Written by Dániel Antal

Central Europe is in a turbulent political mood. The Czech and the Hungarian republics, once the forerunners of political and economic reform have interim governments. In the newish states, the incumbents have gained further popular support in last weekends election series.

In the Czech Republic, after the resignation of the minority cabinet-leader Mirek Topolanek, Jan Fischer, the country’s top statistician has become the interim prime minister, who must have a steep learning curve: he will be acting as the EU rotating president. In the Czech Republic, politics have been characterized with futile elections between the center-right and center-left, often leading to minority and interim government. Mr Fischer has the support of the two blocks the October early election, probably bending to an increasing pressure from the EU that we need a president.

In Macedonia, as expected, Gjorge Ivanov won the presidential election’s in the run-off. The VMRO-DPMNE candidate can claim a landslide victory, almost gaining a 30% margin over the social democratic Ljubomir Frcskoski. As VMRO-DPMNE has been in power and the incumbent had not run for the seat, you can expect pretty much the same politics and a smooth transition. The naming game countinues.

In Moldova, Europe’s pariah-state, which is as poor as a third-word country, a part of its territory is occupied by Russian ‘peacekeepers’, the incumbent Communist party has won the elections. The pragmatic comrades are actually pro-EU, and claim to have grabbed 49,92 of the vote and a 60% majority of the parliamentary streets. The three-party, nationalistic opposition fiercely protests the results and their supporters are on the streets. They are also pro-Europe, but Moscow is not. Expect the frozen conflict to melt as slowly but surely as the ice cap. As Moldova is not a fully working state with a not fully workable democracy, this is the only place in the series where you could have bet on trouble. There are violent demonstrations against the result.

In Slovakia, the nationalist Ivan Gasparovic has won the presidential elections with a 11% margin in the run-off. He has heated up his base with attacking ethnic Hungarians who comprise some 10% of the electorate. As things stand today, after a peaceful period, the two countries might turn against each other. Slovakian nationalims fuels Hungarian nationalism, and the most dovish Hungarian government ever has just failed. Mr Gasparovic enjoys the support of a very strange coalition of the PES member, somewhat populist centre-left Smer party which has to junior partners who are die-hard right-wing populists. He has faced the candidate of a fragmented centre-right plus the Hungarian minority.

And at last, in Hungary, after a tragicomic search for a new prime minister the smoke seems to clear. When Mr Gyurcsány, a strong tactician had resigned, he had to announce his will a second time because nobody believed in it. Within a week, Hungary was flooded with a dozen of candidates to replace him for a mere year until the next elections. A week later his party forced him to quit the party chairmanship as the no serious candidates have accepted a nomination. At last, Mr Gordon Bajnai, Mr Gyurcsány’s young and calm ally, the current economy minister emerged and collected more than enough written promises from Left-wing MPs to support his election. Like in Germany, a Hungarian prime minister can be replaced with a motion that immediately give a majority to a new leader. Mr Bajnai is planning to include a number of technocrats into his cabinet to fight the economic and financial crisis. The populist right-wing would probably get a two-third majority that can change the constituion if elections were held today.

Overall, Central and Eastern Europe is very strongly hit in the current economic crisis that had divided the European Union as well. In some countries, which are in a nation-building state, candidates have expressed unfaltering support for nationalistic parties. In the more established countries, such as the Czech Republic or Hungary, the political elite is divided among ideological, not ethnic or nationalistic lines, and the political elite is in a deep crisis.

Written by Eamonn Fitzgerald

Of course the Bulgarians will debate ebulliently in Bulgarian, just as the Italians will campaign indefinitely in Italian. And the French will argue fervently in French, while right up to the end, the Finns will deliberate in Finnish. But when the MEPs come to Brussels, they will all speak one language.

And it won’t be Romanian. Sure, Commissioner Leonard Orban is all for multilingualism, and the full report of his imposingly-named “Group of Intellectuals for Intercultural Dialogue” concluded that “Promoting a ’second mother tongue’ strengthens multilingualism and intercultural dialogue,” but there is something called “reality” and it will certainly make its presence felt this year.

