The E.U. Backtracks On Its Eastern European Partners

PRAGUE, Czech Republic -- Initially conceived to forge a new relationship between the European Union and six former Soviet republics, the May 7 summit launching the E.U.'s Eastern Partnerships accord wound up more like the first date from hell.
Instead of feeling the welcoming embrace the program had promised, representatives from Azerbaijan, Armenia, Belarus, Georgia, Moldova and Ukraine instead got a European straight-arm designed to keep them at a safe distance.Indeed, given the manner in which the courtship has begun, some observers now wonder whether any of the parties involved can ever hope to make beautiful music together.Of course, it probably didn't help the officials who gathered May 7-8 in Prague that extended families on both sides of the match had already seriously meddled with what had been a pretty simple proposal.An outgrowth of the E.U.'s long-standing European Neighborhood Program (ENP), the Eastern Partnership (EaP) plan called for establishing preferential development, trade, and travel agreements with the six former Soviet republics in exchange for them taking steps to create solid and responsible free market economies and democratic political systems.In that way, the multi-lateral EaP sought to strike up and reinforce ties with the E.U.'s outlying neighbors even faster than the bilateral ENP agreements had.But something happened on the way to the EaP's founding summit — namely, the global recession. Many of the countries worst hit by the economic downturn are the same 12 nations that have joined the E.U. since 2004, most from Eastern Europe.Now not only are those post-Cold War newcomers — who used huge inflows of European development aid to build up U.S.-style economies — most in need of more emergency funding to prop up their credit-dependent markets, but they are also viewed as migrant threats to other E.U. nations already facing escalating unemployment.Not surprisingly, such factors have fueled a rise in the sentiment among old E.U. nations that recent eastward enlargement was a mistake.Given that, European leaders who in 2008 had enthusiastically backed proposing the EaP to the six former Soviet republics began scrambling to lower its scope ahead of its May 7 launch in Prague. Just hours before the gathering, for example, German and Dutch officials pushed to change wording in the official document to refer to the six EaP postulates as "partner countries" rather than "European countries".They similarly struck any language that even remotely hinted at possible E.U. membership for any time in the future, and revised a "long-term goal" previously described as "visa-free travel" by EaP citizens to the E.U. down to more modest "visa liberalization" for certain business people.Once the document and its objectives had been thoroughly watered down, it was of little wonder that leaders such as France's President Nicolas Sarkozy, Italian premier Silvio Berlusconi, Spanish Prime Minister José Luis Rodríguez Zapatero, and British Prime Minister Gordon Brown all found more productive things to do rather than attend the EaP launch summit.But they may have had their doubts about EaP even before that. Fabio Liberti, a European affairs and security expert with the Institute of International and Strategic Relations in Paris, notes that the calls to push the E.U.'s influence eastward was devised by certain member states — above all Poland and Sweden — to counterbalance the Mediterranean Union that Sarkozy initiated last year to reach out to Europe's southern neighbors.Even that, Liberti says, was fueled by France, Italy, Spain and Greece trying to shift the E.U.'s center of gravity back towards the middle of the continent after the fall of the Berlin Wall tipped it east. Such ulterior motives made the EaP ripe for downsizing in the face of growing European resentment over enlargement."In the end, it became a non-event, because an initiative that corresponded to the very logic and mission of the European Union itself became undermined by a lot of political factors," says Liberti. "Just as people now tend to view E.U. enlargement as a mistake — rather than examine the errors made in managing it — leaders have gotten shy about the Eastern Partnerships over how it might look, rather than what it will do."Appearances are not always insignificant, however. Moscow has voiced its hostility to EaP, and said it will defend its influence over the six neighboring nations involved.And many E.U. leaders — notably the Russia-friendly Sarkozy, Berlusconi and German Chancellor Angela Merkel — want to avoid provoking an increasingly stroppy Kremlin. Indeed, ever since Russia's August 2008 war with Georgia, E.U. officials have become particularly wary of possibly prodding the Kremlin into similar action by appearing to set up camp with the EaP countries in Russia's backyard.However, Liberti notes that efforts to placate Moscow may only go so far — especially given the energy stakes the EaP involves. He says repeated moves by the Kremlin to choke off gas supplies pumped to Europe via the Ukraine have left many E.U. leaders determined to wean themselves off of their Russian gas dependency.For that reason, Liberti says, developing and exporting new energy resources for EaP signatories like Azerbaijan remains high a priority, along with building a new pipeline to Europe via central Asia that bypasses Russia completely."Europe is in this schizophrenic mode in which we're trying to create partnerships without creating them too much, and trying to undermine Russian influence without challenging Russia," Liberti notes. "At the same time, Germany and Italy sign long-term bilateral gas contracts with Russia that increase their dependency."In other words, if the six former Soviet republics came away from the Prague summit disappointed and confused, they aren't alone.

