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Sovereignty versus nature: Central and Eastern Europe not ready to fight for environment at all costs

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While attending the UN Climate Summit in New York, French President Emmanuel Macron urged European environmental activists to look in the direction of some countries of Eastern Europe, in the first place, those that this summer came up against the “EU initiative to achieve carbon neutrality by 2050”.

The 2050 deadline was first voiced in a report prepared last year by the UN Intergovernmental Commission on Climate Change. According to the authors of the Report, humanity will be able to avoid the worst effects of climate change if it reduces greenhouse gas emissions to zero by the middle of the century. The proposal in support of the United Nations initiative by EU countries  put forward by the European Commission in November last year  envisages a set of measures to reduce greenhouse gas emissions  next to zero; and to compensate for the residual emissions by taking agricultural and technological measures aimed at extracting carbon from the atmosphere. In March this year, as members of the European Council discussed the details of the initiative, the initial reaction, according to media reports, was “cautious”.  Only 8 EU member states  supported it unconditionally.

However, “the situation had changed a lot” by May: the G8 addressed the other EU members with a proposal to fundamentally step up efforts to avert climate change. The participants in the discussion suggested channelling for these purposes a quarter of the total EU budget for the period 2021-2027. In addition, they proposed to introduce a ban on EU subsidies for projects that could worsen greenhouse gas emissions into the environment. And they also called for supporting the Community’s commitment to the “zero emission” target by 2050 “as a deadline.” . According to observers, what led to a rapid change in the attitude of many EU countries to the issue was a wave of environmental protests that swept through a number of major European cities, including London, Brussels, Stockholm, Paris and Berlin. Also, the change in attitudes could be attributed to the success of the “green parties” in the elections to the European Parliament held in May.

In Eastern Europe, the new “super-ambitious” climate initiatives were met with outright mistrust. During a summit in Brussels at the end of June, Poland, the Czech Republic, Hungary, and, with certain reservations, Estonia, blocked a clause on the implementation of the “2050 Initiative” in the EU strategy for 2019–2024 . Instead of clearly defined obligations of the European Union, with a fixed deadline of 2050, vague wordings were added to the final document. Under the new agreement, only an “overwhelming majority of member states” intend to achieve a zero impact of their economies on the climate, the so-called “climate neutrality”, by 2050 . The refusal of EU members to unanimously support the new climate strategy has also cast doubt on the commitments undertaken by the EU under the Paris Climate Agreement. At the moment, all EU countries are obliged to reduce greenhouse gas emissions by 20 percent of the 1990 level by 2020. And  by 40 percent by 2030. However, many member states cannot meet  these requirements, some “significantly”. The decisions taken in Paris in 2015 require signatories to prevent a rise in global temperature by more than two degrees Celsius. And “ideally”, the temperatures should not increase by more than 1.5 degrees.

Countries of Eastern Europe came up against the new commitments even despite the “softening” of the original wording. Technically, the EU may soon get back to discussing the initiative: after the EU presidency goes to Finland, the issue can be added to the agenda again. Finland is one of the most ardent supporters of stepping up measures to address climate change. However, the recent failure means that, in practical terms, the EU will be able to return to the problem only after 2024. As they explain their position, the Polish authorities focus on preserving the country’s energy security, – up to 80 percent of the country’s electric power is still generated using coal. Warsaw also advocates a substantial increase in subsidies from the EU budget for upgrading the energy sector. The Prime Minister of the Czech Republic has pointed out that it is impossible to predict what course the events will take in 30 years. Finally, a country’s formal endorsement of the “2050 Initiative” does not necessarily presuppose unconditional support for the EU climate policy in practice. According to the NGO Climate Action Network Europe, in addition to Poland, the Czech Republic, Hungary and Estonia, a cautious position has been demonstrated by Bulgaria, Lithuania, Slovakia, Romania and Croatia. Austria, Greece, Cyprus and Latvia have a number of  reservations.

