The Belgian Curtain: Europe after Communism Part 3

Foreign investors are gung ho. The country is now the prime investment destination among the countries in transition. In a typical daily occurrence, bucking a global trend, Matsus.h.i.ta intends to expand its television factory in Plzen. Its investment of $8 million will enhance the plant's payroll by one tenth to 1900 workers. Siemens - a German multinational - is ploughing $50 million into its Czech unit. Siemens Elektromotory's 3000 employees export $130 million worth of electrical engines annually.

None of this would have been possible without Germany's vote of confidence and overwhelming economic presence in the Czech Republic.

The deteriorating fortunes of the Czech economy are, indeed, intimately linked to the economic stagnation of its northern neighbor, as many an economist bemoan. But this only serves to prove that the former's recovery is dependent on the latter's resurrection.

Either way, to have so overtly and blatantly abandoned Germany in its time of need would surely prove to be a costly miscalculation. The Czechs - like other central and east European countries - mistook a transatlantic tiff for a geopolitical divorce and tried to implausibly capitalize on the yawning rift that opened between the erstwhile allies.

Yet, Germany is one of the largest trading partners of the United States. American firms sell $24 billion worth of goods annually there - compared to $600 million in Poland. Germany's economy is five to six times the aggregated output of the EU's central European new members plus Slovakia.

According to the New York Times, there are 1800 American firms on German soil, with combined sales of $583 billion and a workforce of 800,000 people. Due to its collapsing compet.i.tiveness and rigid labor laws, Germany's multinationals relocate many of their operations to central and east Europe, Asia and north and Latin America. Even with its current malaise, Germany invested in 2001 $43 billion abroad and attracted $32 billion in fresh foreign capital.

Indeed, supporting the United States was seen by the smaller countries of the EU as a neat way to counterbalance Germany's worrisome economic might and France's often self-delusional aspirations at helmsmanship. A string of unilateral dictates by the French-German duo to the rest of the EU - regarding farm subsidies and Europe's const.i.tution, for instance - made EU veterans and newcomers alike edgy. Hence the deliberate public snub.

Still, grandstanding apart, the nations of central Europe know how ill-informed are recent claims in various American media that their region is bound to become the new European locomotive in lieu of an aging and self preoccupied Germany. The harsh truth is that there is no central European economy without Germany. And, at this stage, there is no east European economy, period.

Consider central Europe's most advanced post-communist economy.

One third of Hungary's GDP, one half of its industrial production, three quarters of industrial sales and nine tenths of its exports are generated by multinationals. Three quarters of the industrial sector is foreign-owned. One third of all foreign direct investment is German.

France is the third largest investor. The situation is not much different in the Czech Republic where the overseas sales of the German-owned Skoda alone account for one tenth the country's exports.

The relationship between Germany and central Europe is mercantilistic.

Germany leverages the region's cheap labor and abundant raw materials to manufacture and export its finished products. Central Europe conforms, therefore, to the definition of a colony and an economic hinterland. From a low base, growth there - driven by frenzied consumerism - is bound to outstrip the northern giant's for a long time to come. But Germans stands to benefit from such prosperity no less than the indigenous population.

Aware of this encroaching "economic imperialism", privatization deals with German firms are being voted down throughout the region. In November, the sale of a majority stake in Cesky Telecom to a consortium led by Deutsche Bank collapsed. In Poland, a plan to sell Stoen, Warsaw's power utility, to Germany's RWE was sc.r.a.pped.

But these are temporary - and often reversible - setbacks. Germany and its colonies share other interests. As The Economist noted correctly recently:

"The Poles may differ with the French over security but they will be with them in the battle to preserve farm subsidies. The Czechs and Hungarians are less wary of military force than the Germans but sympathize with their approach to the EU's const.i.tutional reform. In truth, there are no more fixed and reliable alliances in the EU.

Countries will team up with each other, depending on issue and circ.u.mstances."

Thus, the partners, Germany and central Europe, scarred and embittered, will survive the one's haughty conduct and the other's backstabbing.

That the countries of Europe currently react with accommodation to what, only six decades ago, would have triggered war among them, may be the greatest achievement of the Euro-Atlantic enterprise.

How the West Lost the East

By: Dr. Sam Vaknin

Also published by United Press International (UPI)

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The Pew Research Center published last week a report expansively t.i.tled "What the World Thinks in 2002". "The World", reduced to 44 countries and 38,000 interviewees, included 3500 respondent from central and east Europe: Bulgaria, the Czech Republic, Poland, Russia, Slovakia and Ukraine. Uzbekistan stood in for the formerly Soviet central Asia. The Times-Mirror 1991 survey, "The Pulse of Europe" was used as a benchmark.

With the implosion of communism in 1989 and the disintegration of the Soviet Union in 1991, large swathes of central and eastern Europe found themselves devoid of an internal market, an economic sponsor, or a military umbrella.