How The Financial Crisis Is Affecting Eastern Europe

KIEV, Ukraine -- Russian President Dmitry Medvedev said on Friday officials were working too slowly to ease the economic crisis. Russia's $1.7 trillion economy is set to contract this year for the first time in a decade and unemployment is soaring.
Following are some details of how the financial crisis is affecting Russia and some other countries in eastern Europe:BULGARIABulgaria's farming industry, once a main stay of the economy, has shrunk to 5 percent of GDP from 25 percent in the past decade. Cash-strapped producers suffered again in 2008 after the EU froze millions in farm aid over graft. The crisis may erase Bulgaria's gains over the past decade because its main export market, the EU has fallen into recession. Trade unions say some 50,000 people are likely to lose their jobs in 2009.CZECH REPUBLICThe economy is highly open and dependent on exports, which in gross terms account for about 70 percent of GDP. The financial system has been relatively unaffected by the initial phase of the global financial crisis, but was hit from a collapse in demand. Over 45,000 people lost their jobs in January, bringing the unemployment rate up 0.8 percentage points to 6.8 percent, the highest level since April 2007.HUNGARYHungary, which escaped the crisis by way of a $25.1 billion IMF-led loan in October, planned to cut its budget deficit below 3 percent of GDP and decided on new spending cuts worth 200 billion forints ($835 million) in 2009 to prevent an overshoot. The economy is under pressure from a collapse in demand in the euro zone, its key export market, and the economy is expected to sink into a recession of up to 3.5 percent.POLANDEconomic growth slowed to 4.8 percent in 2008 from 6.7 percent in 2007 and analysts expect it to slump to 1.4 percent in 2009.ROMANIADecides this month whether it needs to help from the EU or the IMF. The unemployment rate rose to 4.9 percent in January from 4.4 percent the previous month. Several major industrial companies announced job cuts after demand was hit.RUSSIARussia's economy is set to contract this year for the first time in a decade. About 300,000 Russians lost their jobs in January as collapsing commodities prices and months of market crisis hammered the real economy. The number of jobless jumped to 6.1 million or 8.1 percent of the workforce versus 7.7 percent the previous month. The government forecast on Tuesday the economy would contract by 2.2 percent in 2009. Growth in retail sales slowed in January to 2.4 percent year on year and a 16.3 percent increase in Jan. 2008.SERBIASerbia expects to conclude a 2 billion euro ($2.52 billion) loan with the IMF by April as growth is seen falling far short of earlier official estimates, Prime Minister Mirko Cvetkovic said on Friday. He said it will most probably grow between 0.5 and 1 percent after the fall in fiscal revenues since the beginning of the year. By contrast, last week Serbia's central bank said the economy was most probably heading into recession. Serbia's economy grew 5.5 percent in 2008.SLOVAKIASlovak industrial output fell by 16.8 percent year-on-year in December, the sharpest fall at least in 10 years. Slovakia expects its export-oriented economy to be hurt by the crisis as demand for its products slows in the West.UKRAINEIndustrial output has shrunk by over a third -- the worst drop in over a decade. Machine building and mineral production both contracted by over half year-on-year. Thousands of workers have been put on unpaid leave as a consequence of the drop. Ukraine's banks have also been hit as its hryvnia currency plummeted, with three banks put in receivership last week, including the seventh largest, the Nadra Bank.Political turmoil has delayed policy making to combat the crisis and has threatened a $16.4 billion loan from the International Monetary Fund, which failed to agree last week on disbursing a second, much-needed tranche.

