Despite the virtual implosion of some economies in Central and Eastern Europe (CEE)—plunging living standards in parts of the region, protests and social unrest—little attention has been paid to the crisis and recession in the ten post-Communist countries that joined the European Union (EU) in 2004 and 2006.1 The Baltic States have gone from being dubbed the “Baltic Tigers” to suffering the effects of the crisis in the most acute form in the EU with their currencies, banking systems and economies verging on collapse. In 2010 Hungary came under speculative attack from the markets with threats to downgrade its debt to junk bonds. Only Poland and the Czech Republic look at first sight to have had a relatively soft landing.
Even before the fall of the Berlin Wall in 1990 these countries were not immune to crises in the global economy and the recessions of the mid-1970s and 1979-82 sharpened the contradictions in their economies and contributed to their eventual collapse in 1990. However, their deeper integration with and exposure to the global economy, and the EU in particular, since the fall of the Berlin Wall have meant that they are much more vulnerable to crisis and recession.
The foundations of this vulnerability were laid by the widespread adoption of neoliberal policies in the economies of CEE, a high dependence on foreign investment and in particular their exposure to international finance. Iván Szelényi describes this in the following way:
Now that the crisis of global finance capitalism shakes the world in its very foundations, when we experience an economic collapse of a magnitude not experienced since 1929-1933 (a collapse that affects Hungary and in fact the entire European post-Communist region especially severely), the wisdom of the neoliberal path chosen by the post-Communist countries in 1989-90 appears highly dubious. Today, the ball got rolling from the United States, but it appears that it may trigger the greatest avalanche in this very region. Neoliberalism is in crisis in America as well, but it seems that post-Communist capitalism, which was more neoliberal than the neoliberals themselves, will have to pay twice the price for its—it appears that we have grounds to believe this today—erroneous economic and social policy.2
In order to understand the scale and nature of the crisis in CEE, both across the region and in individual economies, it is necessary to understand the extension of the European project to the East.
The European project goes east: 2004 onwards
Massive effort by the ruling classes of Europe and the US was put into the so-called “transformation” of CEE to ensure its integration into the global economy after the fall of the Berlin Wall. The IMF underwrote the financing of the project, while the World Bank provided funds for overhauling the depleted infrastructure of these countries. However, there was a gap between the rhetoric and reality of the “aid” that went to CEE. The scale of resources to underpin transformation fell far short of the “Marshall Aid Plan for the East”, which had been trumpeted. Various schemes such as PHARE (Poland and Hungary: Assistance for the Restructuring of the Economy) from the EU and USAID were all naked in their intention to instill a neoliberal agenda, so that these countries were open to capital for trade and investment through widespread liberalisation and privatisation.3 There was a significant element of coercion used by the IMF through putting in stringent conditions relating to cutting public spending and rapid privatisation, but there was also extensive investment in ideologically underpinning the project. For example, USAID financed courses for trade unionists in Poland using first year economics textbooks to explain the principles of the “market economy” and the necessity for “downsizing”. Leaders of the Solidarity trade union were taken on extensive trips to the US to learn about democracy and the “proper” role of trade unions.4
In the context of the geopolitics of the period, the fall of the Berlin Wall and collapse of the Soviet Union had opened up a window of opportunity for the US through which NATO could influence the development of CEE. These political and economic interests were reflected in a remark by assistant secretary of state Richard Holbrooke, who concluded, “The West must expand to Central Europe as fast as possible, in fact as well as in spirit, and the US is ready to lead the way”.5
Further, changes in the organisation of finance and banking were of paramount importance and were a condition of existence for the market economy itself.6 Moves towards establishing an independent central bank, a process which had started before 1990, underpinned the framework necessary for the neoliberal project to ensure sound money and disentangle finance from domestic capital and the political influence of the old Stalinist ruling classes. The economies of Western Europe and the US needed new markets, in which some of their largest and most profitable financial firms could operate. This was particularly true of Britain and the US, which dominate global financial services. The outcome of this scramble for assets is reflected in the large amount of foreign capital that dominates the financial sector in CEE, with about 80 percent of the banking system under foreign ownership.7
However, “transformation” and installing neoliberalism were not straightforward processes whereby these countries simply reflected the needs of global capitalism. The competing interests of different sections of the ruling class and struggles of organised labour made the process protracted and the outcomes a political compromise, particularly regarding privatisation and welfare. Therefore the restructuring of the state was much more complex than simply guaranteeing the conditions for the operation of transnational capital. The three Baltic States, Estonia, Latvia and Lithuania, for example, were particularly ardent in their adoption of neoliberal policies, in the case of Lithuania “even to the extent of importing a US citizen of Lithuanian origin, Valdas Adamkus, to take office as President of the Republic”.8
The first stage of transformation after 1990 was crude and draconian and had devastating impacts on the living standards of large sections of people as these economies integrated with an increasingly liberalised global economy. In 1990 a particularly brutal version of this was the introduction of “shock therapy” in Poland, which was neoliberalism in a bullet with drastic cuts in public spending, subsidies and public sector wages. The EU strategy, however, was a much more systematic attempt to promote neoliberal reform and the influence of European transnational capital through the liberalisation and deregulation of CEE.9 The main thrust of PHARE was to prepare countries for EU membership by demanding more and deeper measures of deregulation and liberalisation, along with a dose of social protection in case social discontent derailed reforms.
