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November 2009

Eastern-Europe - Monthly political report

November was a prolongation of a somewhat long electoral season in the region. Local elections were held in Kosovo, as well as in some districts in Albania and Montenegro and in the Bulgarian capital. Slovakia held regional elections, while Romania held its presidential election. This latter was one of the most important events of the month. Meanwhile, the EU approved the visa-free regime for Serbia, Macedonia and Montenegro. Serbia adopted important laws. Croatia and Ukraine are also preparing for their presidential elections, and the Ukrainian government managed to seal an essential gas agreement with Russia, which is burning in the fever of modernisation. Many countries adopted their budgets, for example Latvia, where international creditors had to be convinced in lengthy negotiations. Bosnia, on the contrary, made no step forward on the way to constitutional reform.

One of the most awaited events of the month, the first round of the Romanian presidential election ended in a result somewhat tighter than expected, but with no surprises. The incumbent Traian Basescu and the leader of the Social Democratic Party, Mircea Geoana got into the second round. The last weeks of the campaign were, besides social protests, characterised by a seemingly quite strong coalition between the PSD and the National Liberal Party, built around the support for Klaus Johannis' possible premiership. This agreement, which attracted the Democratic Union of Hungarians in Romania (UDMR) as well, resulted first in the failure of Lucian Croitoru and Liviu Negoita, appointed to the Prime Minister's position and then in the parties' announcing that they would support Geoana in the second round, scheduled for 6 December. The result of this will, of course, will be determined by the parties' ability to mobilise their voters. The campaign is underway in every possible field, while still no budget is in sight - this made the IMF suspend the payment of Romania's credit line. In the neighbouring Moldova, the presidential election was the main topic of the month as well, although here the head of state is elected by the parliament (at least for the time being). The governing coalition, suggested amending the constitution and introducing the direct election of the president even before the second attempt to elect a president. Marian Lupu, the candidate of the governing coalition is trying to position himself as the candidate most accepted internationally. The government quickly announced that it would begin the consultations with the EU on the association agreement in January, and that it sealed an agreement with Romania on small-scale border traffic. Besides this, Lupu made numerous visits to Russia. What is still unclear is whether he will get the necessary backing in the legislature in December or early elections will have to be called for again. November saw the increased intensity of the Croatian presidential campaign as well. The government is facing a likely failure when it comes to the election: its candidate, Andrija Hebrang is only the fourth in the ratings, overtaken by the two left-wing and the unofficial right-wing candidate as well. The second round may even be fought between the two opposition candidates, Ivo Josipovic, and the Zagreb mayor Milan Bandic, who has spent an enormous amount of money on his campaign. In November, the government implemented showy measures against corruption: the deputy Prime Minister Damir Polancec resigned due to the Podravka-scandal, and, after the adoption of an anti-corruption package, five leaders of the state motorway company were arrested. Polancec's portfolio was later split: the two new deputy Prime Ministers are party strongmen, while the new minister of economy is Duro Popijac, the chairman of the main employers' association. Besides them, the economic advisory body of the Prime Minister may also exert considerable pressure. A very important step was made with the Prime Minister having signed and the parliament having ratified the border arbitration agreement with Slovenia. This still has to be approved by the Slovenian parliament, and there the government announced that, in order to take the initiative away from the opposition, it would call a consultative referendum in the question. Even the career of Prime Minister Borut Pahor is depending on the question, but the result is likely to be positive. The parliament accepted the law on the government's interventional measures, the amendments to the public sector wage system and the pension system, as well as the budget, while unions held protests. Two deputies quit the junior governing Democratic Party of Pensioners due to inner conflicts. Social partners did not accept the budget in Latvia either, where it was adopted after lengthy negotiations with creditors: the personal income tax will be raised to 26%, the tax on capital gains to 15%, and a progressive tax on real estate will be introduced, among others. After the adoption of the budget, the conflicts within the governing coalition may deepen even more as since the November congress of the People's Party, Andris Skele is once again the party's chairman. Criticising the finance minister Einars Repse would almost inevitably lead to a crisis in the government, a compromise solution would be the dismissal of the minister of economy, Artis Kampars. On the opposition side, Ainars Slesers is the sole chairman of the coalition Latvian Way / Latvia's First Party since November. The budget is still in formation in Lithuania, although the parliament has already adopted it in its first reading. The Prime Minister Andrius Kubilius, resigning from his earlier, stronger stance, conceded to the pressure, and instead of raising social contributions, he agreed to cut social expenses. So, in accordance with the Liberals' suggestions, the unemployment benefit will be lowered to 650 litas. The deficit of the budget will still be around 9,5%. The parliamentary support to the government is still hanging on a thread, after unsuccessful negotiations with the Workers' Party to expand the coalition, and the resignation of the Liberal deputy, Arturas Zuokas, in protest to the government's inactions. The Social Liberals may in the future be courted by the shadow government, made up from the Social Democrats and the party Order and Justice. In Estonia, the opposition Social Democratic Party is trying to build cooperation with the Greens that in the majority of the cases support the government. This may complicate the adoption of the budget, although the government has conceded to a number of green suggestions, including the raising of certain excise taxes. The Social Democrats sealed a coalition agreement in Tallinn with the Centrist Party, the senior governing party in the capital. Meanwhile, farmers and health care workers were protesting, but the expenses of the budget cannot be further raised. It is even possible that new austerity measures will be necessary to take in order to comply with the Maastricht criteria.

