The June issue of the Romanian Journal of European Affairs proposes to its readers the latest topics related to European affairs, such as: the role of the national independent fiscal institutions within the new EU economic governance and fiscal framework; the current geopolitical situation, especially with regards to the financial sanctions imposed by the EU on Russia; regional cooperation, namely the comparison between the Open Balkan Initiative and the Berlin Process, and insights about the contribution of the Visegrád Group to the European integration of the Western Balkan states. The journal also analyses aspects which impact the daily lives of European citizens, such as the energy efficiency, the influence of good governance on the quality of road infrastructure in the EU or the role of the digital transition in transforming the agriculture sector in states like Romania and Hungary. The current issue also presents a book review about the 30-year functioning of the European single market.
A New EU Economic Governance and Fiscal Framework: What Role for the National Independent Fiscal Institutions (IFIs)?
The European Commission’s communication on orientations for a reform of the European Union’s economic governance framework asks the European Fiscal Board (EFB) and national Independent Fiscal Institutions (IFIs) to play a more significant role in it. This vision has plenty of merit, but one needs to be careful in how to implement it. Structural reforms and public investment analysis demand an expertise hardly existing at the level of most national IFIs, and any involvement in policy design would make its assessment tricky when IFIs are part of the process: an inescapable conflict of interest would ensue. It could also be perceived as a technocratic encroachment on a democratic decision-making process. In order to play a more significant role in the EU economic governance framework, national IFIs need more resources according to the EU-wide acceptable standards of operation, and, first of all, they need to bolster their macroeconomic and debt sustainability analysis capabilities.
Keywords: debt sustainability, EU economic governance, fiscal rules, fiscal capacity, IFIs, investment, risk sharing, reforms, transparency.
JEL classification: E61, E62, F15, F33, F34, F36, H6, O52.
Implications of the EU Sanctions for the Resilience of the Russian Financial System under the Current Geopolitical Environment
Dorina Clichici, Andreea-Emanuela Drăgoi
The military invasion of Ukraine by the Russian Federation turned into Europe’s most prominent military conflict since World War II, severely modifying the economic and financial relations between the European Union (EU) and the Russian Federation. Since the beginning of the Russian aggression, the EU has imposed a large number of sanctions against the Russian Federation, which aimed at limiting Russian resources to finance the war and restricting its access to European financial markets. In this context, the paper aims to investigate the impact of the EU sanctions on the Russian financial system by assessing the banking system’s resilience to imposed restrictions. The findings highlight that, in the initial phase, the Russian financial system has been significantly disrupted by the EU sanctions, facing a collapse of the rouble, the most significant drop in the history of Moscow’s stock market, a banking liquidity crisis, but also a contraction in lending and in the interest rate spread. In a later phase, due to largescale countermeasures taken by the Russian authorities and the Bank of Russia, it has been stabilized, reflecting its high level of resilience to risks.
Keywords: EU sanctions, Russian Federation, banking system, banking liquidity crisis, countermeasures.
JEL classification: F51, G18, G28, G21.
Agricultural Technology Start-ups – Romania and Hungary Compared
This paper departs from the hypothesis that in the era of agriculture 4.0, start-ups specialised in digital agricultural technology (AT) have the potential not only to rapidly grow, but also to have a beneficial impact outside the core countries of agricultural innovation. To validate this assumption, we compiled data about a sample of Romanian and Hungarian AT start-ups entering the market with self-developed digital solutions. Based on extensive desk research, we identified the main distinctive features of the surveyed startups, compared to their peers in advanced economies, and answered the related key research question: how meaningful is the impact of these start-ups on the much-needed upgrading of agricultural production in these countries? Our analysis reveals that although local AT startups in these countries do develop innovative solutions in the field of precision farming, farm management software, applications, and e-marketplaces, their number is below a threshold where they could have an impact on the upgrading of local agriculture. More importantly, the reduced size of the local market for technology and other hard-to-overcome barriers make it barely possible for them to grow as rapidly as some AT start-ups do in advanced economies.
Keywords: agriculture 4.0, agricultural technology start-ups, precision farming, Hungary, Romania.
JEL classification: Q16, O33, Q18.
The Impact of Good Governance on the Quality of Road Infrastructure within the European Union
Cezar Teclean, Gabriela Drăgan
The article assesses the role of good governance in promoting the quality of road networks in the European Union. For this purpose, we consider four dimensions related to good governance: effectiveness of government, quality of legislation, control of corruption, and political stability. Our research aims to test the hypothesis that the different indicators of the governing act have differing impacts on the quality of road infrastructures, the objective of our analysis being to quantify the contribution of each of the above-mentioned indicators. Through a quantitative analysis which used coefficients of correlation and determination, we quantified the explanatory contribution of good governance indicators to the configuration of the quality of road infrastructure in the states of the Union from 2007 to 2019. Our findings show that political stability has the most consistent explanatory contribution, followed by government effectiveness, legislative quality, and corruption control, although the distribution of impact varies significantly across EU member states.
Keywords: road infrastructure, government effectiveness, regulatory quality, control of corruption, political stability, European Union, good governance.
JEL classification: L91, L92, L98, R42.