Therefore in dangling the carrot of membership, the EU managed to push Central and Eastern European economies towards adopting a specific neoliberal reform model, which was a much more radical variant than the one operating in the economies of existing members. Having to conform to EU norms, regarding state aid and rules on competition policy in particular, wedded these countries to the liberalisation of trade and investment in a way that made it difficult to accede to any demands by members of the ruling class for protection or retreat.
Two projects which consolidated the neoliberal project in Europe were extended to the post-Communist new member states. The first was the European single market, a popular symbol used to relaunch European integration in the mid-1980s and implemented in 1992, the aim of which was to restore Europe’s global competitiveness with Japan and the US. In particular, this opened up previously protected sectors (for example, services, utilities and telecommunications) to trade and investment and spurred further rounds of privatisation. While the rhetoric was of innovation, competitiveness and economies of scale, the reality was that it allowed the reorganisation of European capital over a wider territory, which was manifested in an unprecedented wave of mergers and acquisitions.
The second project was that of monetary union with a central bank and single currency. This was the consolidation of the single market as it removed barriers and reduced costs for large firms by providing an undifferentiated terrain on which capital could operate. Monetary union was a stick with which to force countries to reduce their public spending through the restrictive monetary policy in the convergence criteria of the Maastricht Treaty and Stability and Growth Pact.10 The role of monetary policy was therefore to exert a disciplinary neoliberalism, particularly on weaker economies that would face the highest costs in terms of unemployment. 11
Full accession to the EU in 2004 deepened and strengthened the neoliberal agenda. Earlier claims that EU enlargement provided the best way to ensure democracy in all of post-Communist Eastern Europe were immediately undermined by the inclusion of selected states and the exclusion of the remaining applicants. It was considered by the ruling classes of current EU members and representatives of capital that the costs to European capitalism of admitting the excluded states outweighed the advantages they would reap in terms of new markets for goods and new destinations for foreign investment.
The institutions of capital such as the Transatlantic Business Dialogue, the World Economic Forum, the International Chamber of Commerce and the Competitiveness Advisory Group played an active part in trying to mobilise economic interests, governments and trade unions in their desire to make CEE safe for US and European capitalism. The ERT (European Round Table of Industrialists), in particular, which consisted of the chief executives of European transnational corporations (TNCs) and represented the interests of transnational capital, played a pivotal role in trying to secure the interests of capital and exerted a strong influence on policies that were in its interests. This included most notably the implementation of the Single Market, the creation of the Trans-European Network infrastructure scheme, the restructuring of European education policy and the whittling away of social protection measures.12 Therefore the pre-accession strategy was devised by the EU Commission with the support of the ERT.13
The EU Commission and the ERT therefore gave an ideological direction to the overall process of European integration including unleashing market liberalisation for candidate countries. The promise of membership ensured a restructuring of CEE in line with the EU’s neoliberal trajectory and satisfied the need of European transnational capital for further expansion of capitalist accumulation. In turn, it fulfilled the objective of some sections of the ruling class to secure external pressure for internal restructuring and therefore strengthened the hand of those who were most enthusiastic about the neoliberal model.
