Press Watch: FT on Slovakia

Press Watch
Another one from the Financial times

"By contrast, Slovaks have lived through turbulent times. After escaping from Mr Meciar’s grip in 1998, the country embarked on liberal reforms and leapt from laggard to leader in post-Communist transition and attracted big foreign investors, headed by motor manufacturers. But with unemployment stubbornly high, voters lost patience and this summer elected Mr Fico on an anti-reform ticket. Despite warnings from EU partners, Mr Fico’s Smer party allied itself with Mr Meciar and Mr Slota’s nationalists.

Pavol Demes, head of central and eastern Europe at the German Marshall Fund, a US public policy institution, says the worst fears about the Fico government have not been realised. However, Slovakias Hungarian minority is worried about Mr Slota, business people are concerned about how electoral promises will be reconciled with commitments to fiscal discipline and the Europe-wide Party of European Socialists is preparing to suspend Smer over its ties with the nationalists.

Business people are concerned about the divisive effects of the anti-Communist purge. However, they are less worried about macroeconomic policy: growth is strong and the budget is under control, with the planned 2006 and 2007 deficits below 3 per cent of gross domestic product – the ceiling for joining Europe’s monetary union.

Across the region, however, aspirations to membership of the eurozone have been a victim of post-accession politics. Before 2004, governments were pledging early entry – notably in Hungary, which wished to join by this year. But Hungary’s 2006 budget deficit target is a towering 10 per cent of GDP.

Slovakia remains committed to a firm date – 2009 – but there are doubts whether Mr Fico will stick to a timetable set by his predecessor. Some new EU members are well ahead, with Slovenia joining next year and the Baltic states due in 2008. But for the rest in central Europe, the aim is for 2010-14.

Postponing their single-currency ambitions allows governments to delay reforms required to bring deficits down to the euro-entry 3 per cent. Economists warn that central Europe is miss
ing an opportunity to undertake reforms that will be needed later, perhaps in more difficult conditions.

Meanwhile, developments in the region are affecting relations with EU partners. Poland, in particular, is finding it hard to square its new-found assertiveness with the need for EUwide co-operation, even in energy, where Warsaw wants close ties.

There is little danger that big west European states will turn on central Europe. But if central European countries develop unpredictable reputations they will find it harder to influence their partners. This is particularly important for further enlargement, favoured by most central Europeans.

Central Europe is not doomed to political irrelevance. Given its strong economic record and importance to world business, it will not be ignored. However, the region needs consistent and predictable leadership if it is to make its voice heard at the EU table.

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