What are countries of Central and Eastern Europe afraid of? First of all, they fear for the economy. Decades after they switched to market economy, their per capita income is 2 to 2.5 times less than in Germany or France. Less diversification of economies, technologically and infrastructurally outdated generating capacities – all this puts Eastern Europeans on the losing side against the background of the more developed members of the European Union. Meanwhile, many leaders of Central and Eastern Europe owe their popularity with voters to the high rates of economic growth. It is no accident then that the success of the “greens” in Eastern Europe was much more modest than in the west and in the center. Eastern European voters are literally frightened by the high cost of today’s “green” technologies, which promise far from clear prospects and only after decades. Politicians cannot but take into account public sentiments at home. In addiiton, the EU economy is slowing down. Even Germany, whose production chains attract many suppliers from the “east”, teeters on the brink of recession. Not surprisingly, environmental issues in such a situation are fading into the background.

In addition, the ambitious slogans about the forthcoming triumph of “green” technologies do not always have a leg to stand on. In February The Economist reported that the income level of traditional energy companies is still higher than the performance of renewable energy projects. The global demand for oil continues to grow by 1-2 percent yearly – just like in the previous fifty years. Most environmental activists are still driving cars and using airplanes. It would be premature to rely on breakthrough technologies, which are not available for mass production yet. The volume of investments in renewable energy sources around the world is about 300 billion dollars a year – a drop in the ocean compared to investments in the development of fossil fuels. And even though they talk much about the early arrival of electric cars, in 2030, up to 85 percent of cars will still be running on internal combustion engines.

Meanwhile, the “2050 Initiative” in its current form is too vague to sound convincing, does not contain any, at least preliminary, estimates of potential costs or possible damage to economic growth. Given the situation, it is very difficult to convince the majority of voters that measures aimed at reducing harmful emissions will not inflict a catastrophic blow to their personal well-being. What makes it all worse is not only by the “bad example” of the USA, which many CEE countries are looking to. After America withdrew from the Paris Climate Agreement in 2017,  the Trump administration has been taking steps to revive the national coal industry. Even such environmentally advanced countries as France and Germany have yet to devise a policy that could convince wide sections of society of the benefits of higher prices for eco-friendly products and services. One of the motives behind mass protests of the “yellow vests” in France was fears that that the government would boost taxes under the pretext of the need to “spend more on “green “technologies.” As for tax cuts to stimulate the economy, the proposal is not popular with top-level officials in most EU countries. Meanwhile, fiscal incentives, which encourage public support for technological and cultural changes that come handy for combating climate change, are seen by specialists as one of the most reasonable measures that can alleviate the fears of skeptics.

Since most countries of the world are characterized by a “mixed” picture of the  “pluses” and “minuses” of global warming, many people in the east of the EU are questioning the point of introducing a fundamental change to the economic structure of several decades in an attempt to reverse the negative climatic phenomena in the environment. Should we focus instead on political, economic and social measures that would help individual countries and associations to adapt to the objective trends in nature? Or, could it be an attempt, under the guise of solving environmental problems, to restrict development opportunities for competitor countries, either present or potential.

In the conditions of ever-increasing rivalry between states, the environmental issue becomes a convenient and attractive tool to discredit the opponents. East Europeans point out that rich countries, including Great Britain and Germany, are still using coal in order to maintain their economic growth. In many cases, it means tax exemptions and even budget subsidies. A dramatic reduction in the use of coal for production purposes and heating needs may require extensive political efforts, including an increase in subsidies from EU funds, for which Western members of the alliance will not be ready for years to come. For some environmental groups, the struggle for the protection of the environment outweighs any objective needs for the development of both individual territories and entire states. At times, it is next to impossible to separate the recklessly sincere idealism from the “lobbying of new-type corporate interests”. As a result, criticism of the fuel-based development model turns out to be an instrument of competition that promotes the interests of the green economy — which is, as it has become clear in recent years, far from ecologically perfect.