The crisis hits Central and Eastern Europe
The scale of the financial crisis of 2008 and subsequent recession is clearly evident in Table 1. This shows dramatic falls in GDP in the Baltic States, and with the exceptions of Poland and the Czech Republic, falls in GDP significantly above the EU average of 4.2 percent.
The crisis hit the Central and Eastern European countries in the EU through two channels. In the language of the World Bank “global deleveraging” (a massive contraction of lending) was triggered in “distressed home country financial markets” (financial institutions exposed by toxic debts), which, with the “unwinding of the real estate booms” (the crash of property prices) in some host countries, reduced the willingness of financial markets to finance sovereign debt.14 The subsequent recession reduced demand for exports in Western Europe, having a negative impact on production and employment in small economies like the Czech and Slovak Republics, and Estonia and Hungary where exports accounted for 70 and 80 percent of GDP in 2008. To a lesser extent, this was also the case for the larger economies of Poland and Romania.
One of the impacts of integration with the EU and global economy was the domination of the banking systems of CEE by mainly Western European or US banks and finance companies. Capital inflows were larger in this part of Europe and fell more severely during the crisis. Therefore risk was transferred from Western European parent banks to affiliates in countries of CEE as cross-border loans.15
The growth of credit was driven by households borrowing to try and boost their living standards, and fuelled by the ability to borrow in foreign currency with a lower interest rate and longer payback period than local finance (see Table 2). 2003 to 2006 was a period of historically high global liquidity. International banks were awash with funds and there was fierce competition between them to bolster profits by lending to governments, firms and households in the post-Communist economies of the EU. Lending to ordinary people in these economies in foreign currencies was analogous to lending to poor people in the US—the so-called subprime market—where banks ratcheted up profits by lending to people irrespective of whether they could repay their debts.
Table 1: Selected economic indicators 2009/201016
Country | Real GDP growth percentage (2009) | Government deficit as percentage of GDP (2009) | Unemployment (first quarter, 2010) |
---|---|---|---|
Average EU 27 | -4.2 | -3.9 | 8.9 |
Post-Communist economies | |||
Bulgaria | -5.0 | -3.9 | 9.7 |
Czech Republic | -4.1 | -5.9 | 7.4 |
Estonia | -14.1 | -1.7 | 19.0 |
Latvia | -18.0 | -9.0 | 20.0 |
Lithuania | -14.8 | -8.9 | 17.3 |
Hungary | -6.3 | -4.0 | 10.4 |
Slovakia | -4.7 | -6.8 | 15.0 |
Slovenia | -7.8 | -5.5 | 7.0 |
Poland | +1.7 | -7.1 | 9.6 |
Romania | -7.1 | -8.3 | 7.4 |
Selected comparators | |||
Spain | -3.6 | -11.2 | 20.0 |
UK | -4.9 | -11.5 | 7.8 |
Ireland | -7.1 | -14.3 | 13.3 |
Although some credit went to firms, the bulk of the loans went to households, and in the majority of cases this went on financing mortgages, as can be seen from Table 3.
In general the integration of these economies with the European and global economies has shaped the nature of their vulnerability, but in the same way that the crisis has unfolded in different ways in economies of Western and Southern Europe, its scale and nature have been different in the former Communist countries of the EU.
Table 2: Currency composition of loans, by country, March 200917
Country | Percentage foreign currency |
---|---|
Bulgaria | 62 |
Estonia | 88 |
Hungary | 72 |
Latvia | 92 |
Lithuania | 65 |
Poland | 40 |
Romania | 62 |
Table 3: Growth and composition of credit to the private sector from 2003 to 200818
Average growth of credit to household (percentage) | Average growth of credit to corporations (percentage) | Share of housing loans in total household spending (percentage) | |
---|---|---|---|
Bulgaria | 41 | 57 | 43 |
Czech Republic | 26 | 12 | 65 |
Estonia | 39 | 32 | 78 |
Hungary | 21 | 7 | 64 |
Latvia | 44 | 28 | 64 |
Lithuania | 59 | 31 | 76 |
Poland | 28 | 13 | 30 |
Slovak Republic | 28 | 10 | 69 |
From economic miracle to implosion: the Baltic States
Between 2005 and 2007 the Baltic States had the highest growth rates in the EU. In these three years GDP in Latvia increased by an average of 10.8 percent year on year, while in Estonia and Lithuania in the corresponding period the year on year average was 8.8 percent. The governments of these countries had pursued the most extreme form of neoliberalism with no progressive taxes (flat tax on income), no inheritance tax and no tax on property.