The Energy Efficiency Issue in the European Union: Perspectives, Objectives and Challenges
This paper discusses the energy issue in the European Union and the EU’s progress on energy efficiency since the Energy Efficiency related Directive of 2012 (EED): (i) The energy consumption dynamics (primary and final energy consumption), (ii) Directives and other regulations adopted by the EU’s institutions between 2012-2022, for energy consumption and efficiency targets established for the entire Union and for its member states, (iii) The National Energy and Climate Plans (NECPs) corresponding to the 2020 accomplishments and the 2030 projections, (iv) The same 2030 forecasts in the long-term context of climate neutrality to be ensured up to 2050. All these will be approached below in our argumentation. Effective energy consumption data are retrieved from Eurostat and the International Energy Agency (IEA). Optimism comes up for the 2030 perspective, since the 2020 specific performances were delivered, partly despite the recent COVID-19 pandemic related circumstances of 2020. A list of possible responses to some questions will conclude this paper: ‘How receptive will the member states be in the future for transposing the EU’s energy efficiency ambitions into their own strategies?’ and ‘Will the European policies be rigorous enough, and flexible to achieve the long-term objectives?’.
Keywords: energy efficiency, primary energy consumption, final energy consumption, energy targets, Green Deal.
JEL classification: Q40, Q43, Q48.
Regional Dynamics of Two European Clusters: Cooperative Financial Tools and Collective Support as Part of V4 Presidencies’ Foreign Approach Towards WB6 Partners
Mihai Christopher Marian Radovici, Lukáš Danko
Based on current paradigmatic, programmatic and operational changes, which oversee how global systems were transformed through inter-actor dynamics and systemic rifts, we can underline the necessity for an in-depth comprehension of the political and economic interactions between regional actors, especially within CEE and the EU’s Neighbouring areas. Thus, as the present paper seeks to address this knowledge hiatus found in the field, there is an extrapolation and interpretation of the Visegrád Group’s (V4) collaborative and cooperative patterns during the last full presidential cycle (Slovak Republic – 2018 to Slovak Republic – 2023). As such, this analysis is aimed at deciphering some of the ways used by the V4 to employ economic measures, as part of collective or individual foreign policy approaches, to further enhance Western Balkan partners’ European trajectories and regional integratory processes, alongside their respective geostrategic and geoeconomic interests. When it comes to the methods utilised in this study, the primary and secondary questions are answered through an extensive collection, selection, and inspection of data produced throughout the V4 presidencies, including: official statements and papers (V4 memorandums, meeting minutes, declarations during the Balkan Forum, official statistics, etc.), specialist literature (academic articles and books, policy analysis, etc.) or related sources (expert groups, op-eds, think-tank reports, etc.). Based on these procedures and forthcoming findings, we can highlight a noticeable increase in the constant economic flows both between the V4 – WB6 (Western Balkans 6) corridor per se and amongst their members, although collective efforts remain highly volatile due to variations in chairmanship. Moreover, the presidencies’ core priorities towards the WB6 seem to follow the general continental pivot regarding the area, with several larger initiatives being spearheaded to optimise interconnectedness between both regions, especially in complementarity with other EU and pan-European projects (e.g., EUSDR, EaP, 3SI, B9). Assuming that the socio-cultural and economic contexts amongst V4 countries are historically close, it is possible to underline that their political environment allows for shared foreign policies to be created, particularly when it comes to enhancing well-founded neighbourhood relations, expanding towards other spheres of interest or assisting non-EU partners in their transition period (driven by their own development processes and good practices).
Keywords: Regional cooperation, Visegrád Group, Western Balkans, economic cooperation, foreign aid.
JEL classification: F530; F550; F590; F350; N100; O190.
Road to Europe: Between the Berlin Process and the Open Balkan Initiative
The Open Balkan initiative has been partially supported by the leadership of the Western Balkans. If years ago it seemed a political whim, currently it constitutes a highly conditional factor from a two-level perspective: firstly, in the bilateral relations between the Balkan countries and, secondly, in relation to the Euro-Atlantic orientation of these countries for which the EU foreign policy had implemented the Berlin Process since 2014. In fact, the two processes have key differences, since for the Open Balkan initiative the priority interest resides in economic cooperation, while the Berlin process seeks to resolve, before their accession to the EU, many divergences of the Western Balkan countries, issues of a more complex nature than that of economic and cross-border cooperation. The Balkans are a region of turmoil where two world wars started, which left us with indelible memories of human suffering. The initiative has remained a Balkans’ troika due to its lack of support at the national level and beyond. The analysis based on a mixed-methods’ approach, seeks to highlight which of these two processes, that of the Balkans leadership or that of the European politics, is the most suitable for a comprehensive integration, without inter-ethnic conflicts and the mutual influence of the economic expansion.
Keywords: EU integration policy, ethnic conflicts, Open Balkan initiative, Berlin Process, economic development.
Book Review: Single Market at 30, coordinated by Eugen Dijmărescu, Bucharest, 2023, Institute for World Economy, ISBN: 978-973-159-290-9
The volume pays tribute to the 30-year functioning of the European single market. The authors critically analyse the single market considering the megatrends and changes within the global economy. Accordingly, the advancements in circular economy, digitalization, and artificial intelligence are investigated. Subsequently, the realignment of competitive relations is carefully considered, against the background of the spectacular growth of other economies. The entire research is the result of a complex endeavour, based on a wide variety of references and a series of in-depth analyses.
Keywords: single market, European integration, institutional development, European unification.