The conflict over how to harmonize the environmental policy runs the risk of becoming yet another confirmation of an alarming trend for the EU of late. It turned out that “subsidies from the European Union are no longer part of its policy, which was designed to compensate for the internal imbalance in the EU, but rather a kind of gift for loyalty. We mean the well-known ‘divide-and-rule’ policy ”, a deliberate separation of countries and regions in the Community that are not ready to unconditionally follow the decisions which are passed by the leading countries and Brussels.

Is the EU able to “overcome the de facto economic, social and cultural inequalities” which are still visible among its members? Or will these inequalities be joined by ecological and climatic ones over time?

Finally, radicalism among the ecologists frightens even Western Europeans. Emmanuel Macron demonstrated skepticism over the statements made in the UN by Greta Thunberg, a young Swedish activist who became known throughout the world in 2018 thanks to the idea of a global environmental “strike of school students”. According to the French leader, Thunberg’s “radical” position is destructive because it could trigger antagonism in society. The day earlier, German Chancellor Angela Merkel praised the activist’s speech in the UN, adding, however, that Thunberg had overlooked a number of key trends. The German leader spoke about new technologies and innovations that “play a significant role in energy and climate protection”.

The crises of the past decade have “revealed the ever-growing differences within the European Union”, and have significantly undermined the previously unquestionable authority of “old” Europe in the eyes of many residents of the East. Against the background of a continuing asymmetry in the socio-economic situation, many CEE countries have managed to overcome the effects of the global crisis better than their Western partners. A number of observers have even outlined the prospects of turning Central and Eastern Europe into a “new driver” of economic growth within the entire EU. Under these conditions, it is not surprising that East Europeans are set on preserving the freedom of socio-economic maneuver in climate change issues in order to avoid their unjustified politicization. Russia shares these kinds of aspirations. By ratifying the Paris Climate Agreement, Moscow declares its readiness by joint efforts to work out such a paradigm of relations with nature that would meet the interests of long-term development. Russia is striving to strike a balance between a clean and safe environment, on the one hand, and the preservation of national competitiveness, on the other. 

From our partner International Affairs

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What lies ahead for Meloni’s Italy

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Not many would have predicted that 100 years after Benito Mussolini’s Black Shirts marched on Rome, a leader claiming lineage from the same political ideology would ascend to power. Georgia Meloni is on her way to become the first woman Prime Minister of Italy, hailing from a party that emerged out of the neo-fascist Italian Social Movement (MSI). Her rise to power is as dramatic as that of the fascist dictator. Brothers of Italy, which Meloni founded in 2012, recorded a measly 4.3% of vote in the 2018 elections. In the four years since, the party has gained significant ground and is now set to win 26% of the vote in a coalition with Matteo Salvini’s Lega and Silvio Berlusconi’s  Forza Italia. With the right wing coalition coming to power, major shifts in Italy’s domestic and foreign policy are expected. But taking command at such a turbulent time will be a task easier said than done. Hence, it will be interesting to see what course Meloni’s coalition might take.

As things stand, Italy is edging towards a major economic crisis. The continued war in Ukraine has terribly affected Italy’s economic growth in the post-pandemic era. The rising prices of energy resources and supplies have held back household consumption, slowing the rate of recovery. The economic growth projection for 2022 stands at 2.5% while 2023 is estimated to see a further fall to a mere 1.2%. Italy’s debt crisis has also severely worsened with rising interest rates in the post-pandemic years. The national debt currently stands at about $2.9 trillion which is estimated to rise steadily, touching $3 trillion i.e. around 150% of the GDP by the end of 2023.

In her election campaign, Meloni has addressed these economic woes with a populist vigour. Meloni advocates for a protectionist stance. Her policies include a business-friendly dispensation, steep tax cuts for all, early retirement and amnesties to settle tax disputes. While the right-wing coalition manifesto pledges ambitious spending plans, Meloni has promised to keep the public finances in check. Key to keeping the economy afloat and achieving these targets will be the new government’s efforts to meet the reforms and targets agreed by the Draghi administration and the European Union to obtain the €750 billion Covid recovery and resilience fund. Meloni has already indicated that she will seek some changes to the agreed plans, making it a priority for her new coalition.