However, the seemingly endless growth in the Baltic States, which drew accolades from the World Bank for being in the top 30 most “business friendly” economies, was illusory. In fact these economies were hosts to the world’s fastest growing real estate bubbles. Rising living standards were the result of property speculation fuelled by cheap foreign credits as Scandinavian and other foreign banks extended mortgage credit to Latvia, Lithuania and Estonia, mostly denominated in foreign currencies (dollars, sterling, Swiss francs and euros—see Table 2). Michael Hudson describes the way in which this enabled the old nomenklatura and apparatus of the Communist Paries to obtain and sell off assets in the public domain or collateralise them for foreign loans:
The effect has been to jump out of the frying pan of Soviet bureaucracy into the fire of “wild capitalism” and “grabitisation” by giving away or selling off public enterprises and real estate…what has emerged is a symbiosis combining the worst vestiges of the old Stalinist bureaucracy with new predatory finance.19
While a small number of people enriched themselves, the experience of ordinary people was dismal. The Baltic States are the worst places to work in the EU. Eurostat reports that they have Europe’s lowest standards of living and the longest working hours per week. Spending on social protection per head is a quarter of the European average and income inequality is the most polarised.20 The pace of the crisis has been swift, with unemployment in Estonia rising from 10 percent to 19 percent between the first quarters of 2009 and 2010, and in the same period unemployment increasing in Latvia from 13 percent to 20 percent (Eurostat). By 2010 this had resulted in a second wave of outward migration as people attempted to escape poverty.
“Good pupil to basket case”: Hungary
Hungary was also deemed a shining example of market reform and model pupil of neoliberalism. Therefore it came as a surprise to those who proselytised the connection between free markets and growth and stability that Hungary was the first country in the region to be affected by the financial crisis. However, problems in Hungary predate the crisis of 2008. By 2005/2006 the budget deficit of 10 percent of GDP was deemed too high for Maastricht criteria, which stipulated a target of 3 percent. The government embarked on a series of austerity packages by increasing taxes and reducing benefits and subsidies. In September 2006 riots broke out, unprecedented in the post-1990 period, when people found out that the government had lied to them about the state of the economy in order to get elected.
The political background of high spending was a history of competition between the main parties over public spending. Parliamentary elections led to the defeat of the government in power every time until 2006—usually a protest against their austerity measures. Due to bids for popularity before each election the budget deficit would peak, creating a cyclical pattern not seen elsewhere in Europe. GDP only caught up with its 1989 level in 1999, so successive Hungarian governments had been forced to use high levels of public spending to bolster the economy.
When the crisis hit in 2008 the Hungarian economy, reeling from two years of austerity, was doubly exposed. First, credits had been taken in foreign currencies by the government, firms and households (Tables 2 and 3), which was disastrous when the value of the forint fell. In 2010 1.7 million people out of a population of 10 million had loans in foreign currency. The government estimated that 10 to 15 percent of these were “endangered”—a euphemism for liable to default. Some people have had to sell their homes and others have faced a 33 percent increase in mortgage payments.21 The second source of Hungary’s vulnerability was its dependence on the demand from Western European economies for goods, which nosedived as the crisis unfolded.
Further as the crisis morphed into a sovereign debt crisis, international finance speculatively attacked Hungarian government debt. Even though public sector debt had been dramatically cut from 10 to 3.5 percent of GDP, and was significantly lower than that of other countries (Table 1), this was deemed insufficient misery for the IMF.
Table 4: Exports as a share of GDP in selected economies22
Total | Machinery and complex products | Motor vehicles and components | |
---|---|---|---|
Czech Republic | 66.8 | 36.5 | 11.2 |
Hungary | 65.5 | 42.3 | 6.2 |
Poland | 34.4 | 13.3 | 4.3 |
Slovakia | 75.7 | 30.8 | 12.4 |
Poland and the Czech Republic: A “velvet” crisis?
