| e-Newsletter |
| Last update 2010-01-20 |
 Calling for reforms: the post-crisis development in RussiaDespite economic stabilization of the Russian economy in the first half of the 2009, Russia finds itself in a difficult position with no explicit post-crisis exit strategy and drawn-out economic problems calling for reforms. In Challenges of Post-Crisis Economic Policy in Russia (CASE E-brief 04/2010), expert Sergey Drobyshevsky points to the key economic challenges, which, if not addressed, put at risk the gains brought by the period of rapid economic development. Despite popular slogans about the need for modernization and economic development, the current lack of political will to conduct the named reforms preserves the dominant role of Russian raw material sector. | ||||
 The price of delay: the future of Russian and Ukrainian pension systemsWith average pension rates in Russia and Ukraine just above the official poverty lines, it is clear that reforms in the system are both necessary and urgent. The “redecorating” of the old pension systems can no longer solve the core problems which both countries are facing. In The price of delay: the future of Russian and Ukrainian pension systems, CASE expert Oxana Sinyavskaya pleads for sweeping reforms of their pensions systems. Instead of focusing solely on the economic background, she suggests that policy makers should realize that certain features of the demographic development of both countries are responsible for the long-term instability of their pension systems.
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 Window of Opportunity for ReformsThe authors of Proposals for Ukraine 2010 – Time for Reforms regard the new presidential mandate, the shock of a recent severe economic crisis, and popular dissatisfaction with the status-quo, as ideal conditions for successful reform to take place in Ukraine. Despite the harsh effects of the crisis and Ukraine’s gloomy perspectives, an independent International Expert Commission finds windows of opportunity in the current situation. The chairman of the CASE Advisory Council, Anders Aslund, co-chaired this Expert Commission together with Oleksandr Paskhaver. Among others, CASE President, Marek D±browski, and CASE Advisory Council Member, Charles Wyplosz joined the Commission to get Ukraine’s reform priorities straight in a 10-point plan, complete with suggestions for fields ranging from reforms in the gas sector, to privatization, and to modernization of commercial legislation. The report was published by the International Centre for Policy Studies. | ||||
 Reducing Shadow Employment: Russia and UkraineFinding that workers in the shadow economies in both Russia and Ukraine do not receive higher net incomes than those in the formal sector, CASE Fellow Mateusz Walewski concludes that incentives driving workers to join the shadow economy in both cases are not based on tax evasion but rather the lack of formal employment opportunities. Therefore, the tax reforms of 2001 and 2004 in Russia and Ukraine, respectively, which aimed to reduce the benefits of joining the shadow economy, failed to address the true incentives for shadow employment. | ||||
 Sound expenditure and long term growth: assessing public finances in the EU Mediterranean partner countries Drawn from a diverse array of countries, ranging from candidate-member Croatia to autocratic Syria, data point to clear connections between sound public finance expenditure and long-term growth in the EU’s Mediterranean Partner Countries. The findings are part of a report completed for the European Commission, DG ECFIN, by CASE Fellows, Luc De Wulf and Cyrus Sassanpour, along with Leonor Coutinho. The full report of the “Study on quality of public finances in support of growth in the Mediterranean partner countries of the EU” is now available online on the EC website. | ||||
| Energy Investment Potential: Ukraine Beginning in February, CASE will complete a 4 month study for the OECD digging deep to uncover the potential of energy savings, efficiency improvements, and the use of environmentally friendly technology, in the energy market in Ukraine. The study will be a part of the OECD Investment Policy Review of Ukraine carried out by the OECD Investment Division in order to enhance the country’s policy convergence with the OECD investment instruments and prepare the ground for its eventual adherence to the OECD Declaration on International Investment and Multinational Enterprises. The study (Investment in support of energy savings and efficiency and in environment friendly energy resources and technologies in Ukraine: Government policies and business practices) will be lead by CASE Fellow Wojciech Paczynski. | ||||
 The falling dependency on Russian gas: CASE publishes 400th Network Study and Analysis“Precisely how the spot market for natural gas will develop is uncertain, but the pipeline issues and the Russian threat to EU energy security will become as anachronistic as 1970s fears of OPEC world domination,” says Richard Pomfret in Energy Security in the EU and Beyond (CASE Network Studies and Analyses No. 400). Reflecting past energy market trends, just as the emphasis on oil security has taken a back seat, he anticipates a decreasing threat of gas dependency on Russia as nations within the EU begin to embrace new Liquefied Natural Gas (LNG) technologies. “Energy insecurity have been fleeting and the fears have been [and will again be] assuaged by market forces or technical change” | ||||