While Meloni will become Italy’s first woman Prime Minister, her case presents an example of weaponising women empowerment to further autocracy. Under her leadership, Brothers of Italy has rolled back women’s rights in the localities it governs. These rollbacks include making abortions harder to access. Her party’s slogan – “God, Fatherland, Family” – is reflective of their intentions of leading a patriarchal setup in the guise of a woman leader. With their coalition coming to power, it is likely that Meloni and her party will continue on the route of further cutting back on women’s rights and freedom.

The right-wing parties have stressed on the importance of Christian conservative familial values in their election campaign. This has resulted in vicious attacks on what Meloni calls “the LGBT lobbies” who have “harmed women and family by destroying gender identity.” Last year, Brothers of Italy and Lega blocked ratification of the Zan bill which sought to categorise violence against the LGBTQ+ community as a hate crime. The two parties opposed the bill, calling it unnecessary and against freedom of expression.

Another part of Meloni’s populist rhetoric are her claims of “ethnic substitution.” She has repeatedly claimed that Italian identity is being erased by the globalists and EU officials, who have “conspired” to unleash “uncontrolled mass immigration.” In the past, she has infamously proposed a naval blockade of the Mediterranean to stop migration to Italy. While the coalition has promised stricter border controls, blocking boat landings and establishing EU centres to evaluate asylum applications; they have also assured to regulate legal migration more smoothly, with initiatives to integrate recent immigrants.

Meloni’s stance on the European Union has been the highlight of her election campaign. While she no longer advocates for a complete withdrawal from the organisation, Meloni is vehemently against its current state of operations. “I want a Europe that does fewer things and does them better, with less centralism, more subsidiarity, less bureaucracy, and more politics,” she said. She has pushed for an ‘Italy first’ approach, countering the regional integration of the EU. Addressing a rally in Milan earlier this month, Meloni said, “In Europe they are a bit worried. The fun is over, Italy will start to defend its national interests, as others do.” Meloni has indicated her support for Poland and Hungary in their current ongoing dispute with the European Commission and the European Court of Justice. She has previously made her admiration of Hungarian Prime Minister Viktor Orban clear, calling him a ‘democratic leader’ in the face of stark EU criticism over authoritarian measures.

While Meloni and her coalition have been critical of the European Union, it is unlikely that it will lead to drastic changes in the Italian policy towards EU integration. The economic challenges that the new government finds itself in will largely affect its decision making. To obtain a much needed relief fund from the organisation, it is important for the coalition to agree to certain terms proposed by the EU. Hence, while they can be a bit more assertive in their approach, complete rejection of the EU is not on the cards.

However, Italy’s foreign policy is set to see new developments. Meloni has previously condemned Russia’s war on Ukraine, supporting sanctions against Russia and supplying weapons to Ukraine. “It is the tip of the iceberg,” she said, calling the conflict’s objective as “revision of world order.” Meloni has also been critical of China, condemning the country’s “economic expansion measures.” In 2019, Italy became the first major nation to participate in the Chinese Belt and Road Initiative (BRI), a programme to expand Beijing’s economic outreach. Meloni has since criticised the pact as a “big mistake,” indicating that Italy will re-evaluate its stance on the pact under her administration. She has also been vocal about the Taiwan issue, calling it an issue of “essential concern for Italy.” She also described Chinese threats against the island “unacceptable,” calling Taiwan and Italy’s relationship a “sincere friendship.”

Giorgia Meloni is not so different from the Trumps and Bolsonaros of our world. She gained popular support on the back of economic failure under the previous administrations and emerged as the clear winner once Mario Draghi resigned following the economic and political turmoil. Meloni fills the void that the centre-left parties have failed to address so far. She has presented herself as a new alternative against an opposition that now seems much distant from the needs and aspirations of the people. Her populist rhetoric has only helped to further fuel her rise to power. Facing economic catastrophe for the longest time, the Italians now demand security and stability. However, her anti-immigration and anti-EU policies do not present an answer to the problems Italy faces. Her populist rhetoric is highly unfortunate and raises the threat for hate crimes in the future. Her authoritarian stance coupled with the ‘Italy first’ rhetoric will not fare well in the future. In deep economic stress, Italy needs to welcome immigrants who can actively contribute to their economy and stabilise the turbulent waters.