The governments of Poland and the Czech Republic attempted to avert speculative attacks on their economies by trying to distance themselves from the catastrophes elsewhere in CEE. The supervisory authorities of the Czech Republic, Slovakia, Poland, Romania and Bulgaria issued a joint statement asking that investors differentiate between the stronger and weaker economies in the region. They did not want to be seen as the subprime of Europe along with the Baltic States and Hungary.
Poland and the Czech Republic are the economies least scathed by the economic crisis. The fall in GDP in the Czech Republic puts it at just below the EU average. In 2009 Poland had a 1.7 percent increase in GDP, though this was meagre when compared with 6.8 percent in 2007 and 5 percent in 2008. Although it had the best growth in the OECD, this was not difficult given the dramatic falls elsewhere in CEE. The daily newspaper Gazeta Wyborcza described the country as having a “velvet crisis”.23 There are a number of factors which have cushioned Poland, to some extent, from the economic crisis and recession. A floating exchange rate meant that the zloty fell against the euro by 30 percent between August 2008 and 2009, which meant that it could steal an advantage over competitors whose currencies was not floating.24
Poland and the Czech Republic, unlike the Baltic States and Hungary, did not have huge property bubbles fed by foreign banks. Their exposure to foreign currencies was much lower: 8 percent in the Czech Republic and 30 percent in Poland. Although both countries were vulnerable to the fallout from the recession elsewhere in Europe, Poland was much less exposed than the Czech Republic with a lower dependence on exports (see Table 4).
However, Poland’s “success” in riding the storm of the current crisis should be treated with caution. This modest growth masks high levels of poverty with 44 percent of people earning less than 75 percent of the average wage and growing inequalities in wealth. The high average rate of unemployment of 9.8 percent only tells a partial story with youth unemployment running at 23 percent in 2010. Furthermore, 27 percent of people are on fixed term contracts—the highest number in Europe.25 The struggle to survive is reflected in falls in savings and increasing levels of indebtedness. In the future demand will be buoyed by the fact that Poland will be the largest recipient of EU Cohesion Funds, which between 2009 and 2015 will amount to an average of 3.3 percent of GDP per year. Poland’s Achilles heel is a high public sector deficit which leaves it exposed to speculative attacks on its sovereign debt. This has risen fast from 2 percent of GDP in 2007 and 3.6 percent of GDP in 2008 to 7.1 percent by 2010 (Eurostat).
Slovakia, with 15 percent unemployment by 2010, did not have a soft landing. It did not have the option of devaluing in the way that Poland did, as it had adopted the euro, and further it was particularly exposed to the recession, with exports forming 75.7 percent of GDP (see Table 4).
Different symptoms, same medicine
The broad pattern of parliamentary politics across the region has been similar. After 1990, alongside the emergence of right wing Christian Democrat political parties, the old Stalinists reconstituted themselves as social democratic parties. In post-Communist economies disillusion with parliamentary parties has been even deeper than in Western Europe as parties of the “right” and “left” have pursued privatisation and market reforms which have enriched a very small proportion of the population, leaving the vast majority with no gains from transformation. Scepticism about politics and politicians has been bolstered by widespread corruption.
The depth of the crisis has varied between the countries of CEE depending on the scale of property bubbles, the level of dependence on exports, the size of public sector deficits and whether they have had a floating exchange rate with which to steal an advantage on competitor countries. The response of governments, however, has been universally the same—to make working class people pay for the crisis. The raft of austerity packages across the region has been simply made up of variations on the theme of reducing wages and benefits, attacking pensions, cutting spending on health and welfare, and raising (regressive) taxes. Despite rising unemployment and falling GDP the IMF and EU urged even greater cuts and tax increases to reduce public sector deficits to the punitive Maastricht target of 3 percent of national income.
