition collapsed.

In Romania, the inevitable occurred. As we have predicted in advance, with the presidential elections now in 2 months' reach, the unstable governing coalition split. The last straw was the dismissal of the Social Democrat interior minister Dan Nica, which was followed by the PSD's recalling its ministers from the government. The Prime Minister Emil Boc formed a minority government. The picture will be clearer only after the presidential election. Before its split however, the coalition had adopted in the parliament 3 important laws (the education reform, the unitary salary law, the law about public servants), which the government assumed responsibility for. The timing of toppling the government was not a coincidence: the PSD wanted to raise the bid after the President Traian Basescu had proposed a referendum on a smaller parliament. However, the split of the coalition will do more harm to the Social-Democrats. In the neighbouring Moldova, at the same time, the new order is being formed: in September the Speaker of the Parliament Mihai Ghimpu became interim president, while the chairman of the Liberal Democratic Party, Vlad Filat occupied the Prime Minister's position. The governing coalition made serious reforms in the governing structure, and made steps to restore close relations with Romania instead of closeness with Russia. The president may even ask for the withdrawal of Russian troops from Transnistria. There were some strange assignments, nevertheless: Ghimpu appointed his nephew to the governor of the National Bank; his other nephew is the mayor of the capital, Chisinau. In the Czech Republic, on the contrary, the new government will be formed only in 2010, as the Social Democratic Party suddenly decided not to support early elections. This gave the party an opportunity to criticise the draft budget from the left. Jan Fischer's government has to stay in office until next spring, and assume responsibility over the stabilisation package (which, among other things, cuts salaries of public servants), and the draft budget with a deficit of 5,2%, that had been tough to agree on. The government will raise the VAT and compulsory contributions, but in the issue of parental aids concessions were made to the left wing. Due to the complaint raised by Civic Democratic senators before the Constitutional Court the President will sign the Lisbon Treaty possibly only next year. The Baltic countries were debating about their respective budgets as well. In Latvia the adoption of the draft law about tax on property failed. This again threatened with the possibility of the fall of the government, but later a compromise was reached in the issue of raising income for the budget (10% tax on capital gains and interests and raising the tax on land). As for cuts, however, there is a debate even between the Prime Minister and the finance minister, as the majority of the governing parties would cut back expenses only by 275 million lats, while the IMF is expecting a decrease of 500 million. The government's position is made even harder by a report claiming that the bailout of Parex Bank was contrary to national interests. Similarly in Lithuania the main issue was the cutting of social spending. After the dismissal of the Speaker Arunas Valinskas (he was replaced by the conservative deputy Irena Degutiene), and the split of the Party of National Revival, the Prime Minister announced an almost mechanical cut in social spending, with the most vulnerable groups of society being the only exception. The contributions to the state social security fund will be increased, although there is still a debate between the President and the Prime Minister about the way this is going to happen. The President would not approve further tax increases either.

In Montenegro too, the month of September could have begun with a personal change, but the junior governing Social Democrats did not support the motion of no confidence against the mayor of Podgorica, Miomir Mugosa (although they did support a motion of the opposition to hear the police's report on the case). While in the parliament two important working groups are debating the law on deputies and the survey of the European Commission (with two opposition parties boycotting the work of these), a very important issue has been the topic of local elections in Kotor and Cetinje. The opposition Movement for Changes wants to boycott these, persuading other parties to do the same. On 11 October, the Russian Federation's citizens will hold parliamentary elections. The 'phoney' opposition as well as the real one accused the government (and each other) with cheating already. The draft budget for next year (and for 2011 and 2012) is finalised. For the next year the government counts with a deficit of 6,8% of GDP and an oil price of 58$, pensions will be significantly raised, in spite of the exhaustion of the state reserve fund, and a substantial amount of funds will be used to modernise the economy. Dmitry Medvedev, through his article published in September, distanced himself from Vladimir Putin's policies to an unusual extent, with other events also suggesting that Medvedev in fact has begun to pursue his own policies. As for external policies, Russian diplomacy can call it a success that the USA cancelled its plans concerning a rocket shield in Eastern Europe, with the Russian government having made concessions in the question of Iran. The report of the EU about the South Ossetian war, although critical against Russia, is likely to cause a bigger turmoil in Georgia, the government of which protested also against Russia having deployed troops in Abkhazia and South Ossetia after an agreement promising a permanent military presence. It is more and more Irakli Alasania who starts to stand out of the opposition politicians and who may be the number 1. challenger of President Mikheil Saakashvili. It was also Alasania who made proposals to reform the legislation related to local elections, seemingly approved by the government itself. The government, by the way, has been 'on tour' through the country, trying to gain popularity by showing its results. The World Bank approved a reconstruction aid programme of 900 million dollars for the country. Russian relations continued to be in the focus of Ukrainian politics too, especially with the presidential election coming up. The President Victor Yushchenko tried to get gas bypassing Russia directly from Turkmenistan, but did not succeed. The President has also been complaining about the government to the IMF, claiming that the Fund had been too 'lenient' with the government. Due to the blocking of the opposition Party of Regions, the parliament is still unable to function effectively, but a background fight for the control of the central bank has been edging. The planned restructuring of the debt of the state gas transmitter Naftogaz is a matter of heated debates as well. A boycott makes the parliament's work harder in Albania too, with re-elected Socialist Party chairman Edi Rama doing everything it takes to justify his position on the matter. The Socialists will hold protests in the capital in October. In the meantime, nevertheless, the new government started its mandate, with the junior governing Socialist Movement for Integration being represented far stronger than its parliamentary strength would preclude. The party got 4 ministries. The government wants to overcome the bad state of public finances by widening the base of VAT and increasing excise taxes. The Prime Minister Sali Berisha also raised the possibility of introducing the euro as Albania's currency, instead of the unstable lek.