For one, the enormous costs of maintaining the EU’s translation and interpreting services will have to be questioned at a time when industries and countries are fighting for economic survival. Then, there’s the environmental aspect of generating so much paper-based documentation. Making it all digital would be a rational alternative, but it would not address the crux of the matter.

Enter English. And here is the proposition in favour of getting all MEPs to use the world’s lingua franca:

The evidence points to the imminent collapse of the European Union’s official language policy, known as “mother tongue plus two”, in which citizens are encouraged to learn two foreign languages as well as their own (ie, please learn something besides English). Among Europeans born before the second world war, English, French and German are almost equally common. But according to a Eurobarometer survey, 15-to-24-year-olds are five times more likely to speak English as a foreign language than either German or French. Add native speakers to those who have learnt it, and some 60% of young Europeans speak English “well or very well”.

That’s Charlemagne in the 12 February edition of The Economist. Hard to argue with the logic of “English is coming“.

Quoting Philippe van Parijs, a Belgian academic, Charlemagne adds that “speakers at EU meetings automatically choose the language that excludes the fewest people in the room. They do not use the language best known, on average, by those present (which in some meetings will still be French). Instead, they seek the language that is understood, at least minimally, by all. Thanks to EU enlargement to the east (and poor language skills among British and Irish visitors to Brussels), this is almost always English.”

Yes, let’s learn as many languages as we can and, yes, let’s honour their diversity and beauty, but let’s not waste millions on denying the reality that one of the 23 official languages is, luckily for all of us, better suited to saving resources and money than the other 22. Especially when those resources and that money could be, should be, used more effectively and efficiently in a time of crisis.

The entry first posted here.

Written by Dániel Antal

I was bemused in the early 90s when there was a wave of thought in the Czech Republic which tried to prove that the country does not belong historically to Central Europe and it is indeed a Western European country. Now, as the financial and economic crisis takes its heaviest toll in the Central and Eastern European region, a few countries try to get rid of the CEE label that makes their government treasury bonds hard to sell.

Earlier this week Czech economic policymakers tried to convince journalist hard that their country has nothing in common with Hungary, which indeed had a much less disciplined fiscal policy in the last decade. Now I read a Polish blog (via Julien) that Poland is not a CEE country. According to the Polandian, “Austria is as related to Central Europe as it is to China”. Even if you assume that somebody has never visited neither Austria nor China from Poland this is a very funny statement.

I also prefer to draw a line between Central Europe and Eastern Europe, but I think the CEE phrase is still very much useful. The former Habsburg Empire, and countries that are at least in some part used to belong to it are economically, culturally, historically very much tied to each other. This includes of course Austria, Hungary, the Czech and Slovak Republics, and also Slovenia, Croatia, Romania and Poland; but also somewhat Ukraine, Serbia and Bosnia-Herzegovina. The Austrian financial system has an exposure to these countries which amounts to 80% the size of Austrian GDP. Albeit Austria is definitely the core of this region and much richer, the living standards, consumer habits in the other countries are rather similar. In Vienna, Hungarian, Czech and Slovak languages are widely spoken. The former Habsburg group usually votes together in the EU. Oh yes, and Phare was named after Poland and Hungary, and there is the largely defunct but still existing Visegrad Group. (This argument is shared in a different form by Leopolis and Julien Frisch: the CEE bloc is indeed a useful phrase from a political economy point of view).

Probably you could rightly claim that the Baltic Republics with their strong economic, cultural and historic ties to Scandinavia and Russia are different, and modern Poland is indeed a mix of everything, but I think the CEE phrase, as well as Central Europe and Eastern Europe will remain useful in the next few centuries. With a pure re-branding none of these countries will be able to ditch their shared history on and destiny.

It is reported many times, that the countries' long-term development may only be assured by an increased support of the education and the innovation/research & development (R&D).

These days, the European Commission reviewed its latest innovation scoreboard, which outlined that unfortunately not only Hungary, but whole Europe pretty much underachieve compared to the world economic partners as well as their own pledges. The European Union set it as an aim already apropos of the Lisbon Strategy, - towards becoming the most competitive knowledge-based economy in the world until 2010 – that the member states should spend in average 3 percentages of their GDP on R&D. We are still very far from this objective, because according to the current report - based on the figures in 2006 -, the EU average is not more than 1,84 percentages. Altogether two member states may say about oneself, they accomplish the target number; of course, this time also the eminent Scandinavian countries: Sweden spent the most (3,73 percentages of GDP), in Finland this proportion is 3,37 percentages.

