The June edition of the Romanian Journal of European Affairs proposes to its readers topics such as: the reform of the capitalist economic system, the causes behind Brexit, the emergence of Romanian life sciences clusters, the EU-China agreement on investments, the East-West divide in the European Union, EU’s interdependencies in the COVID-19 crisis, the debt dynamics of municipalities and their municipally owned corporations in the EU Member States.
Guest article: Overhaul Capitalism to Save Democracy
Why have our societies become so deeply divided, which is inimical to democracy? How do growing distributional conflicts impact governance structures? Why does fake news take often precedence over truth? What should be done to avert that the rule of law is undermined by the rule of the mob? It may be that the current crises (public health and economic) are harbingers of a new turning point in the evolution of capitalism. This evolution is interlocked with cycles of ideas, of public policies, and institutional change. A mixed economy took shape over time, in which a public sector and a private sector cohabit, based on market dynamism, entrepreneurship, with the shares held by the two sectors shifting in accordance with historical and local conditions. The debate that has started after the outbreak of the last financial crisis is about the path of capitalism, of the mixed economy, of democracy. We need to steer the course of events in the right direction via wise policies. Safeguarding democracy relates to the urgency to deal with climate change as an existential threat.
Keywords: Capitalism, central banks, climate change, community, economic crisis, democracy, European integration, fairness, finance, globalization, government, illiberalism, income distribution, inclusion, liberalism, market fundamentalism, mixed economy, pandemic, reforms, socialism, stakeholder, State.
Deep Causes behind Brexit
In an in/out referendum, held on 23 June 2016, the British electorate chose to leave the European Union. This paper uses the information and scientific outputs accumulated since the vote to explore and explain the deeper reasons behind Brexit. Key findings can be grouped in two categories. First of all, there are centuries long-standing endowments/factors – like history, geography, or differences in law or traditions, and, closely related to these, the legendary obsession with sovereignty and free trade – which have always been major drivers in influencing the British attitude towards Europe and have generally been reflected, in aspirations for a looser cooperation. Second, there are more recent factors – however, being around for the last 30-40 years – like changing balance of power (i.e., rising German influence) in the European institutions, or growing inequality in income, wealth, and opportunities, which may have been pushing some voters towards rejecting the status quo and embracing disruption as occasion emerged.
Keywords: Brexit, European Union, euroscepticism, Germany, inequality, sovereignty, trade, United Kingdom.
Deconsolidation of Liberal Democracy in the Baltic States. The Issue of Compliance with the EU Standards at Institutional and Value Levels
Nataliia Khoma, Oleksii Kokoriev
This article analyses compliance of the post-Soviet Baltic States with the EU liberal-democratic standards, at both institutional and value levels. The authors prove that fulfilment of the Copenhagen criteria for EU accession did not determine an enhancement of the quality of democracy in Estonia, Latvia and Lithuania. This study highlights that, in recent years, the Baltic States have entered a phase of stagnation of liberal-democratic transformations and that they need a more active position of the state on institutional reforms and resocialization of citizens to strengthen adherence to the political and legal values that the EU is based on. The article emphasises how the global financial crisis of 2008, the European migration crisis (2015) and the current coronavirus pandemic have all had an impact on the quality of democracy in the Baltic States. The authors focus on the incomplete process of value reforming among the Baltic population against the EU liberal-democratic standards. The article highlights that the post-totalitarian rotation of values in Estonia, Latvia and Lithuania is slow and faces rejection of European liberal-democratic values to a greater or lesser extent. It underlines the preservation of the totalitarian (Soviet) vestiges of political culture, which contradict the EU paradigm of values and prevent the Baltic States from improving the quality of democracy. It is noted that, in terms of the radicalization level in defending national interests, the Baltic countries take the intermediate position between the Nordic and the V4 countries, particularly Hungary and Poland that develop illiberal democracy patterns.
Keywords: Baltic States, values of the EU, quality of democracy, liberal democracy, deconsolidation of liberal democracy, lack of democracy.
Emergence of Romanian Life Sciences Clusters in the Context of the New EU Industrial Strategy
Valentin Cojanu, Adriana Petre, Cristina Porumboiu
We place this research in the context of the new EU industrial strategy call for encouragement of “place-based innovation and experimentation” with “a new focus on industrial ecosystems”. Public attention is redirected again to the basic coordinates of modern competition – value chains and location – although the strategic agenda is compounded by “different risks and needs” of an industry. We illustrate the challenge in the context of a confluence of emergent processes on three levels – industry, cluster, and country, along two dimensions of competitive upgrading – institutional and technological. Against this background, the investigation surveys the climate of cluster development of life sciences in Romania.