Eastern Europe Gripped By Political Instability

BRUSSELS, Belgium -- Growing political instability in Latvia, Ukraine and Georgia are mainly triggered by the global economic crisis and deep internal problems, such as corruption. But problems with Moscow could be adding an extra "irritant" to an already bad situation, according to leading analysts questioned by EurActiv.
Ukraine, Georgia and Latvia are moving into a period of political instability as they sink deeper into economic recession.On 13 February, the government of Ukrainian Prime Minister Yulia Tymoshenko survived a no-confidence vote in parliament. Her situation has been further complicated by a power struggle with President Viktor Yushchenko, once a close ally.A mission by the International Monetary Fund reviewing Ukraine's arrangement with the fund left Kiev last week without making it clear whether or not more funding will be released to keep the economy afloat. Ukrainian Finance Minister Viktor Pynzenyk quit his post on Thursday over budget and policy disagreements with Tymoshenko, the Associated Press reported.In addition, Ukraine's foreign minister, Vladimir Ohryzko, was reported as having instructed the country's embassies abroad to report at the "highest possible level" the "unscrupulous and inadequate actions" of his prime minister.In Georgia, many opposition figures blame the president, Mikhail Saakashvili, for the country's troubles and are calling on him to resign. Many foreign investors have fled, leaving Georgia with the highest unemployment rate in the Caucasus.In Latvia, recent riots illustrated just how badly the Baltic country has been hit by the global economic crisis. But now experts say that the Latvian economy is in terrible shape, even by the standards of the global financial crisis. "The Latvian economy is staring into the abyss," said Neil Shearing of London-based Capital Economics, quoted by Deutsche Welle.As political instability grows in Ukraine, Georgia and Latvia, EurActiv asked analysts to comment on the background of these developments and the Kremlin's possible role in the region's current instability.The analysts largely agreed that the main cause of instability is the difficult political and economic contexts in these countries, which include high level corruption and bad governance. Hostile meddling by Russia is only seen as a secondary factor.Moreover, the worsening economic situation in Russia itself and instability throughout society there were singled out as handicaps for Moscow. Recently, Thierry de Montbrial, president of IFRI, the French Institute of International Relations, warned of a doom-like scenario in which falling oil prices would cripple Russia's economy.Positions:Fraser Cameron, director of the EU-Russia Centre in Brussels, said that in his view, the world economic crisis and "massive corruption" in Ukraine and Georgia are for the most part to blame for the worsening situation in these countries."There is no question that Russia wants to have these countries under its influence. But its means to do that are limited essentially to the energy weapon. And that's not something they can use with 100% impunity, because there are international rules," Cameron said.The director of the EU-Russia Centre admitted that Russia is using its Soviet time network to influence on its neighbours, but also warned that this was not the main underlying factor."They [Moscow] have been using bribery to influence politics in some countries, that's also quite clear. But it's difficult to assess how effective they have been," said Cameron. He added that the counties in Russia's surroundings are weak, but so is Russia."Russia is severely hit by the economic crisis. Russia is not a very stable society either. So I think the opportunities are rather limited here. Gazprom is running around, trying to find money in London, Paris, New York and Frankfurt for capital investment," Cameron observed.Tomas Valasek, director of foreign policy and defence at the Centre for European Reform in London, also told EurActiv that before analysing the state of Russia's neighbours, one should first examine the situation in Russia itself."I don't see very much Russian cloak-and-dagger manoeuvring in Latvia. The political scene has been producing basically the same government for the past six or seven years, there have been elections every other year, people are frustrated, and when you couple it with the economic crisis, the real drop in living standards, that explains the instability. You don't need to look for Russia," he said.For Ukraine, he stressed that "bad governance and corruption" is "very much behind the picture"."Again, you don't need to look for Russia. Russia has been a factor, Yushchenko accusing Timoshenko of being a Russian agent, and Yanukovich accusing both Timoshenko and Yushchenko of being irresponsible in Russia policy. Russia has been used more as the object that the political class has been throwing at each other, rather than somebody who has been doing the acting".Georgia is a completely different case, Valasek admitted, adding that Moscow had chosen to turn the Caucasian country into an example of what happens to a country when it openly provokes Russia."The war scared investors, the war destroyed a lot of value, the war has made it impossible for Georgia to raise funds in other ways than through a donor's conference. How can we separate Russian hands from the economic trouble Georgia is in?," asked Valasek as a rhetorical question.The analyst also singled out the problems facing Russia in the context "of the current global economic recession, if not depression". He added that some countries had been hit more than others, if measuring the impact in terms of the falling value of the stock markets and the devaluation of the national currency, which in his words is exactly what happened in Russia.Amanda Akcakoca, a policy analyst at the European Policy Centre, told EurActiv she did not consider it fair to blame Russia for all things that are going wrong in Ukraine and Georgia."Clearly, in the case of Ukraine, a lot is to do with its internal political situation," Akcakoca explained, adding that the internal political in-fighting between Yushchenko, Tymoshenko and Yanukovich plays for the interest of Russia."In this way, Ukraine offers Russia the role of a player in its political scene on a silver plate," she stated.In the case of Georgia, she observed that in spite of confusing media reports, Saakashvili stays more popular than the opposition, because the opposition is fragmented."I would agree that Russia does irritate the situation in these countries, but it’s the domestic situations which at the origin of this," Akcakoca said.