Opposition parties are trying to cooperate in Montenegro as well, but - similarly to last year - there seems to be no big chance for this. The Kotor local elections were boycotted by the parties, but the Socialist People's Party is set to run in Mojkovac. Meanwhile, the government prepared the answers to the questions of the European Commission, with the complete exclusion of the public and the opposition. The parliament is working on the amendments to the law on deputies, with the victory of supporters of the natural threshold for minority representatives. In November the minister for minority affairs Ferhat Dinosa was also severely criticised for trying to place the minority councils under his influence. The citizens of Montenegro will, together with Serbia and Macedonia enjoy visa-free travel to the Schengen Area from 19 December. Serbia will soon apply for full membership as well, provided that the report of the Hague attorney Serge Brammertz will be positive and the Netherlands will agree to unfreeze the trade agreement. Another very important step forward was the adoption of the new Statute of Vojvodina, preceded by lengthy and nervous debates. The government sealed a new agreement with IMF on keeping next year's deficit under 4% and the reform of the pension system, but Russia may give credit to Serbia with easier terms. Macedonia also expects a breakthrough in the field of its EU-application, but the situation became even worse than it had been in the course of the negotiations with Greece. This leaves the country without guarantees that the EU Council will even put the question of accession talks on its agenda on 7 December. This poses a major threat for the Prime Minister Nikola Gruevski, even if the quite popular government was rumoured in November to call for early elections. One thing seems to be sure: should the two countries agree on a name, Macedonia will hold a referendum on it. The government announced concession plans for hundreds of kilometres of roads, while social protests once again gained momentum.

At the Armenian-Azerbaijani talks, on the contrary, some steps were made forward, at least according to official reports, but none of this was visible on the surface. The November meeting was marked by belligerent speech from both parts. Armenia threatened with the recognition of Karabakh's independence, while the Azerbaijani president spoke about a new war. The key question of the talks is for the time being the vacation of the territories surrounding the rebel region. The two presidents are likely to meet once again this year. Armenia, meanwhile, is preparing for major reforms: the financing of the education system will be reformed, and a two-pier pension system will be introduced in 2011. The Prime Minister Tigran Sargsyan became part of the leadership of the governing Republican Party. On the opposition side, the leader of the party National Congress, Levon Ter-Petrosyan spoke about the possibility of making concessions to the government, as well as about the new crisis plan of the party. In Azerbaijan, at the same time, the parliament dealt with the alarmingly falling tax revenues and the 2010 budget. The campaign before the December local elections was also started. One of the main issues in the neighbouring Georgia was also the local elections, more precisely their methods. After negotiations with the opposition the governing party announced that in the first weeks of December the government would draft the relevant bills: the mayor of the capital would thus be elected by the people, and a 30% threshold would be implied in the first round. The opposition Union for Georgia, the leader of which, Irakli Alasania will also participate in the election, does not support the reform. The government is preparing a 'patriot act', after separatists kidnapped four Georgian teenagers at the border of South Ossetia. Local elections caused a turmoil in Kosovo as well, for the first round was clearly won by the Democratic Party of the Prime Minister Hashim Thaci, who - as it had been expected - instantly got into conflict with his coalition partner, the Democratic League, due to the latter's plans for the second round. The conflict was later 'suspended'. The parliament, untouched by the conflict, adopted the budget for 2010, and the government announced the future reforms of the pension system and the rules concerning state debts. The country may in the near future apply for an IMF-loan. November saw the beginning of the hearings concerning Kosovo's independence in Hague.

Besides Romania, Ukraine was also deprived of the next tranche of the IMF's loan, as the country's political life is still chaotic before the January presidential election. This resulted in President Victor Yushchenko signing the law on social standards, disapproved by IMF, but vetoing the law assigning 1 billion hryvnya for fighting the flu epidemic. The parliament could not override either of the President's vetoes, and the budget continues to be in a similarly delicate situation. Yushchenko would also amend the constitution before the presidential election, and threatened with a referendum, in case the parliament turned down the proposal. Russia is already ignoring the head of state: Vladimir Putin sealed a very important gas agreement with the Prime Minister Yulia Timoshenko, in which he made concessions to the Ukrainian government. Russia stepped on the way to modernisation in November: the program of the President Dmitry Medvedev was addressed first towards the public, then to the parliament, and last, but not least the governing United Russia party (at its congress). Next year will see the beginning of large-scale privatisations, as the circle of bureaucrats around the President will try to make the siloviki lose ground. Next year Russia will issue Eurobonds, and the budget was adopted too. The wind of change is tangible when we look at the personal changes in November. Meanwhile, on the initiative of Vladimir Putin, a new crisis plan is in preparation for AvtoVAZ. The end of the month was shadowed by an act of terrorism: the explosion of Nevsky Express claimed the lives of several high-ranking officials. A very important event was the launch of the customs union of Russia, Kazakhstan, and Belarus. The union will work in its full capacity by the summer of 2011, but the agreement is applicable from January on. It is still not known, however, in what way this will affect the WTO-accession of the three countries. The EU was quite dissatisfied with Belarus: according to the Swedish minister of foreign affairs, Carl Bildt, reforms are not progressing as they are expected to, in spite of the Belarusian government's preparing for common projects with Ukraine within the confines of Eastern Partnership.