 The global recession and energy marketsGiven the trajectory of the technological and economic policies of advanced economies, Leonid Grigoriev, President of the Institute for Energy and Finance in Russian Federation, predicts a decrease of oil intensity of the world economy in The global recession and energy markets (CASE Network E-brief 01/2010). He explains, that this change will require time and investment, while the latter is at a shortage due to the global recession. Grigoriev expects the energy market to balance at the current price in 2010-2011, and continue to remain balanced at this level until demand grows. Underpinning Grigoriev’s view is the expectation that the low investment outlook will result in a possible shortage of oil supply. In combination with rising demand, the foreseen supply shortage will drive oil prices up in the long-term prospective. | ||||
 Enhancing Financial Sector Monitoring in EU Candidate and Potential Candidate Countries CASE has been selected to carry out a 7 month study on “The effects of the global crisis on the financial sector in candidate and potential candidate countries” for DG ECFIN. The study will increase the understanding of how the international economic and financial crisis affects the financial sectors of the EU candidate and potential candidate countries by providing a relatively simple, non-technical and user-friendly toolkit for enhanced monitoring. | ||||
 The crisis of “the deep Keynesian project”Jacek Rostowski, the Minister of Finance of Poland and one of the founders of CASE, delivered a key note speech in The Return of History: From Consensus to Crisis CASE International Conference that raised a remarkable interest from all participants. Turning down the view that the recent financial crisis is a crisis of capitalism, Rostowski argues that what happened is a crisis of “the deep Keynesian project,” implying that the aim of economic policy is minimizing economic fluctuations on the down. This policy succeeded for almost 20 years and it led to this massive crisis, because, to quote the Minister: “what drives the market is the balance between fear and greed. If you successfully remove the fear you have no right to complain when a greed takes off". In this context, Rostowki advocates that smaller crises should be allowed to happen to discipline the marketplace and to avoid a bigger crisis in 10-15 years. | ||||
 Global Imbalances and the Financial CrisisVideo Clips from The Return of History: From Consensus to Crisis CASE International Conference are now available on the website. Keynote speaker, David Robison’s speech can now be viewed at http://www.caseconference.eu/video.html. In his presentation, David Robinson, Deputy Director of Western Hemisphere Department of International Monetary Fund, makes an introspection to global imbalances and their underpinning factors. He elaborates on the links between global imbalances and the recent financial crisis and discusses deriving policy challenges. Robinson argues that imbalances are still a concern that needs to be addressed both by individual state policy response and multilateral policy coordination with the IMF serving the facilitator role. | ||||
 The path to the next crisisRegardless of whether fiscal stimulus has been the correct policy choice or not, “the price of countercyclical fiscal policies in 2008 and 2009 has been extremely high,” says CASE President, Marek Dabrowski in CASE Network E-brief 12/2009, From fiscal stimulus to fiscal crisis. Assessing the international response to the global financial crisis, Marek Dabrowski warns that the counter-cyclical fiscal policies enacted, have pushed many developed economies in the direction of a debt trap. The negative consequences of this trend may lead to “another macroeconomic and/or financial crisis.” | ||||
 Deteriorating energy infrastructure in the CIS stalls development in the regionFollowing the recently held CASE International Conference, CASE has published the research of Ben Slay from UNDP, a panelist from the third session of the conference, titled Enegry Security in Europe and Other Regions. In Energy security, Poverty and Vulnerability in Central Asia and the Wider European Neighborhood, Slay argues that two decades of under-investment in Soviet-era energy, water, and communal service infrastructures threaten significant reductions in access to these services in the poorer countries of this region, particularly Tajikistan and Kyrgyzstan. Ben Slay is the Senior Economist at UNDP’s Regional Bureau for Europe and CIS, Bratislava | ||||
 Fixed exchange rate regimes contributed to the East European financial crisisIn The East European Financial Crisis, Aslund focuses on the global financial distress of 2008/9 in thirteen countries, the ten new EU members and the three countries of former Soviet Union. He claims that the East European countries with fixed exchange rates are the hardest-hit by the crisis. Aslund advocates easing ERM II conditions and facilitating euro adoption in the region to increase economic stability. Anders Aslund is the Chairman of CASE Advisory Board and a Senior Fellow at the Peterson Institute for International Economics. | ||||
