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  Eastern European crisis

Arûnas Spraunius
2009 07 07

This year should have been the year of festivities for Eastern and Central Europe: the Berlin Wall crumbled two decades ago, expansion of NATO commenced ten years ago and five years ago the first countries of the region became members of the EU. Is this situation really festal?

According to the journalist of the Canadian "The Globe And Mail", a tourist having occurred in Prague during a weekend could hardly notice major signs of recession (the picture in the middle of the week is a bit different).

In the middle of May the European Commission announced economic forecasts for the European countries for the coming two years. According to forecasts, Ireland would suffer most of the „old“, and Latvia of the new Member States. Forecasts  should be evaluated carefully, but so far the GDP reduction indicators in the majority of EU Member States are not optimistic.

However, the current situation reveals new Europe‘s realia. The economic margin between the East a West (the so called „wall of wealth“) is replaced by a more complicated reality. The Polish Government rejected the reduction of GDP by 1,9 percent, forecasted for the country this year, and highlighted that recovery will start next year. This year the Czech Republic also expects only 2,7 percent GDP reduction and recovery to start from 2010. Whereas economies of the countries like Hungary, Romania and Ukraine are shattering. These countries have already applied to the IMF for support. With a certain reserve Eastern and Central European states could be divided into the states which managed to implement reforms successfully and the states where the situation is more complicated.

Besides, certain processes in the East already comply with the analogous processes in the „old“ Europe. Spain and Ireland which implemented reforms long time ago run after the bubble of the real estate market; Hungary and Latvia behave similarly in the East. Today these states are in the unenviable situation and this was predetermined not by the „East-West“ division, but most probably by peculiarities of the national character. Most probably Poland and Czech Republic(partially – the Baltic States) „run after“ the West more quickly than it was assumed. According to M.Laar, one of the authors of the Estonian reforms, during fifteen years of reforms the Baltic States got rid of the „surplus activities“ and became more flexible.

Thus, Eastern and Central Europe is gradually submitting to the prevailing rhythm of the global world.

In fact, there still are people assuming that the East is in weaker position. „The Financial Times“ wrote in February, that crisis will affect Eastern Europe more than the old EU Member States. Public structures in Central and Eastern European countries are not as stable as in the West, thus economic confusion would inevitably affect public life and politics. The broken windows of the Seimas in Vilnius is not an exception – the ultra rights are becoming stronger in Hungary, and I.Krastev, the director of the Bulgarian Liberal Research Centre is concerned about the spiritual decline of the representatives of the middle class, unable to repay loans.

Besides, the Eastern Europeans could see that the European solidarity sometimes is nothing else but rhetoric. According to P.Demes, the leader of the Marshall Fund representation in Central and Eastern Europe, „people start suspecting the liberal democracy, free market and the EU. They can see that such countries as France make national decisions when international efforts are needed, and feel alienated“. On the other hand, the current world is not solely cynical: the IMF, WB and EBRD plan to allocate additional funds to overcome the financial crisis.

According to the French „Agora Vox“, the situation in the Eastern European countries will be fragile until they enter the Euro zone. According to the publication, the crisis highlights hidden feelings, suppressed intentions and fears; at the same time it is like a test demonstrating the extent to which Eastern and Central European countries are considered EU Member States and solidarity of the „old“ Europe with them.

On the other hand, the apocalyptic picture of the future is not the best scenario for consideration of the above situation. Whatever happens, the new EU Member States have already experienced the economic and political benefit of becoming part of Community. According to experts, even during the recession economic indicators in Eastern and Central Europe would be higher than in the West. This region has retained its key advantage – a comparatively cheap qualified labor force. According to the EBRD economist E. Berglof, despite the crisis, integration of Eastern and Central Europe into EU would continue even during the crisis.

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