The Polish government is also to revamp public finances with a two-year programme. The government has adopted the draft budget, with a deficit that is 'massive but manageable', to quote the finance minister, amounting to 52.5 billion zlotys. Euro introduction is set to be delayed once again due to a surge in government debt. The government, however, is set to face its biggest scandal so far, as, at the beginning of October, tapes were made public, according to which some passages in the draft law about gambling were rewritten because of bribery. In the neighbouring Slovakia, the adoption of a similar law was smooth. In the field of environment, nonetheless, a massive witch-hunt is about to begin. The new interim head of the ministry, Dusan Caplovic dismissed a number of people in institutions belonging to the ministry, and the contract with the Interblue group about selling emission quotas will be cancelled. Due to the scandals of the ministry, tension has been growing between the Prime Minister and the chairman of the National Party Jan Slota, which could be felt during the Hungarian-Slovakian diplomatic conflict. The tripartite talks about next year's minimum wage ended without success, and judges have been criticising the judicial system more and more. Yielding to the pressure from within his party, minister of agriculture Stanislav Becik resigned. In September neither Slovakia, nor Macedonia could be called the champion of minority rights. In the country the scandal arose around the publication of the Macedonian Encyclopedia, as the book contained pejorative remarks regarding Albanians, not to mention its political bias. A step to change the content was made only after the junior governing Democratic Union for Integration had threatened with stepping out of the government. The opposition is gaining momentum: Social Democrats adopted a new, strong left-wing programme at a party congress in September, and the image of the party is to be changed too. Should the assessment of the European Commission be positive in October, the government might even call for early elections. An undoubtedly image-worsening tragedy was the boat accident on the Ohrid Lake, claiming several lives, mostly Bulgarians, which made Bulgaria start its own enquiry into the matter. The Bulgarian government, besides this, carries on its investigation against ministers of the former government. Proceedings have been started against the former minister of agriculture, Valeri Tsvetanov. The members of the former government are protected by a law of amnesty, but due to a debate around it, many have resigned of their respective rights. Partly because of the investigation, the country got back a part of its frozen funds from the EU. The government will not stop here though: thorough and deep reforms will start on the field of the judiciary, with no compromises to be made. At the Sofia mayoral elections the candidate of the governing party, the education minister Jordana Fandakova seems to be the top candidate.