The crisis hit the Baltic States first and huge cuts were made to spending and wages in January 2009 that provoked street riots in Lithuania and Latvia.26 These countries along with Hungary were seen as “exceptional” cases by some sections of the financial press, but as the recession deepened and spread, all EU post-Communist countries have been affected. In elections in the Czech Republic (May 2010) and Slovakia (June 2010), despite social democratic parties gaining the largest number of votes, right wing coalitions, committed to budget cuts and slashing public spending, have formed the new governments.27 In return for borrowing from the IMF the Romanian government introduced draconian austerity measures in June 2010, which included cutting public sector wages by 25 percent and increasing sales tax from 19 to 24 percent.28
Despite Poland’s supposed “velvet” landing in the recession, the right wing Civic Platform government is committed to reducing the public sector deficit from 7.9 to the 3 percent, which will mean ferocious cuts in public spending and in welfare—already in the process of being dismantled after 20 years of neoliberal reforms.29 The government announced an increase in VAT from the beginning of 2011 and was planning more privatisation with the aim of generating 25 billion zloty to plug the gap in government spending.
The spat in July 2010 between the Hungarian government and the IMF and the “markets” is instructive. The Hungarian government had already imposed four years of austerity measures and reduced its public sector debt from 10 percent to 4 percent of GDP at the cost of the living standards of ordinary people. In July 2010 the government, afraid of losing electoral support, refused to make the further cuts that the IMF was demanding. The IMF and its acolytes balked at the fact that the “maverick” and “populist” prime minister Viktor Orban had said that implementing further austerity measures was “out of the question”.30
There was further squealing when the Hungarian government decided to reduce the budget deficit by imposing a levy on banks and financial institutions (mainly foreign) for three years. This levy was described by the Financial Times as “the most punitive considered anywhere in the world”, but was hugely popular with the electorate.31 Taxing the banks and refusing to implement further austerity measures has caused huge consternation in the “markets”. Timothy Ash (Head of Emerging Market Research at the Royal Bank of Scotland) wrote: “The new government has not learnt its lesson from the previous gaffe, while the market is in no mood to overlook fiscal laxity”.32 Another analyst, Gyula Toth (UniCredit SpA, Vienna), added: “We believe that market reality will finally force the government to take the necessary measures”.33
The lesson of Hungary, as of southern Ireland, seems to be that those ruling classes that have been supine in agreeing cuts urged on them by the IMF then face even more demands for austerity.
Social unrest and resistance
In January 2009 Latvia had the worst riots since the collapse of the Soviet Union as 10,000 people protested in Riga. At the same time in Lithuania, for the first time since 1990, the three trade union confederations united around a set of demands.34 A massive demonstration took place outside of parliament as well as in half a dozen cities and was followed by a cross-border protest simultaneously in Riga and Vilnius. Slogans appealed to class solidarity: “Our power is in being united! For workers’ rights!”35
There have been further sporadic protests such as the one in Lithuania in February 2010 against a fourfold rise in electricity prices. This was initiated by Fronto Partija (the Front Party or Frontas)—a new left wing party formed in 2009, previously unknown in Lithuania. Its stated objectives include “to create a socially just Lithuania, where there is no gap between the rich minority and the poor majority, between the large owners of capital and the rest of society”. The leader of Frontas admitted that his party had only omitted the word socialism from its name because it has “heavy negative connotations”.36
In May 2009, 30,000 trade unionists protested in Prague against the way companies were using the recession as a pretext for reducing wages, salaries and other benefits. At the demonstration the Chair of the Czech Metalworkers’ Federation, KOVO, Josef Stredula, read out the following statement:
Don’t allow those who did not cause the crisis to be harmed most harshly. Don’t make the crisis a pretext for changes to the Labour Code, which would bring about an unprecedented curtailment of employees’ rights, including groundless dismissals from work. Don’t allow any hazard with the pension fund. Don’t approve the new risky bill on savings. Don’t allow a devaluation of saved pensions and further weakening of public finance. Act, make decisions and rule for the benefit of citizens, not in the interest of speculative profit of financial groups and lobbies and tax havens.37
In Romania in May 2010 tens of thousands of public sector workers protested in Bucharest against plans to cut wages and pensions. It was one of the biggest gatherings on the street since the Romanian Revolution. Marian Gruia, head of the police union, called on Romanians to unite “as we did on 1989, when we overthrew the dictatorship” of Ceausescu.38
In Poland protests have been rumbling. The most significant is that miners at the state-owned Kompania Weglowa (the biggest mine in Poland and one of the biggest in Europe) are balloting for strike action in opposition to plans to cut jobs from 62,000 to 45,000.39
The darker side of the crisis and recession is that the uneven impacts of market-led policies and their failure to benefit large sections of the population alongside the neoliberal policies of political parties, have provided the fuel for the rise of neo-Nazi parties which are overtly anti-Semitic and anti-gay. In particular, there has been an increase in the scapegoating of the minority Roma community. In Hungary in 2009 at least eight Roma were murdered by Nazis.40 There has also been a marked increase in homophobia. In Slovakia the first gay pride event was cancelled in May 2010 when it was attacked by a neo-Nazi group, Slovenska Pospolitost.41
In Hungary members of the neo-fascist Jobbik party have made electoral gains. They got 17 percent of the votes in the first round of the Hungarian general election in April 2010 and came third with 842,306 votes—only just behind the leading socialist party. By the second round of the parliamentary elections they had won 47 out of 386 seats. Earlier in April 2010 they held a 50,000-strong rally. Walter Mayr writing in Der Spiegel reported: “Members of citizens’ militia and neo-Nazi groups have taken over patrolling the streets on this day. In combat boots, camouflage or black military uniforms they form human chains and divide the crowd”.42 They have built on the despair of ordinary people and are strongest in poorer parts of the country where unemployment is highest.