Hungary devoted – with a minimal increase – altogether 1 percent of the GDP on research and development; and even with this proportion we ranked in the middle tierce of the members (ten states spend even less than we do). Among the new countries – joined the EU after 2004 –, only Estonia, Czech Republic and Slovenia perform better in R&D than Hungary.

Anyway, on the long-term, it is rewarding to spend on this area, and possibly this could be one of Hungary's breakout point – what genius are always looking for -, because where we are relative well-supplied, is the well-trained human capital. We are proud of many Hungarian inventors, our Nobel laureates with Hungarian origin; consequently it would be worth sacrificing more to R&D.

Of course - realistically contemplated -, current economic difficulties can destroy these results also. It is to be feared, that government cut the R&D expenses – since they have a delayed effect – in the interest of immediate emergency rescue... preserving our lag in this field.

What there will be with you so, Europe?

Translated by Györgyi Darida

Read this article in Hungarian!

Written by Dániel Antal

Ever since the global financial crisis started, economists in Central Europe have been making the point that the best solution for a Europe-wide financial crisis would be to let Central Europe in the eurozone without the hassle of the Maastricht criteria that were drawn for different countries in different times. Now that the Financial Times makes the same argument some people might listen.

The Central European countries are by any economic indicators more integrated into the EU single market than a good few of the old member states. Most of their production goes into the eurozone, sometimes more than 50% of their GDP. Most of their imports are nominated in euros. Since these countries came out from the Soviet zone in poverty and in lack of capital, they are hungry for FDI and credit, which comes from the eurozone. Cross-border financial transactions are more common than in some parts of the Union. Yet these transition economies, with the lucky exception of the rich Slovenia and Slovakia (which came out from Communism with little state debt) could not meet the Maastricht criteria.

I always agreed with the view that the non-introduction of the euro in Lithuania back in 2006 was a failure of the EU and not that of the Baltic Republic: at that time, inflation indicators as well as other economic indicators in many of the 2006 euro zone countries were iconsiderably worse than those of Lithuania. By applying the requirements set in 1991 (when the euro zone was just a vision, and not a reality), the EU institutions have simply demonstrated their inability to promptly react to obvious changes that have taken place. Back than the idea was that a countries unsound policies might harm a new and yet unproven currency. In 2006, at the height of a global conjuncture, Lithuania, which accounts for less than 0.5% of the eurozone GDP, could have hardly pose any danger to the 18 members.

In 2008 the eurozone central bank, ECB realized the exposure of the eurozone banks to the risk of the failure of a Central European economy, and although Maastricht rules and the whole logic behind the criteria forbids this, it helped to bail out Hungary. At this point, many Hungarian economists made the claim that probably it would be cheaper and better for both parties if they just let Hungary introduce the euro.

Now Wolfgang Munchau makes this eloquent argument:

{{ But the central and eastern Europeans got one thing right. They made sure their banks were owned by foreigners. Austrian banks are among the most active. Their exposure to eastern Europe is about 80 per cent of Austria’s gross domestic product. If Hungarian households default, it is not Hungary that will go down, but Austria. Italy and Sweden are also exposed. A central and east European crisis is therefore a systemic event for the eurozone as well. One should not therefore treat this as someone else’s problem – because it is not. ...

   In my view, the smartest answer to the prospect of meltdown is the adoption of the euro as quickly as possible. There is no need to switch over tomorrow. All we need tomorrow is a credible and firm accession strategy – one for each country – which would include a firm membership date and a conversion rate, backed up by credible policies.

   Obviously, this would require the long overdue abandonment of the eurozone’s defunct entry criteria. Of those, the most nonsensical is the reference rate for inflation, calculated as the average of the lowest three national rates. Soon, this will be a deflation rate. So an aspiring member state would be in the absurd position of having to deflate as a precondition for euro entry. ... The inflation criterion is not only insane, it is also in conflict with other parts of European law.
}}

I think this will be a testing case, again, for European governance. If the EU will stick to its Maastricht rules because it cannot agree on anything that is more sensible, both creditors and lenders, old and new member states will go even deeper into this recession. They cannot blame this on America.