 Yegor Gaidar passed awayYegor Gaidar, father of economic reforms and market transformation in Russia and world renowned economist died today on December 16, 2009 at the age of 53. He was the Deputy Prime Minister in charge of economic policy and Minister of Economy and Finance (1991-1992), acting Prime Minister of the Russian Federation (1992), advisor to the President of RF (1993), first Deputy Prime Minister and acting Minister of Economy (1993-1994). He was twice a member of State Duma (the lower house of parliament): from 1993 to 1995 and from 1999 to 2003. He was one of the founders and then Director of the Institute for the Economy in Transition (IET) in Moscow, the prestigious research institution belonging to the CASE network. He was a member of the CASE Advisory Council from its first formation, participating in several CASE conferences, seminars and author of CASE publications. He was good friend of CASE and many of us personally. President of CASE Marek Dabrowski | ||||
| The EU and CIS: deeper integration should be welcomed In the lattest CASE Network Report CASE experts estimate the impact of the removal of NTBs in trade between the EU and its selected CIS partners: Russia, Ukraine, Georgia, Armenia and Azerbaijan (CIS5). The report includes a discussion of methodologies of measurement of non-tariff barriers and the impact of their removal, including a review of previous studies focusing on CEE and CIS regions. Further, the authors employ a computable general equilibrium model encompassing the following three pillars of trade facilitation: legislative and regulatory approximation, reform of customs rules and procedures and liberalization of the access of foreign providers of services. The study concludes that a reduction of NTBs and improved access to the EU market would bring significant benefits to the CIS5 countries in terms of welfare gains, GDP growth, increases in real wages and expansion of international trade. The possible welfare implications of deep integration with the EU range from 5.8% of GDP in Ukraine to sizeable expected gains in Armenia (3.1%), Russia (2.8%), Azerbaijan (1.8%) and Georgia (1.7%). | ||||
 The Crisis and EU's Weakness"The crisis demonstrated the limited capacity of EU institutions to conduct Union-wide anti-crisis policies," CASE president Marek D±browski explained in an interview with EurActiv. He predicts a "near-stagnation scenario" for many EU economies. While Marek assessed that the De Larosiere report is a step in the right direction, he questions whether the degree and speed of building the EU regulatory framework will be sufficient to meet the existing challenges. The interview from November 19, 2009 is available on the EurActiv website in English and in Czech. | ||||
| CASE Hosts 2009 International Conference
The 6th CASE International Conference took place 20-21st of November 2009 at the Falenty Center in Warsaw. The Return of History: From Consensus to Crisis CASE International Conference hosted two days of high level debate. The event brought together more than 50 experts from all over the world to discuss the global financial and macroeconomic crisis. Conference presentations are available on the conference website (www.caseconference.eu). | ||||
 No, the central banks didn't do it“Monetary policy was lax and eventually caused inflation, but not the financial crisis itself," states Charles Wyplosz in the 11/2009 CASE Network E-Brief. In No, the Central banks didn’t do it, Wyplosz untangles the misconception that central bank policies may be fully to blame for the onset of the financial crisis. He argues that although lax monetary policy may have contributed, particularly to rising inflation, it was distorted market perceptions and inaccurate calculations of risk which set the stage for the crisis. | ||||
 Analyzing the Euro‐Mediterranean Road map until 2010 and beyond In September, CASE and CEPS experts submitted the final report “Economic Integration in the Euro‐Mediterranean Region” to DG TRADE, concluding the year long EUROMED project. The report recommends that in order to significantly move forward the EuroMed Free Trade Agreement and advance the integration process, the region must work to reinforce the network of free trade agreements, promote a Euro‐Med trade and investment facilitation mechanism, and enhance efforts to deepen existing integration. The report is now available on the European Commission website. | ||||
 Creating the Emerging Market FundSimon Johnson, member of the CASE Advisory Council, suggests that emerging markets should create their own alternative to the International Monetary Fund. The rise of an “Emerging Market Fund,” whose membership would exclude the U.S. and Western Europe, may be the “best way forward,” states Johnson. In CASE E-brief 10/2009, Replacing the International Monetary Fund, he explains that the new institution would overcome several of the IMF debilitating flaws by granting greater power to weaker states to control their own safety net institution. [download full text E-brief 10/2009] | ||||