Serbia also continues its reforms to edge closer to the European Union, according to a government report, the country fulfilled all the conditions of the visa-free travelling. There is still a debate about the customs line in Kosovo, but negotiations are already underway. In October the IMF will also make an inquiry about the way Serbia achieves what it has undertaken in the credit contract. According to the agreement, Serbia will cut its public sphere in order to avoid cuts in social spending. The parliament has soon to take the statute of Vojvodina on the agenda as well. In September, the attacks on foreigners and the ban of the gay pride march raised the problem of the extreme right wing, and the interior ministry suggested the banning of two organisations. Kosovo and Serbia, meanwhile, simultaneously tried to lobby in the UN for and against Kosovo's independence, respectively. Kosovo's parliament will not vote on EULEX-Serbia agreements, but it does not approve of the process by which they were sealed. There were many protests against the EU's mission. The autumn session of the parliament will adopt important laws to promote transparency, and the government started the tender of the highway Vernice-Merdare. A question still to be answered is whether Serbs will vote on the November local elections. There were protests in Bosnia and Herzegovina as well, mostly veterans threatened with holding protests against the cuts in their allowances. In the first days of October, the parliament of the Bosniak-Croat Federation gave in, but this could seriously endanger the agreement sealed with IMF. The country, if this is possible, was even less operable in September than before. First, Croat ministers boycotted the sessions of the government because of a debated road construction, and then the High Representative Valentin Inzko had to interfere in the management of the state company Elektroprenos in order to make the company work. As an answer, the parliament of Republika Srpska threatened Inzko with a withdrawal from all the state institutions, provided that the High Representative continues his practices.

The Croatian Prime Minister Jadranka Kosor is standing on a more and more unstable ground. She started to build up her own platform (for example when replacing the head of the state health insurance fund), and contradicted some of the senior personalities of her party, i. e. the speaker of the parliament Luka Bebic. The fact that neither of the big parties is really united is marked by the presence of 'dual' candidates for next year's presidential election. Kosor is criticised also for the way she settled the Slovenian border dispute, although it was exactly this that made possible for Croatia to continue negotiations with the EU. The otherwise satisfactory agreement was not welcome in Slovenia either, but debates about next year's budget drove the attention away from this. The Prime Minister, after lengthy debates, could agree with the chairman of the Democratic Party of Pensioners on pension indexations, but trade unions are harder to convince about cuts in wages. They disapprove some elements of the health care reform as well, although they are a necessity in order to hold the deficit at the same level as in this year. There may be a referendum on higher wages of judges, which was also supported by the parliament in September. There will be no pension hikes in Estonia either, in order to be able to adopt a budget corresponding to this year's one in size. Excise taxes will be raised, and the finance ministry prescribed a general economising of 9% by the end of the year. The effects of the sudden VAT hike were mitigated by the parliament after the complaint of the chancellor of law. Meanwhile, the campaign before the local elections is under way, for the time being, the Centrum Party having a considerable advantage over its rivals, although in the capital it is the opposition Reform Party that keeps the issue of Tallinn kindergartens on the agenda.

Azerbaijan will hold local elections in December, but one thing is for sure: opposition parties are still unable to make up a common platform for the vote. The autumn session of the parliament has already started, the legislature formed a committee of European Integration, and soon next year's budget will be debated as well. Azerbaijan welcomed the new chief negotiator of the USA in the Karabakh issue, Robert Bradtke, and negotiations started on the possible withdrawal of Armenian troops from around Karabakh. Azerbaijan also welcomed the statement by the Turkish minister of foreign affairs not to open up the border with Armenia until the Karabakh issue is settled. Many protested against the protocols of the border opening inside and outside Armenia. In Yerevan, the opposition Revolutionary Federation and the Heritage party are the backbone of protests. Heritage is practically split after the resignation of the party chairman Raffi Hovhanissian, because of unclear relations to the opposition National Congress. Meanwhile, however, talks about next year's budget are underway: the government plans a cut of 9% because of falling tax revenues, and this year's budget is likely to be amended too. The deficit will be financed mainly by Russian loans. This possibility must have emerged in the thoughts of the Belarusian president too, as, during his visit to Lithuania he raised the possibility of Belarus recognising Abkhazia and South Ossetia (something that was later cancelled). The IMF is quite satisfied with the implementation of the anti-crisis programme and the fulfilment of conditions. On the other hand nevertheless, Belarus is now closer to Russia again on military terms: after the common military exercise, the President was close to signing the treaty on quick reaction troops in the cadre of CSTO, which would make it possible for Russia to have troops permanently based in the country. In September, the main opposition Popular Front elected its new leader: Alexander Yanukevich is a young politician who would like to build up the new image of the party.

In October, the IMF will review its agreements with countries after the likely adoption of budgets. In most countries, the government will vote on the draft budgets. In Russia and Estonia local elections will be held. The fate of the Romanian minority government will be decided. Moldova may elect its new president. According to the plans, Turkish-Armenian protocols will be signed. The Polish government will have to handle its greatest scandal so far.

11 October: local elections in Russia

18 October: local elections in Estonia.

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