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How should Europe respond to sovereign investors
in its defence sector?
policy brief by Clara Marina O'Donnell, September 2010
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| A small number of sovereign investors, sometimes originating from non-democratic states, are buying shares in European aerospace and defence companies. Some EU governments have responded by calling for tougher controls on foreign investment in their defence industries. Clara Marina O'Donnell argues that EU countries should not reject sovereign investors in principle. Instead, they should rely on investigative committees to assess the possible risks of sovereign and other foreign investments. And in the long term, EU member-states should co-ordinate their efforts. |
India's response to China's rise
policy brief by Charles Grant, August 2010
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India and China, rising powers in the same part of the world, have much in common – but mistrust each other. Many Indians are nervous about the growth of Chinese power. They worry about China’s military build-up and its alliances with some of India’s neighbours. India’s response has been to strengthen its own economy and to move closer to other countries worried about China, including the US. In this new CER policy brief, Charles Grant assesses the Indian strategy for coping with the rise of China. |
A transatlantic defence market, forever elusive?
by Clara Marina O'Donnell, July 2010
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Despite close political and military ties across the Atlantic, defence markets are fragmented by burdensome export controls and government reluctance to buy equipment from abroad. For the US, the current state of affairs is sustainable, although very inefficient. But in Europe, defence budgets have become too small to maintain national industries and the survival of the European defence industrial base is at risk. As the economic crisis forces transatlantic allies to cut defence spending, Clara Marina O’Donnell argues that European governments must stop shielding unsustainable national defence industries. In addition, current EU and US reforms to loosen export controls should be more ambitious and co-ordinated. |
How to reform the Russian economy
policy brief by Sergei Guriev, July 2010
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| Russia's economy faces tough medium-term challenges: over-dependence on oil and gas, state-dominated industries and meddlesome bureaucrats. If Russia wants to avoid Brezhnev-era stagnation, it needs audacious reforms. Sergei Guriev argues that the best way to create a pro-reform constituency would be to privatise state-owned companies and make it easier for small businesses to grow. Private entrepreneurs would then lobby for a better business environment. Russia would also benefit from an outside anchor for reforms. However, Russia's ruling elites gain handsomely from the current opaque and skewed economic environment; they have little interest in radical change. |
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| Germany agreed to support its eurozone partners only slowly and reluctantly. Domestic political constraints and Angela Merkel's caution were partly to blame. But underlying shifts in Germany's stance towards the EU mean that any German government will take a more hard-nosed approach to European policy-making. The current rift between Berlin and its European partners needs to be handled carefully. The implications of a more eurosceptic Germany for the future of European integration would be severe. |
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| NATO spends too little time thinking about potential conflicts close to home and developing the means to react. Some of its members – mostly in Central and Eastern Europe – worry that the alliance would not be able to come to their defence in a crisis. NATO should take 'reassurance' measures to address this spreading sense of insecurity. It should create new mechanisms to study crises in and around Europe, improve its co-operation with the EU, and upgrade ports, air bases and other military facilities in Central and Eastern Europe. |
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Nabucco - a pipeline to bring Caspian and perhaps Middle Eastern gas to Europe - is the flagship project of the EU's fledgling energy diplomacy. Nabucco would add to the EU's energy security, strengthen its neighbourhood policies and improve relations with Turkey. Since these benefits do not accrue to the companies that want to build the pipeline, Nabucco warrants more public support. But the EU also needs to admit that its power to secure gas supplies from Azerbaijan, Iraq and Turkmenistan is limited. |
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The EU and its governments make a substantial financial, civilian and military contribution to Afghanistan - yet European influence in the country is limited. For too long the EU has had too many offices and representatives there, sometimes working at cross purposes. The EU also lacks a coherent strategy for Afghanistan. Joanna Buckley's policy brief recommends streamlining the EU's presence. She also argues that the EU needs a new strategy built around governance, reconciliation, police training, regional diplomacy, human rights and the rule of law. |
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China has come through the global financial and economic crisis in a confident manner. Economic growth is strong and China's foreign policy has become more assertive. Bobo Lo's essay challenges many western assumptions about the rise of China. He argues that the economy is increasingly driven by domestic consumption rather than exports. At the same time, the Communist Party is consolidating its control while avoiding significant political reform. Lo regards friction between a more influential China and the West as inevitable, and concludes that American and European attempts to 'get tough' with Beijing will achieve little.