PS: I remember when I made this claim in a comment two month ago on afoe they thought I was crazy. Now it looks the other way around.

by Waldo Vanderhaeghen 

Eastern Europe has been stealing jobs by using their people to produce French cars being sold to French people. That is going to stop with me.

This is the baseline of Sarkozy’s remarks in the last couple of days. But as we have seen in the 1930s, protectionism results in retaliation after retaliation, countries keep on building walls, eventually suffocating themselves. So why did Sarkozy utter these words last week, even though he must be aware of the implications? Is he an imprudent populist or an intelligent and cunning strategist?

One way of looking at it, is Sarko being a pompous nationalist, looking no further than the end of his own nose. Or is it something completely different? Could he be a cunning strategist, misleading us all?

After millions took the streets in Paris, Sarkozy launched populist, nationalistic recovery plans, soothing the mob. Hereafter he reinforced that protectionist signal, by targeting his remarks at the EU president: the Czech. This creates two very beneficial effects for Sarko. On the one hand the angry threats of other EU countries to oust French companies if French protectionist plans go through, proves the Paris’ mob wrong and partly alleviates Sarko of those pressures. On the other hand it has induced the Czech to call for an EU summit. This creates an opening for European action and coordination of the different economic stimulus packages, something the French have been demanding for several months. And it could of course also be an excellent opportunity for Sarkozy to regain European leadership.

Each day of doing nothing results in 1000s of new unemployed. One thing is sure: Europe needs to unite again to fight this crisis, to reform the financial institutions and to kick start to the European economies.
In more than 60 years we have not seen a crisis such as this one. Europe’s unemployment is projected to soar to record heights, and we can expect negative growth all over Europe deep into 2010. Loud calls for fierce government action can be heard in all European capitals. Yet Europe has not been the frontrunner in planning a government-induced economic recovery. According the EUobserver, the largest 13 EU economies’ stimulus packages, announced since September 2008, account for only €90 billion or 0.78% of GDP. Compared to the stimulus packages in the US (around 6% of GDP), China (around 7.5% of GDP) or Japan (around 6% of GDP with public debt at 180% of GDP), this is but insipid water. However, large public spending also implies large public debts and quantitatively big government spending does not equal quality. Unfortunately the European recovery plans seem to also lack quality. According to the Danish weekly, the European stimulus packages devote only €1.2 billion, or 1.3%, to green investments, compared to $58 billion for green and climate friendly investments in the U.S. "(European) rescue packages are designed to give us our old lives back", according to Staffan Laestadius, professor at the Royal Institute of Technology in Stockholm. "It is all about saving jobs in the car industry".
Such investment policy is firmly denounced by the Czech, not only it means building walls where we could hold hands and gain from it, but it is also very ill-advised policy. Money can indeed be used to ensure people a job, but it is not enough to just spend it, we need to spend it wisely. Money should not flow to failing industries building up debt for future generations. Money should go to the future, to education, training, innovation, research, competitive industries,… We should invest in tomorrow, not yesterday. Green investments targeted at a transformation to a green economy, are excellent examples. They help save the climate, the reduce energy dependency, reduce consumption costs and can become a key driver for innovation, entrepreneurship and jobs.

Europe today does not appear to go for a shock and awe treatment of the economy into recovery, nor does it work on its fundamentals. We urgently need to put our attention on tomorrow, not yesterday. Some countries such as Germany have understood that and are redirecting their economy to the future green knowledge economy, albeit refrain from large government funding to avoid large debts. France’s stimulus package on the other hand, which hands out money to car manufacturers as long as they stay in France, will call for subsidies of other European governments to keep the car manufacturers in their own country. This results in more of society’s money spent than needed. If we want to invest society’s money and support our ailing car industry, we would do better to coordinate and focus on the production of, for example, green cars, creating jobs but also gaining a competitive advantage.

Let us hope Sarkozy is indeed a rational and cunning strategist, who is aiming low to shoot high. Sarkozy assured European action is taken and the Czech can become the broker for an EU deal. Many tasks are in front of us, such as a shift to a green economy, providing social stability by inclusion, stabilizing the bank sector, avoiding long-term government debt and preparing for the future knowledge economy to accommodate the workers of tomorrow. To assure our future, European countries need to coordinate and cooperate in designing their economic plans to boost Europe’s faltering economy. The stakes are high. If Europe fails to unite and divides up into different fronts, a depression can come in sight.