Furthermore, Meloni’s election presents a threat to the democratic system in Italy. The right-wing coalition is in a position to negotiate a constitutional amendment that approves the President to be elected directly by the people. Currently, the President is elected by an electoral college which was setup in 1948 as a measure to prevent the future possibility of a government takeover by the fascist forces. While the Presidency is a figurehead role in the country, Brothers of Italy have advocated for a more robust head of state with a popular mandate. This advocacy for “Presidentialism” may have grave repercussions for Italy’s democratic setup, making the President a politically motivated role which will severely affect the system of checks and balances in the present system.

It is difficult to say whether Meloni’s coalition will be able to weather the storm in the coming years but one thing that is certain is that this election is one for the history books where victors are set to write the fate of Italy, once again.

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Smile Diplomacy: From Putin to Macron

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Photo:kremlin.ru

In the world of politics, what should be done when things don’t go according to plan? The answer of Talleyrand, the French politician of the 18th and 19th centuries, was simple: organize a conference!

Perhaps it is due to this lesson from the French politician and diplomat that Vladimir Putin held his conference under the title of “Economic Boom of the East” in the port of Vladivostok, and French President Emmanuel Macron is going to start his conference under the title of “Political Council”, Europe” next month in Prague, the capital of the Czech Republic.

Let’s talk about Putin first. No matter how we look at it, the course of things is not as intended. The war in Ukraine is practically frozen in a north-south line. The pitched battles, the use of heavy artillery, the high casualties, and the ever-increasing logistical problems are more reminiscent of the First World War, or even the Crimean War than modern 21st-century war.

Last week, the first sign of Putin’s desperation to fully win this war appeared. In a short televised address, the Russian president claimed that his goal was to preserve the “Russians” of the Donetsk and Luhansk regions. In other words, it has moved away from its initial portent of removing Ukraine from the map as an independent country. Is he now calling for a limited deal that would put parts of eastern Ukraine under Russian control forever, if ever? No one knows the answer to this question, except maybe Putin himself. But, surprisingly, neither Volodymyr Zelensky, the president of Ukraine, nor his American and European supporters have shown any attention to this possible retreat of Putin.

Failure in the war is not Putin’s only concern. Contrary to his claim that Western sanctions have not affected the Russian economy, it can be seen that things are not going as planned on that front either. Of course, Russia has been able to find new customers for its oil—customers like India, China, and Turkey, which have reduced their purchases from Iran and Iraq by receiving significant discounts to take advantage of the Russian auction.

However, double-digit inflation, the closure of hundreds of factories, widespread shortages of many goods, a 25 percent drop in viewership of Putin’s state television, and the flight of tens of thousands of middle-class citizens show that the sanctions are having little effect.

The Vladivostok conference was formed with the slogan “The future is from Asia”. Putin’s message was: “Asia builds the future, while the West falls.”

Of course, we heard this slogan in the 1950s, during the last years of Stalin’s rule over the Soviet Union. Stalin spoke of “Young Asia and the West of Fertut”. Today, Putin plays the same music with notes from the Tsarist Imperial Symphony added.

According to Khmiakov, the Pan-Slavist guru, Russia is a “two-headed eagle”: one head looks to the East and the other to the West.

In the beginning, the double-headed eagle was the symbol of the kings of Hayatele in Asia Minor; But after a few centuries, the Byzantine emperors usurped it. In 1471, Ivan III, Tsar of Russia, married Princess Sophia, the daughter of the Byzantine Emperor, and the symbol of the double-headed eagle was assigned to Russia. Today, Putin is bringing this symbol, which was abandoned during the Soviet Union, back to the scene.