The EU was not satisfied with Bosnia and Herzegovina either, which failed to progress with the Butmir reform talks, although neither the EU, nor the USA resigned from the will to adopt at least a 'minimal' package. Thus, the mandate of the High Representative was prolonged by the Peace Implementation Council. The Prime Minister of Republika Srpska, Milorad Dodik continued to attack harshly the decisions of Valentin Inzko, and said that he would initiate a referendum in his entity about the mandate of international judges. In the RS, worrisome economic statistics were revealed, and the government plans to cut the expenses of the public sector next year. The adoption of the Federation's budget is still a problem, which made the IMF postpone the next tranche of the country's loan. The Croat parties again suggested the creation of a separate Croat entity. Nevertheless, in November, the new minister of security, Sadik Ahmetovic was finally appointed. The decision was preceded by lengthy debates between Bosniaks and Serbs. Similarly to Bosnia, Albania will also have to wait a little more before getting the opportunity of visa-free travel to the EU. The country has not even adopted all the necessary laws. The Prime Minister, Sali Berisha said that the government would not wait for the opposition any more, and that it would continue the reform of the judiciary. The opposition Socialists, however, continues to boycott the work of the parliament, as well as the local elections held in five municipalities in November, contrary to the expectations of the EU. The government was also criticised by IMF, which disapproved of the optimistic amendments of next year's budget, and by journalists, who protested because a businessman close to the Prime Minister beat a reporter. The incident was condemned by President Bamir Topi as well. The senior governing Democratic Party is preparing for its congress. Bulgaria, meanwhile, continued to implement showy changes: again two former ministers, Emilia Maslarova and Nikolay Tsonev were charged with wrongdoings. What is more, even the responsibility of the ex-Prime Minister Sergey Stanishev and the President Georgi Parvanov was brought into question for the leaking scandal and the conflicts of interest in the Iraqi Food for Oil program respectively. Stanishev also made some changes in the leadership of the opposition Socialist Party. The governing GERB could not agree with the small right-wing parties on raising the tax on gambling and the excise of alcohol, but the Sofia mayoral election was easily won by the party's candidate, Yordanka Fandakova.

In Poland, the gambling industry will face draconian measures, which were presented this month with the open purpose of regaining the people's respect for the government. The Prime Minister Donald Tusk incited a serious debate by suggesting that Poland should switch from a semi-presidential system to parlamentarianism. Tusk continues to be the most popular potential candidate for president, in spite of heavy critics from influential businessmen. Instead of reforming public finances, the government would reform the system of pension funds, simplifying them, refraining from changes that would have helped to settle debts. November saw the creation of the opposition shadow government. After the Polish president, the president of the neighbouring Czech Republic, Václav Klaus also signed the Lisbon Treaty. This was followed by long debates on the new EU-commissioner of the country, who, in the end, became Stefan Füle, the minister for European affairs. The Prime Minister, Ján Fischer announced that due to the disagreements of the two main parties, he would hold consultations with both party chairmen in the coming months, on a 2-3 week basis (Social Democrats have been attacking a number of the government's decisions, i.e. the premium for wrecked cars, which, expectedly will fail because of the party's objections). Before the congress of the right-wing Civic Democratic Party, the party chairman Mirek Topolánek was right in his tactics, thus his leadership was not openly questioned before next year's elections. The conservative TOP09 party held its first congress. In the neighbouring Slovakia, meanwhile, the budget was adopted, although with an unusually high deficit, according to the opposition. President Ivan Gasparovic signed the controversial law on strategic corporations, which gives the right to the government to interfere in companies close to bankruptcy. The steps to implement the law on state language were introduced as well. Motions of no confidence against ministers all failed, and another success for the junior governing Smer was the regional election, where the opposition was able to win in only one region out of 8.

In December the new Romanian president will be elected, and the Moldovan parliament will decide on the new president of the country as well. Kosovo will hold the second round of its local elections. Budgets will be adopted everywhere, with the possible exception of Bosnia and Herzegovina and Ukraine. The Ukrainian and Croatian presidential campaigns will enter their final stage. The citizens of Montenegro, Serbia and Macedonia will be entitled to travel freely to the Schengen Area, and the EU Council will decide on the accession talks with Macedonia.  The Armenian and Azerbaijani presidents will meet again.

6 December: 2nd round of the Romanian presidential election

17 December: 2nd round of the Moldavian presidential election.

13 December: 2nd round of the Kosovo local elections.

23 December: local elections in Azerbaijan.

27 December: 1st round of the Croatian presidential election.