press release
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The EU's Lisbon agenda has failed to deliver what it promised. Although most member-states have made some progress towards the targets they set themselves in 2000, their commitment to reform has been half-hearted. This leaves few EU countries well-placed to thrive economically. With public finances in a parlous state following the financial crisis, population ageing kicking in, and strains emerging in the eurozone, the EU must provide new impetus to supply-side reforms. The new EU 2020 agenda needs a stronger method of governance – with public rankings of countries’ performance – and should pay greater attention to skills and innovation.
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Coal will be the biggest single source of electricity for decades to come. Yet the EU is doing far too little to encourage the take-up of carbon capture and storage, a technology which could make coal a low-carbon fuel. This failure threatens not only Europe’s leadership of global climate change policy but also its ability to profit from the emergence of a huge global market for equipment and expertise. Stephen Tindale and Simon Tilford argue that more public money is needed for the construction of demonstration projects, while regulation and strong market signals will be required to ensure mass deployment of the technology.
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Russia's oil-fuelled boom has ended and President Medvedev is calling for radical improvements to the economy. Some EU politicians are tempted to offer Russia a 'modernisation partnership' to re-launch the stalled EU-Russia relationship. However, any EU strategy that is predicated on positive change within today's Russia carries a big risk of failure. There is scope for constructive co-operation in energy and climate change. But the EU should cut back on summits, go slow on a new treaty and be prepared for disagreements over the common neighbourhood. |
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In November 2009, the German government called for the removal of all US nuclear weapons from Germany. But Germany should not claim protection from NATO's nuclear umbrella without sharing the risks associated with hosting nuclear weapons. In addition, removing tactical nuclear weapons would destabilise the alliance: Turkey could feel compelled to develop its own nuclear weapons, while some NATO members in Central Europe would feel even more threatened by Russia. Nevertheless the German proposal could have some merit if it encouraged NATO and Russia to start talks on reducing their tactical nuclear arsenals. |
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The broad orientation of the Commission's economic policy is unlikely to change. It will continue to defend the single market, free trade and a tough competition policy. However, the economic policies of the Commission and the EU as a whole will inevitably reflect the economic backdrop of slow growth and high unemployment. The most pressing immediate challenge for the Commission is to help prevent Greece or another eurozone member defaulting on its debt. Another will be to draw up a convincing 'EU 2020' programme of economic reform. A third challenge will be to reconcile pressure from member-states for more activist industrial policies with a defence of the single market and adherence to an independent competition policy. |
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The looming deadlock in Turkey's EU accession bid stands in contrast with its increasingly active role in the Middle East, the Caucasus and Central Asia. Some observers worry that Ankara is turning away from the West and is instead pursuing a 'neo-Ottoman' or 'Islamist' foreign policy. Turkey should be able to combine its EU aspirations with its re-emergence as a regional power - provided it maintains its western bonds and continue internal modernisation. The EU, meanwhile, must keep the membership talks moving forward while finding a way of co-operating with Ankara in foreign policy that goes beyond the narrow confines of the accession process. |
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In 2008, the global financial system came close to collapse. Ever since, policy-makers have been busy overhauling the way it is regulated and supervised. Will this flurry of activity produce a more stable financial system – and if it does, at what cost? Many of the changes afoot are desirable. But the reform agenda suffers from three flaws: side-issues are getting more attention than they deserve; regulation is doing all the heavy lifting; and not enough attention is being paid to the combined impact of all the changes underway. The regulatory burden is rising, therefore, but policy may not be taking the optimal path to greater stability. To do so, the reform agenda needs to be guided by a clearer sense of priorities.
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