The countries of central Europe - from Slovenia to Hungary - and the Baltic dismissed the communist phase of their past as a "historical accident" and vigorously proceeded to seek integration with Western Europe, notably Germany, much as they have done until the rise of Fascism in the 1930s.

The polities of eastern Europe bitterly divided into the "nostalgics"

or "reactionary" versus the "European", or "progressive". The first lot - including Russia, Ukraine and Belarus - sought to resurrect an economic incarnation of the former USSR. The latter - notably Poland - recla.s.sified themselves as "central Europeans" and emulated the likes of the Czech republic and Hungary in a desperate bid to curry favor with the European Union and the United States.

The Pew report reveals that the concerns of the denizens of central and east Europe are varied but closely aligned with the global agenda. In this sense, the iron curtain has, indeed, lifted and total integration has been achieved despite ma.s.sive economic disparities. The publics of the former Soviet Bloc place surprisingly great emphasis on the environment, for instance - hitherto thought to be a preoccupation of their more affluent neighbours to the west.

Consider the war on terrorism.

People in Russia are vehemently opposed to the use of force to dislodge Saddam Hussein. They regard the Israeli-Palestinian conflict as a greater threat to peace in the Middle East.

They are convinced that the USA is bent on war in the Gulf to secure its oil sources. Europe is likely to pay the price, say the Russians, by becoming a target for international terrorism.

Yet, in a sweeping reversal of sentiment, Russians now regard the world as safer with a single superpower. In Uzbekistan, whose crumbling economy has enjoyed a fillip from the presence of 1500 US troops, support for America's military campaigns is understandably high.

Yet, the most startling and unambiguous revelation was the extent of anti-American groundswell everywhere: among America's NATO allies, in developing countries, Muslim nations and even in eastern Europe where Americans, only a decade ago were perceived as much-adulated liberators. "People around the world embrace things American and, at the same time, decry U.S. influence on their societies. Similarly, pluralities in most of the nations surveyed complain about American unilateralism."- expounds the report.

The image of the Unites States as a benign world power slipped dramatically in the s.p.a.ce of two years in Slovakia (down 14 percent), in Poland (-7), in the Czech Republic (-6) and even in fervently pro-Western Bulgaria (-4 percent). But it rose exponentially in Ukraine (up 10 percent) and, most astoundingly, in Russia (+24 percent, albeit from a very low base).

Still, rising anti-Americanism may have more to do with a nonspecific wave of gloom and dysphoria than with concrete American policies.

"People who are less well off economically are more likely than those who are more financially secure to dislike the U.S." - says the report.

Only two fifths of Czechs are satisfied with their own life or with the state of their nation. Three quarters are unhappy with the world at large. The figures are even way lower in Slovakia, Poland and Ukraine.

Only Uzbeks are content, probably for want of knowing better.

In Russia, less than one fifth are at ease with their life, their country, or the world. Bulgaria takes the prize: a mere 8 percent of Bulgarians find their life gratifying. One in twenty five Bulgarians is optimistic regarding his or her nation. One in eight approves of the world.

East Germans are far more pessimistic than the Wessies, their brethren in the western Lander. East European are exceedingly displeased with their income, though they find their family lives agreeable and, in the lands of vertiginous unemployment levels, their jobs appealing.

Nine in ten Ukrainians, Bulgarians, Poles and Slovaks maintain a negative view of their national economies. In Russia the figure is 83 percent and even in the Czech Republic it is 60. Three quarters of east Europeans surveyed - including east Germans - do not believe that economic conditions will improve.

"Will my kids go hungry? Will they be stuck with my debts? ... It looks bad and it can only get worse. I mean, you can hope it will get better but it does not look good" - muses a forlorn 69-years old Polish farmer.

Incredibly, these dismal figures reflect a rise in satisfaction throughout the region since the demise of communism in 1989-91.

Significantly, the young are double as hopeful than those older than 35. Between one third (Bulgaria, Czech Republic) and one half (Ukraine, Slovakia and Russia) of respondents of all age groups believe in a better future - far outweighing the pessimists. Only in Poland are the majority of people are anxious for the future of their children.

Still, "while Eastern Europeans feel their lives are better off since the collapse of communism, many say they have lost ground over the past five years. A majority of Bulgarians (55%) believe their lives are worse today, as do pluralities in Ukraine, the Slovak Republic and Poland. Again, Czechs are the exception - 41% think they have made progress while 27% believe they have lost ground. Russians are divided on this point (37% say they have lost ground, 36% feel they have made progress)."

Poverty is a potent depressant. The greater part of Russians and Ukrainians reported that "there have been times in the past year when they had too little money to afford food", medical care, or clothing.

So did half the Bulgarians, one third of the Poles and one sixth of Slovaks. Ninety-two percent of the Bulgarians interviewed identified economic problems as having the most effect on their lives.

Similar figures obtained in Russia (85), Ukraine (79) and Poland (73).