However, an eagle facing east is nearsighted. Out of 49 Asian countries, only 17 countries appeared seriously in this game. None of the heads of Asian countries were present at Putin’s show. The highest-ranking foreign personalities were the Prime Ministers of Armenia and Mongolia. General Ming Aung Heliang, the leader of the Myanmar (Burma) coup plotters, was also present. But China was represented by Li Zhangsu, the third leader of the Communist Party. Even the leader of North Korea, Kim Jong Un, did not accept the suffering of a trip to Vladivostok. Major Asian economic powers such as Japan and South Korea, or even Taiwan, were not present.

Putin’s hope is to develop the “Eurasian” bloc, which was formed years ago to compete with the European Union, but it never got anywhere. However, even if the participants in the Vladivostok conference were to join the bloc, they would collectively account for nearly 20 percent of global GDP. Currently, almost all of them are closer to the European Union and the United States than to Russia in terms of foreign trade. Russia’s own share of trade with bloc countries does not exceed 12%.

From any angle, the Vladivostok gathering is one of those shows that are referred to as “posturing” in the diplomatic dictionary. In this show, the host appears as the leader of a large group, but in reality, there is no group. The choice of Vladivostok, which means “ruler or emir of the east”, maybe a coincidental sign of Putin’s illusions to lead Asia.

It is interesting that in Vladivostok there was no mention of the war in Ukraine. None of Putin’s entourage was wearing a T-shirt with the letter Z, and his bulletproof car did not have a Z mark.

The participants of this show undoubtedly know that Moscow is closer to Berlin than Vladivostok and whatever the underbelly of history, Russia’s national and cultural orientation is to the West, not to the East. Alexander Herzen, a 19th-century Russian writer, wrote: “Russia looks to the East to remember what dangers threaten its existence, and looks to the West to find out how to neutralize those dangers.”

Currently, Putin is not the only leader who is trying to polish his political image by playing the conference game. French President Emmanuel Macron is also busy organizing Smile Diplomacy. The Prague conference for the formation of the “Political Council of Europe” is a platform for introducing Macron as a strong European leader. With Britain mired in crisis, Germany governed by a floundering coalition government, and Italy on the brink of an election with uncertain results, Macron hopes to present France as the anchor of Europe’s stormy ship.

Macron’s failure to win an overwhelming majority in the parliamentary elections has limited his possibilities to exert power in the domestic political scene. Therefore, like many politicians in a similar situation, he turns to show his power in the foreign policy scene.

But Macron’s show, many analysts believe, will not have a better result than what Putin achieved in Vladivostok. In a sense, Macron’s show may even be harmful. Trying to prevent Turkey’s participation, under the pretext that a large part of Turkey is located in Asia, can deepen the gap between Western powers and Turkey.

Turkey’s exclusion from the Prague show could help re-elect Recep Tayyip Erdogan as president. Using an anti-Western discourse and being closer to Russia along with claiming to be the leader of the Islamic world, Erdogan is trying to distract Turkey’s public opinion from its failure in economic and social fields. In the last two decades, this is the first time that Erdogan is on the verge of an electoral defeat. Macron’s anti-Turkish stance could be a bitter irony that guarantees Erdogan’s victory.

Macron’s proposal has other disadvantages as well. First, one should ask what is the need for another “conference” in Europe. Aren’t the “European Security and Cooperation Organization” and “Council of Europe” which include all countries of the continent enough? After all, didn’t Britain leave the European Union under the pretext that it does not want Europe to participate in the regulation of London’s policies? Is the “Brexit” government willing to participate in a new grouping, with unknown goals and criteria, after leaving an established union with clear goals?

Currently, a growing trend across Europe, from Poland to France, is to move away from continental groupings. Even the European Union has lost some of its legitimacy and popularity at this time. The growing trend in most European countries is towards limited nationalism within the borders of each country, emphasis on national sovereignty, and striving for self-sufficiency. In other words, the globalism of the past two or three decades is receding and bilateral relations are becoming more acceptable.

You might say that Smile Diplomacy in Vladivostok or Prague wouldn’t hurt anyway. Unfortunately, this assessment of yours is not correct. Smile Diplomacy masks the fact that Russia and Western Europe do not currently have the ability or will to emerge from the crisis caused by war, economic stagnation, inflation, and environmental threats. Smile Diplomacy offers sideshows instead of serious policies.