Conclusion
The degree of support for the post-1990 market reforms has varied between post-Communist countries depending on the strength of trade unions and the organised working class and what the ruling class has been able to deliver materially. However, the level of support for neoliberalism has often been exaggerated, and what support did exist in the early days of transformation quickly dissipated as small groups, often from the previous regime, enriched themselves through privatisation. What could not be clearer is that the crisis has laid bare the class nature of the transformation. For the foreign banks, which have reaped huge profits in the region, it is business as usual. The indignation that they have displayed at the levy imposed on them by the Hungarian government is quite breathtaking.
Huge levels of anger have been manifest in the biggest demonstrations since 1990 across the whole region, underpinned by much clearer class politics than have been evident before. However, these initial explosive protests have not translated into more concerted action, and certainly have not been on the scale of Greece. The dark side of the misery and despair caused by the crisis is the growth of neo-Nazism and rise of nationalism. There are also seeds of hope in the responses of trade unions, the class politics that have underpinned the protests and the presence of new radical parties and campaigns.
Notes
1: In 2004 the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Slovakia and Slovenia joined the EU. Romania and Bulgaria joined in 2006.
2: Quoted in Andor, 2009, pp294-295.
3: Between 1990 and 2001 USAID was involved in 400 activities and pumped $1 billion into Poland. See USAID 2000 and 2002.
4: Hardy, 2009.
5: Holbrooke, 1995, p42..
6: Grahl, 2005.
7: HSBC, 2006.
8: Woolfson, 2010.
9: Holman, 2004; Smith, 2002; Shields, 2004.
10: Gill, 2001.
11: Cardechi, 2001.
12: Doherty and Hoedeman, 1994.
13: Bornschier, 2000; van Apeldoorn, 2000 and 2003.
14: Mitra, Selowsky and Zalduendo, 2010.
15: Pomerleano, 2010.
16: Data drawn from Eurostat. See http://ec.europa.eu/eurostat
17: Mitra, Selowsky and Zalduendo, 2010, p109.
18: Mitra, Selowsky and Zalduendo, 2010, p50.
19: Hudson, 2008, pp75-76.
20: Hudson, 2008.
21: Bryant, 2010a.
22: Myant and Drahkoupil, 2011 (forthcoming).
23: Gazeta Wyborcza, 2009.
24: Most notably the Baltic States and Slovakia.
25: www.solidarnosc.org.pl/en/main-page/polish-labour-2010-html
26: Woolfson, 2010.
27: Slovak Spectator, 2010b.
28: Matthews, 2010.
29: Buckley, 2010.
30: Bryant, 2010c.
31: Bryant, 2010c.
32: Bloomberg Businessweek, 19 July 2010.
33: Bloomberg Businessweek, 19 July 2010.
34: Woolfson, 2010.
35: Woolfson, 2010.
36: Woolfson, 2010, p11.
37: EIROnline, 2009.
38: BBC News, 2010.
39: Polish Press Office, 2010.
40: Fabry, 2010.
41: Slovak Spectator, 2010a.
42: Mayr, 2010.
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