Guns or butter: the fiscal readiness of EU member states for Russia’s war against Ukraine
GÁBOR KUTASI – ÁDÁM MARTON – GRZEGORZ WASZKIEWICZ:
The guns or butter dilemma is a special case of the trade-offs in public funds, which arises from the choice between defense spending with negative sum and welfare expenditures. Russia’s war against Ukraine activated this fiscal dilemma in various regions of Europe. The study is the first step in a multi-stage research process, in which it measures the preparedness of the selected European NATO and EU member countries in terms of the redistribution between defense and welfare expenditures using the cluster analysis method. The cluster variables include defense spending, CDS margin as indicator of risk for public debt, tax wedge as fiscal room of manoeuvring, the Gini index, and geographical distance from Russia. The analysis clearly distinguished five clusters. The major conclusion is that the geographical location gravitating to the war zone has already strengthened the redeployment of general government expenditures towards defense spending even during the less intensive period of the military conflict before 2022. Additionally, the fiscal room of manoeuvring, which would mitigate the welfare sacrifice of the redeployment, is also an important factor of the readiness.
Journal of Economic Literature (JEL) codes: C38, H56, I39
BULLETIN
Economic globalisation and global value chains
ISTVÁN ÁBEL – BENCE GERLAKI – MÁTÉ LÓGA – GYULA NAGY
This paper focuses on the negative changes in the drivers of economic globalisation and the development of global value chains in recent years. Several phenomena point to a slowdown and a shift in the direction of globalisation, while increasing geopolitical uncertainty has exacerbated disruptions in the supply chains linking the most diverse regions, industries and firms of the world economy. Mitigating the resulting risks has triggered policy responses – like decoupling, de-risking, reshoring, near-shoring and friend-shoring – and has also increased the importance of corporate adaptation and resilience. This is likely to lead to a new balance between globalisation and deglobalisation in which international production networks will continue to play a central role despite mounting pressures. Analysing the changing dynamics of these developments can provide a framework for discussing the economic policy responses to moderate the consequences of this challenge.
The new magic bullet of state aid? IPCEIs in Europe and Hungary
ÉVA VOSZKA
Industrial policy, including one of its key instruments, state aid, is experiencing a renaissance worldwide. As international competition between regions to increase state aid for companies intensifies in the early 2020s, the European Union is also trying new approaches, one of which is the funding of Important Projects of Common European Interest (IPCEI). The still incomplete dataset shows a strong concentration of this subsidy at both country and company level. This is why it is important to investigate what Hungary’s chances are of getting involved. After presenting and critically assessing the scheme, the paper explores this, analysing available documents and drawing on the views of the managing authorities, some of the companies and consulting firms involved. The initial experience suggests that, due to the basic features of the scheme and the characteristics of the Hungarian institutional system, IPCEI will not be the main instrument of economic restructuring in the country. Institutional and financial capacity constraints, lack of expertise and experience in many fields, poor coordination between governmental organisations and the various subsidy schemes, the weakness of Hungary’s formal and informal lobbying in the European Union, as well as the
lack of trust and other specific features of the domestic business culture are all obstacles to the effectiveness not only of IPCEIs but also of other governmental policies.
Journal of Economic Literature (JEL) codes: H71, L52, O31, O32.
BOOK REVIEW
From illiberal democracies to illiberalism
Review on the book of
Sajó, András – Uitz, Renáta – Holmes, Stephen (Eds.): Routledge Handbook of Illiberalism
(Routledge, London-New York, 2022, 998 pages)
FERENC KOLLÁRIK
By the last decade of the 20th century, it had become increasingly obvious that democracy, in and of itself, did not guarantee the promotion and protection of liberal values and freedoms. The term illiberal democracy was coined and proliferated to depict this phenomenon. Although the concept has been criticized by many, it has quickly become a very fashionable term in political science. Nevertheless, the professional discourse on the phenomenon has changed and expanded significantly in recent years, leading to illiberalism becoming a separate field of research. In fact, the concept covers an exceedingly complex set of phenomena, which overlaps with other ideologies and concepts in numerous aspects.
Journal of Economic Literature (JEL) codes: F52, K16
Keywords: illiberalism, illiberal democracy, democracy, rule of law
LEGAL SUPPLEMENT
Why different? Specific characteristics of the Hungarian battery industry – Legal background, environmental impacts
ANDREA ÉLTETŐ
Based on official documents, the paper addresses in detail, why battery production in Hungary cannot be discussed as if it were in another European country. The costs and risks of Hungarian battery production are high because of its specific characteristics, and if current practices remain unchanged, the environmental, health and social damage it causes will directly outweigh the benefits for the population. Experience has shown that large companies will obtain environmental permits (if they are required to do so at all), no matter how unclear certain issues remain. Regulations have not been adjusted to this huge battery industry. And even in cases where rules are appropriate, the centrally-mandated authorities are not only lenient, but even break the rules themselves in the interests of the companies. New government regulations are not helping the public, but the companies. There is also a weakening of transparency and inertia on the part of the authorities in many areas. Overall, the environment and nature protection aspect is not really being taken into account in this area.
Journal of Economic Literature JEL code: O25, P28, Q25, Q58.