Minsk's refusal to participate in EU program "Dialogue on modernization" exacerbates the crisis of bilateral relations
On 9 July in Minsk, Evdochenko, the Belarusian Ambassador to Belgium and the Permanent Representative of Belarus to the EU, said that Belarus was ready to participate only in EU programs that were jointly developed and offered.
Official Minsk demonstrates that it is not going to participate in EU partnership programs, developed unilaterally. The inhibition of another project on establishing relations points to the continuation of bilateral policy crisis: Minsk is not prepared to make concessions, and Brussels is not ready to engage in dialogue with the Belarusian authorities.
The refusal of the Belarusian side to participate in the EU program \"Dialogue on modernization\" was predictable, and had an objective basis. According to the statement of Evdochenko, this program was developed without consultation with the representation of Belarus in the EU. In addition, the program has already been launched with the participation of the opposition, civil and independent expert community and without the participation of the authorities.
These two factors lead to the fact that the Belarusian authorities are not interested in joining the already existing program, which engages their political opponents. Therefore, the most likely further reaction of the authorities will be at minimum to ignore the program.
More active blocking actions by the authorities, up to the restriction of contacts between Belarusian and European participants, are also likely. In the end, the authorities’ reaction depends on the activity and the spheres of activity of the participants of the program \"Dialogue for modernization\" inside Belarus.
The inhibition of this program at the official level in Belarus will contribute to the inhibition of other Belarus-European projects under the regional program \"Eastern Partnership\", and, in particular, the National Platform of Civil Society Forum. As a consequence, the Western policy vector of the official Minsk remains locked, whereas current projects are limited to a narrow sector of non-governmental and opposition organizations.
The rapid increase in wages has led to a decline in the ratio between labour productivity and real wages to one. Previously, the rule was that enterprises, in which the state owned more than 50% of shares in the founding capital, were not allowed increasing salaries if this ratio was equal to or less than one. The authorities are unlikely to be able to meet the wage growth requirement without long-term consequences for the economy. Hence, the government is likely to contain wage growth for the sake of economic growth.
According to Belstat, In January – August 2017, GDP growth was 1.6%. The economic revival has led to an increase in wages. In August, the average monthly wage was BYN 844.4 or USD 435, i.e. grew by 6.6% since early 2017, adjusted for inflation. This has reduced the ratio between labour productivity and real wages from 1.03 in January 2017 to 1 in the first seven months of 2017. This parameter should not be less than 1, otherwise, the economy starts accumulating imbalances.
The need for faster growth in labour productivity over wage growth was stated in Decree No 744 of July 31st, 2014. The decree enabled wages growth at state organizations and organizations with more than 50% of state-owned shares only if the ratio between growth in labour productivity and wages was higher than 1. Taking into account the state's share in the economy, this rule has had impact on most of the country's key enterprises. In 2013 -2014 wages grew rapidly, which resulted in devaluation in 2014-2015.
Faster wage growth as compared with growth in labour productivity carries a number of risks. Enterprises increase cost of wages, which subsequently leads to a decrease in the competitiveness of products on the domestic and foreign markets. In construction, wholesale, retail trade, and some other industries the growth rate of prime cost in 2017 outpaces the dynamics of revenue growth. This is likely to lead to a decrease in profits and a decrease in investments for further development. Amid wage growth, the population is likely to increase import consumption and reduce currency sales, which would reduce the National Bank's ability to repay foreign and domestic liabilities.
The Belarusian government is facing a dilemma – either to comply with the president’s requirement of a BYN 1000 monthly wage, which could lead to new economic imbalances and could further affect the national currency value, or to suspend the wage growth in order to retain the achieved economic results. That said, the first option bears a greater number of negative consequences for the nomenclature.
Overall, the rapid growth in wages no longer corresponds the pace of economic development. The government is likely to retain the economic growth and retrain further growth in wages. Staff reshuffles are unlikely to follow the failure to meet the wage growth requirement.