Keywords: emergence; cluster life cycle; competitive advantage; technology; social capital.
Pros and Cons of the EU-China Comprehensive Agreement on Investment
Iulia Monica Oehler-Șincai
The main objectives of the present paper are to elaborate on the EU-China Comprehensive Agreement on Investment (CAI), its provisions, advantages and potential risks, and to detach various standpoints of relevant actors, related to this agreement. The ad referendum CAI, complemented by additional documents by the European Commission, underscores that it goes well beyond the investment protection issues, usually addressed in bilateral investment treaties and it additionally includes rules for: a better market access for the EU companies, a fairer investment environment in China and sustainable development. Despite its support by the European Commission, there has been formulated a strong criticism of the deal from various directions, both European and non-European. Besides, the conclusion of the pact induced not only tensions at the extra-EU level, but also intra-EU. The largest two obstacles to the adoption of the treaty are the conflicting interests of the EU Member States and the opposition of the European Parliament. Therefore a common position is needed inside the EU. The research is complemented by an analysis of the broader circumstances of rising FDI protectionism worldwide, under the increased complexity of the system of international relations and recent trends, harmful to multilateralism.
Keywords: EU, China, investment regime, liberalization, market access, sustainable development, regulatory restrictiveness index, protectionism.
JEL classification: F21, F23, F29, F52, F53
East-West Divide in the European Union: Legacy or Developmental Failure?
Clara Volintiru, Alina Bârgăoanu, George Ștefan, Flavia Durach
EU goes through a realignment process in the context of the demise of multilateralism, yet the impact of this process on the 11 new Member States from Central and Eastern Europe (CEE) is rarely discussed. There is a persistent East-West divide in the EU that is mainly socio-economic, even though often narrated as a political divide between older and newer Member States. The article explores in depth the current developmental metrics in CEE and argues that the progress that has been achieved in overall levels of convergence in the EU is yet to be reflected at subnational level, where great disparities persist. It is the developmental divide that continues to inform political divisions in Europe.
Keywords: Central and Eastern Europe (CEE), East-West divide, socio-economic disparities, European Union.
EU’s Interdependencies in the COVID-19 Crisis
Melania-Gabriela Ciot, Ramona Sferlic
The main purpose of this study is to highlight, from a perspective of globalisation and power relations, the interdependencies manifested at the level of the European Union (EU) during the first year of pandemic crisis. The EU needs to redefine priorities, acknowledge more the importance of the interdependencies, and establish a more inclusive development strategy for the following years. We will also focus our attention on the responses and guidelines drawn by Member States and institutional actors, in order to analyse the efficiency of those decisions. The pandemic crisis must be seen as an opportunity for relaunching the Union, which will have to take into account all necessary measures to streamline the process of European integration that constitutes the challenge of the new Europe.
Keywords: European Union, integration process, interdependencies, crisis management, COVID-19 pandemic.
A Comparative Analysis of the Debt Dynamics of Municipalities and their Municipally Owned Corporations in the EU Member States with a Special Focus on Hungary
Csaba Lentner, László Vasa, Szilárd Hegedűs
The study examines the liabilities as a share of the GDP of the municipal subsystems of public finances and the organisations owned by them in EU Member States between 2013 and 2018. The main goal of the current study is to characterise the EU Member States regarding the examined two areas. Additionally, we analysed the connections between the entities’ liabilities, used statistical methods to compare the respective values and to examine the impacts of the local government system models and the geopolitical location on debt. There were three hypotheses formulated during the research, all of which were confirmed. A statistical connection can be perceived between the two areas of economic management of the local system, and it has also been established that the liabilities as a percentage of the GDP of local government owned corporations are significant, particularly in Scandinavian countries and Germany. At the same time, however, it has to be noted that the results of the theoretical division and the statistical analyses differ from each other. At the end of the study, we used a case study to examine how the two areas developed over time and how the regulatory environment affected debt value. In addition, we also considered the debt dynamics of municipalities and their business organisations, subject to a comprehensive fiscal reform after 2010, which represents another unique element of this study.
Keywords: territorial local government subsystem, fiscal institutions, debt.