(This text represents my opinion only. I cannot be quoted in any other qualification)

Images by courtesy of:

Dëdalus/flickr - Protect me
azrainman/flickr - Napoleon Sarkozy
finetag/flickr - French protectionism
Manel/flickr - Renault contra Ferrari

Written by Dániel Antal

During a hearing, Germany’s Supreme Court has voiced concerns that the Lisbon Treaty may leave its national parliament powerless, fuelling fears that judges may rule the treaty unconstitutional or at least order modifications to the text, writes EurActiv. The two-day hearing, however, only marks the opening of the court’s examination. A ruling is not expected before May.

The decision is highly expected all over Europe. What makes the ruling specially interesting in my region is that the Central European legal systems are very much similar to the German, often based on a shared legal history or simply modeling the strongest country in the neighborhood. The German Constitutional Court, which was a novelty in the world when established, has served as a role model in many Central European countries. The decision of the German court may have a very strong influence on other countries.

Written by Andrei Tuch

The MEPs tell us that the economy is an issue that will be of interest to every voter, right across the Union - and they’re right, because it is the problem that everyone will expect Brussels to help fix. There is strength in numbers, and these are some impressive numbers.

Still, there is hardly a common strategy to dealing with the crisis. The UK, already saddled with the highest rate of personal debt in the world, decided to cut taxes and try to promote more spending. Most of the European states are not being quite that cavalier, although almost all of them have been bailing out their large financial and commercial institutions, in an effort to stave off disaster.

Then again, not even the richest nations have billions of Euros lying around; decisive action takes resources. The money that you are pouring into your economy will have to be borrowed. But wasn’t it the massive borrowing that got us all into this mess?

There is an excellent article in Der Spiegel that talks about the possibility of countries going bankrupt. Everyone knows that this happened in Iceland, but let’s face it: Iceland is three hundred thousand people who can’t grow any bread. More worryingly, the article points out that large countries - those that make up the backbone of the EU - very much can go bankrupt; in fact they have before, and it’s increasingly likely that they will again; and soon. What hope do the smaller member states have?

That question has been on a lot of minds in the northeast corner of the Union. Latvia is hanging on for dear life, and in Estonia, politicians are calling on the people to make sacrifices. They’re telling us that the key to long-term stability and prosperity is in joining the Euro; that it should be our new national goal, just as membership in the EU and NATO was before. We could have joined in 2007, but the rapid growth meant we just missed out on the inflation criterium; with the average EU economy in trouble, it’s quite likely that we can get in by 2011. But we’ll need to work hard on it.

When I mentioned this to fellow th!nker Toni Straka, he thought I was mad. Why the hell would we want to join the Euro, with all the trouble it’s in? Indeed, for all the problems of our economy, we’re ahead of the curve in a lot of useful ways. We have almost no public debt to speak of, devaluation of the Estonian kroon is highly unlikely, and since none of our major banks are locally owned, it was the Swedish taxpayer who kept them liquid. As Europe’s big boys compete with the US in the race to borrow - €50 billion by Germany this year alone - so that smaller countries are left with no lenders (according to a quote in the Spiegel article), Estonia is actually cutting its budget. In the last few days, the cabinet has trimmed down 2009 spending by almost ten percent, forsaking pension increases and birth rate stimulation programs, all in the name of getting through the year without a budget deficit.

If we succeed, we may just find ourself in the odd position of our own currency being healthier than the Euro. Germany’s public debt is 62.6% according to the CIA Factbook; France’s is higher. Let’s go back to the Spiegel article for a clue as to what might be in store for a currency when its issuing government borrows too much:

One way to pay down debt, of course, is massive spending cuts and austere savings programs. That, though, is difficult. Much more attractive is the inflation route. The state can just print money and pay its bills. Or the central bank prints money and pumps it into the economy. The currency becomes devalued, but the state doesn’t care because that makes it easier to pay off its debts. (…) Up until now, the process has been subtle. Since the end of the 1990s, the major central banks in the US and Europe have trippled the volume of money in circulation. In recent months, the volume of money in circulation in the US and Europe has increased by almost half.