Dramatic games allow Putin to mask his failure on the battlefield. On the other hand, Macron and other European leaders hide their inability to stop the war in Ukraine with the Prague show. Both sides are still dreaming of “victory”. Unaware that war never has a winner, because in every war both the victor and the vanquished will be losers in the end. Zelensky seems to think that defeat is better than surrender because it at least offers the badge of hero and martyr. On the other hand, Liz Truss, the new British Prime Minister, speaks of “victory”. The demonstrations in Vladivostok and Prague prevent these irresponsible positions from being seriously discussed.

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In a Crisis-Laden World, Serbia Should Think Green

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Countries around the globe are facing persistent economic headwinds. Trade and supply chain disruptions resulting from the Covid-19 pandemic, the war in Ukraine and extreme weather, have led to surging food and energy prices. Inflation is increasing at an alarming rate in many countries and economic growth is slowing. Policy makers around the world face difficult challenges and complex trade-offs. They need to maintain fiscal sustainability and rebuild economic buffers depleted during the pandemic; but also cater for the needs of the most vulnerable, who feel the impact of higher food and energy prices. As winter is approaching, countries in Europe are scrambling to secure sufficient energy supplies to keep homes warm and factories running. In this challenging context, the urgency of actively expanding renewable sources of energy, pursuing greater resource efficiency, and transitioning away from energy and emission-intensive industries is greater than ever.

Growth outlook

The World Bank expects global economic growth to slow in 2022 to 2.9 percent, from 5.7 percent in 2021. A small and open economy like Serbia will feel the impact of the global slowdown. For Serbia, in 2022, we project an economic growth rate of 3.2 percent, following a 7.4 percent expansion in 2021. Serbia is equally feeling the impact of rising inflation: the NBS expects an inflation of nearly 14 percent in the third quarter of this year.

Higher energy prices have put pressure on current account balances for energy importers around the world. Serbia has also been affected. Its utilities have incurred exceptionally high costs of importing electricity and natural gas on the wholesale markets. While the government has financially supported these companies, it has so far only partially passed these additional costs on to consumers.

Mitigating the impacts of the energy crisis remains the biggest challenge for the new government. Serbia entered the current crisis in a strong macro-fiscal position, but fiscal space is limited. Short-term measures to support households and small and medium enterprises will need to be targeted, time-bound, fully budgeted, and transparent.

Despite the pressures, it is essential that policymakers do not lose sight of structural reforms that would boost Serbia’s potential rate of economic growth over the medium-term, including steps to increase market competition, reform state owned enterprises, raise human capital and productivity, and improve the efficiency of public spending.

Green Serbia

Sustaining long-term growth and resilience also requires putting the ‘green agenda’ at the center of policymaking. The country can do more to increase energy efficiency and lessen the impact of pollution on the health of people and the environment. Staying ‘brown’ runs the risk of slowing down Serbia’s accession to the EU, compromising access to finance, creating trade barriers, limiting the take up of modern technology, and failing to boost productivity. Going ‘green’ would be beneficial on all these fronts. It would also facilitate the structural transformation of the economy through the adoption of new technologies and knowledge. All this will require measures to facilitate a ‘just transition’ for workers and communities who depend on polluting industries for their livelihoods.

Serbia is a signatory to the Paris Agreement under the United Nations Framework Convention on Climate Change, aiming for a climate neutral world by mid-century. The Government recently published its updated Nationally Determined Contribution under the Paris Agreement, pledging to cut greenhouse gas emissions by 2030 by 33.3 percent compared to 1990.  Accompanying plans and strategies are under preparation, but the direction of travel is clear: Serbia urgently needs to boost domestic renewable energy production, increase energy efficiency, and gradually lower dependency on fossil fuels, especially coal and oil, for power generation, heating, and transport.

The World Bank is supporting Serbia’s progress on all these fronts both through financial and technical assistance.

Op-ed originally published in Kurir daily via World Bank

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