 CASE Policy Research Seminar hosts Mark Allen, October 12, 2009At the most recent CASE Policy Research Seminar, Oct. 12, 2009, Allen assessed the outcomes of the negotiations from the Pittsburgh Communiqué and extracted lessons for future global financial governance. Outcomes achieved at the Pittsburg Communiqué have been “a step toward greater global governance, but not a leap,” Allen stated. He named the limited direct criticism at international fora as the main hindrance to major breakthroughs, and in the future expects the IMF to have an increasingly large role as the mediator and instigator of the previously avoided global discussions. Mark Allen is the Senior IMF Resident Representative for Central and Eastern Europe. "Reason and Rules in International Economic Policy Making" [download presentation] | ||||
 Impact of Foreign Direct Investment on Firm Performance in Emerging Markets. In CASE Network Studies and Analyses Publication No. 391, Camilla Jensen contributes to the literature on the impact of foreign direct investment on firm performance in emerging markets. The study distinguishes between the direct (within firm) and indirect (across firm within industry) effects emanating from the presence of a foreign ownership class; it evaluates foreign subsidiary performance, market efficiency effects, labor productivity and employment growth, as well as estimates markup levels using a rich panel of manufacturing firm case studies. | ||||
 CASE Completes Project on Key Competencies in European EducationKey competencies, those that “all individuals need for personal fulfillment and development, active citizenship, social inclusion and employment” should be included in the school curricula for pupils, as well as on-going education of teachers, who are responsible for passing on the competences to their students. In September, a team of researchers led by Jerzy Wi¶niewski presented the results and recommendations from their comparative study on the development and implementation of the key competencies in the education systems of the 27 member states of the European Union. Executive Summary of the Report [download file] Full text report (CASE Network Report No. 87) [download file] | ||||
 CASE's Veaceslav Negruta nominated Minister of Finance of MoldovaVeaceslav Negruta, CASE and CASE Moldova associate, has become one of the members of the new government of the Republic of Moldova, filling the key position as the Minister of Finance. Negruta is a well known, young generation, Moldovan macroeconomist, and author of many macroeconomic analyses and publications. In 2003 Negruta contributed to the founding of CASE Moldova and became its Deputy Executive Director (until 2005). He has also participated in a number of CASE research and technical assistance projects related to Moldova and CIS region. | ||||
 CASE wins Lot 7 and Lot 11 Framework ContractsThe results of two new EuropeAid Framework Contracts bring new project opportunities for CASE. The outcome of the competition renewed CASE presence and eligibility to compete for Lot 11, “Macro Economy, Statistics and Public Finance Management” opportunities and opens the doors to an array of new assignments through the Lot 7 framework contract on “Governance and Home Affairs”. | ||||
 Receive the latest E-briefs! You can now receive e-briefs in your inbox. Each month, CASE publishes concise articles providing insight into the most recent global economic issues. E-Brief 09/2009 The Baltic Conundrum explored the path of the Baltic States into their current crisis, reflected on the appropriateness of past decision and the options that lay ahead. “If international finance and macroeconomics are now to be redesigned, ‘the Baltic Conundrum’ should be kept in mind,” concluded the authors. “Here, we have a group of countries that suffered disproportionately from the effects of the global economic crisis, despite having done ‘most things right’.” In order to subscribe to CASE E-briefs please send an email to: | ||||
 Free Trade Agreement between the EU and the Russian Federation: Economic, Social and Environmental Implications. FINAL REPORTAuthors of the Final Report of the study concluded that an EU-Russia FTA would be beneficial to the Russian Federation and the EU27. As a result of a FTA, the majority of sectors in Russia are expected to expand, while only a few sectors in the EU27 are expected to register negligible decreases in output. Furthermore, the overall increase in economic activity and wages, coupled with likely domestic policies aiming at easing the impact of transitional unemployment, are expected to allow for the overall reduction in poverty rates. The study evaluated the economic, social and environmental impact and feasibility of a free trade agreement (FTA) between the EU and the Russian Federation. The final report was written by a team of researchers led by Maryla Maliszewska. | ||||
 Global Economic Crisis in Belarus: A Look BackIn CASE E-brief 8/2009 Alexander Chubrik discusses the role of the global financial crisis in Belarus. While in the first half of 2009 Belarus’ economic preformance surprised most outside observers, Alexander Chubrik depicts the serious impact the global economic has had on Belarus „primarily though declining demand of Belorussian exports”. Among the first transition economies to ask for an IMF loan, Belarus has reacted to the effects of the crisis by borrowing externally. Instead, Chubrik suggests that the proper response is a combination of structural reforms as well as tight monetary and fiscal policy measures. Alexander Chubrik is the Vice President of CASE-Belarus and an economist at the IPM-CASE Research Center in Minsk.
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