Central and Eastern Europe, Euro, Uncategorized

Greece, Slovakia and the little ironies of life

In 2003, the Greek Prime Minister Costas Simitis had two special moments. First, he unveiled a ‘social package’ worth 1.7 billion euros which included measures to reduce fuel costs for farmers, raising farmers’ base pensions, abolishing a tax on agricultural land’s transfer,  an annual subsidy of 1,000 euros for every child studying in other cities, reducing a tax for buying new cars by 20 percent, raising a supplementary pension and creating 25,000 part-time jobs in the public sector. Second, he presided over the historic meeting in Athens during which 12 new member states signed the Accession Treaty to join the EU.

Eight years later, he might have some regrets. About the second one, I mean. Slovakia, one of the countries that Simitis welcomed into the EU, now threatens to unilaterally torpedo the ESFS (European Financial Stability Facility) expansion by refusing to ratify it in its Parliament (here is Simitis advocating a bigger role for national parliaments in European integration). Even if Slovakia eventually approves the deal, one can only admire one of these bitter-sweet ironies that life so often offers.

During the 1990s and early 2000s, the former communist countries from Central and Eastern Europe (CEE) were subject to rather ruthless and unapologetic economic conditionality. The old member states, Greece included, insisted on the strict application of the Copenhagen criteria which included “the existence of a broad consensus about essentials of economic policy” and “sustainable public finances and external accounts”. There were no attempts to solve the post-communist economic crisis that all CEE countries went through by pumping billions of borrowed euros in their economies. No, the CEE governments were expected to swallow the bitter pills of austerity, privatization, and public service cuts. And they did, slowly emerging by the economic debris of post-communism with reformed economies and public sectors.

That’s why today it is hard not to sympathize with Slovakia which is asked to contribute 7.7 billion euros (which amounts to approx 8% of its 2010 GDP) to the ESFS.

In the words of the Speaker of the Slovak Parliament Richard Sulík: “How am I supposed to explain to people that they are going to have to pay a higher value-added tax (VAT) so that Greeks can get pensions three times as high as the ones in Slovakia?” (interview by Spiegel, noted via Marginal Revolution). Which is why his party, although part of the ruling coalition, is expected to abstain and bring down the ESFS expansion proposal and with it the Slovak government, which tied its fate to that of the vote.

Dimiter

 

Update, 11/10/11, 22.30h The Slovak government has lost the confidence vote…

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One thought on “Greece, Slovakia and the little ironies of life

  1. Indeed. There are even more ironies in this situation. If we follow the path of the Slovak Prime Minister, Ms Radicova, who put her government’s fate on the cards for the euro, one notes that she previously campaigned against the support for Greece. It is a sobering thought for all of us that what changed her mind must have been the prospect of disintegration of the whole eurozone if she does not commit political suicide. Further back in time, Slovakia had its historic moment in the 1998 elections when intellectuals like Ms Radicova (a former colleague and professor of sociology) campaigned against the ruling coalition led by Mr Meciar’s HZDS. The irony is that their main argument was that Mr. Meciar and his coalition were damaging Slovakia’s democracy and with it the country’s chances to join the European Union. Being in the EU was for many Slovaks synonymous with prosperity and democracy. Despite the sacrifices they had to make, most would probably say it was worth it.
    From the Netherlands, I admire Ms Radicova’s resolve. It is hard to imagine current Western European leaders doing the same to save the euro…

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