So, for the eleven member states who still use their own currencies - and especially the more developed ones, whose economies might have some chance of standing on their own without leaning on the European Central Bank - the question is: do we want to join the Euro?

Another fellow th!nker, a Dane, told me his country was extremely EU-friendly. So why hasn’t Denmark joined the Eurozone yet? Maybe they know something we don’t?

I have an answer, but I’d like to hear yours first.

Written by Dániel Antal

Especially if you did not like the logo of the Czech Presidency, here is the opportunity to raise your voice. You can vote on the proposed logos of the Spanish-Belgian-Hungarian presidency troika. I still keep asking why are we turning the European Union into a logo factory - I believe that logos used for a half year do not really have a function at all. But here is it - be quick, you can vote until Friday afternoon.

(PS. The site is in Hungarian, but voting is easy. Each logo plan has a number, the voting box is under the last one and you have to click the number of your favourite and than fill in a captcha and press Szavazok! button (meaning I vote!).

The three countries have called for a competition among art students. Nine proposals were selected by a jury in Hungary and the tenth will be selected for the final decision by the internet vote on Hungary’s official portal, magyaroszag.hu. 10-10-10 logos will be considered from the three countries and a three-country jury will select the final logo from these competing ones. What I like about the idea is that the three country rotating presidency will have similar logos for one and a half year which is at least an improvement from the half-year rotation with new logos and ideas.

The voting is over but the Hungarian Prime Minister’s Office says it will announce the results only two weeks from now. That is odd, I have written them a letter. I actually endorsed this logo because I do not like the idea that the EU tries to introduce dozens of new logos to the world every year. I’ll update the post if I receive an answer.

Let’s take an average Brussels energy politician. Generally, on his working day he has attended on discussions, discourses, conferences, workshops of different strength, in topics like the Social agreement about the guideline to reduce the ediction of harmful materials, the Promotion the usage of renewing energy sources in line with the Lisboa Strategy, or he approved the technical consultant edition of the issue Painting Book for kindergarteners in the topic of maintainable development, with the foreword of José M. Barroso.

On harder days he had to emphasize the importance of the Nabucco-project to the media, in connection with the efforts aiming at the reduction of Russian gas dependence, not forgetting that the natural gas sources are run down, and sooner or later everything has to be heated with sun-wind-biomass-Mexican chilibean energy, anyhow. Sometimes there appeared all sorts of (registered) lobbyists, and talked extendedly against plans, beside plans, irrespectively of plans.

Then one day the Gasprom cuts Europe off the gas line (it’s not an exaggerate: the lack is even amply felt by the French and the Italians), the former Socialist countries suddenly stay without fuel on one of the coldest January days. Suddenly it was a crisis, out of nothing. Everybody has spoken about it, for years, but nobody believed it realizes. Greece, Austria, the current president Bohemia, Slovenia, Romania abruptly lost the 70-100% of its coming natural gas, on top Slovakia importing exclusively from Russia (“Heat with euro”- commented the Jealous Association of Central European Countries Without Euro the news).

The biggest problem is that nobody (except those looking into the collective Medvedev-Yushchenko sense) knows how long the crisis holds on, in spite of the fact that the telephone lines are burning (at least something is heating) among Brussels, Prague, Moscow and Kiev. Maybe tomorrow (on Thursday) all is over, maybe the water heated from Russian gas comes next time in summer from the tap. Now there is a collective brainstorming: the Bulgarians want to re-start the stopped nuclear power stations, Lithuania considers taking similar steps or would quicken the building of the Swedish-Polish energy corridor (they, in 2007, similar to us, were in trouble due to White Russia).

While the plans are feathering, the countries concerned hold in the industrial energy usage (not winging anyhow due to the crisis), the power stations start to burn oil, the taps of the havarias are opening, the diplomatic discussions still do not promise anything. If Europe now lasts out (because it lasts out, the question is what the price will be), one thing is certain: on the continent, in the Union a responsible leader never again can flick on the challenges of energy policy.

Translated by Hedvig Samai.

This post is also available in Hungarian.