Official Minsk imposes its own game to Brussels

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April 22, 2016 18:54

Amid growing tension in Russia – EU relations, the Belarusian authorities aspire to take the lead in their relations with Brussels. The Belarusian government considers the resurgent geopolitical confrontation in Europe as a window of opportunity to develop Belarus – EU dialogue without fulfilling the main requirement, i.e. the release of all political prisoners. However, Belarus’ dependence on Russia and the increasingly aggressive foreign policy of the latter seriously limits Belarus’ participation in European integration initiatives.

During his visit to Minsk, Lithuanian Foreign Minister Linas Linkevičius met with his Belarusian counterpart Vladimir Makei, Prime Minister Mikhail Myasnikovich and civil society representatives.

Amid growing geopolitical confrontation in Europe, official Minsk aspires to settle the Belarusian-European relations by taking a neutral passion in the Russo-Ukrainian conflict and not openly supporting Moscow’s actions vis-a-vis Ukraine (or other countries in the region, which signed association agreements with the EU). The Belarusian leadership is ready to deepen cooperation with the EU in some areas (those considered not overly politicised), such as visa liberalisation and economic cooperation.

Against the background of Russo-European escalation due to the downed Malaysian Airlines’ passenger plane and military conflict in south-eastern Ukraine, Belarus has increased her official contacts with Brussels. While the Kremlin is busy curbing sanctions’ pressure from the West in a response to the plane crash, Belarus attempts to settle her relations with the West without undue interference from the Kremlin. 

For instance, ahead of Belarus’ Foreign Minister’s visit to Brussels, the Belarusian authorities have issued an entry visa to German Bundestag Deputy Marieluise Beck, whose goal was to study the human rights situation and the political situation in Belarus. Marieluise Beck is a well-known critic of Belarus’ official policies; she has been denied entry to Belarus for three years in a row.

The Belarusian government also demonstrated interest in cooperation with the EU within the Eastern Partnership Programme. Primarily, this interest stems from the growing economic imbalances and the need for regular external borrowing to keep the national currency afloat. For instance, Belarus’ Prime Minister Myasnikovich said, that “more serious projects, such as infrastructure projects could be developed”. 

Amid the unpredictable Kremlin’s foreign policy, the majority of the opposition is not interested in throwing a spanner into the Belarus-EU machinery over “pragmatic” issues. 

Meanwhile, the Kremlin’s aggressive foreign policy and Belarus’ huge dependence on Russia, prompt her to cautious actions. In order to mitigate the Kremlin’s potentially negative reactions to enhanced cooperation between Belarus and the EU, the official Minsk proposed to involve Russia in the Eastern Partnership initiative “in order to pre-empt the emergence of new dividing lines in the region”.

The Kremlin reacted nervously to Georgia, Moldova and Ukraine (the EaP countries) signing the association agreements with the European Union and retaliated with adopting import restrictions on some goods from these countries. The Belarusian leadership supports the division of the Eastern Partnership countries into two categories in an attempt to reduce the Kremlin’s reactions towards this initiative. 

All in all, the developing Belarus-EU relations will be restrained by Belarus’ dependence on the Kremlin. Most of President Lukashenko’s opponents are ready at least not to hinder the strengthening Belarusian-European cooperation. However, the Belarusian government will not ease the domestic political climate ahead of the presidential campaign, despite some symbolic steps inter alia, the release of some political prisoners. 

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Growth in real wages may disrupt macroeconomic balance in Belarus
October 02, 2017 12:12
Фото: Дмитрий Брушко, TUT.BY

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.

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