This is not how we imagined it: a tale of hope and despair in CEE

29 Oct 2017


Central and Eastern Europe is going through a period of economic growth and optimism, but worrying political and social forces are at work that threaten to undermine this hard-won post-Soviet prosperity.

I’ve written this blog as a Tale of Two CEEs. Borrowing shamelessly from Charles Dickens, let’s start with the season of light and the spring of hope:

Spring of hope

In this best of times scenario Central and Eastern Europe is a poster boy for growth and stability. It has shrugged off the economic downturn - with gross domestic product growth estimated at 2.2% in 2017 - credit is recovering, lending is on the up, non-performing loan ratios are down and the property sector exultant. Confidence is high, and will only get higher, as the region’s primary trading partners in Europe – and beyond – themselves grow in confidence and economic stature.

That’s the epoch of belief bit over with. Now onto the incredulity, foolishness and potential winter of despair. Quite apart from IMF warnings about weak productivity, low investment rates, a shrinking working-age population and inefficient public sector in the region, there is the political factor. The simmering populist pot the European Union has left on the boil as it spends all its time fretting about Brexit.

Winter of despair?

Populism has reared its multiple ugly heads across the region. It used to be thought it was the tortured relationship between Russia and Ukraine that was the biggest threat to prosperity in CEE, but the rise of right-wing governments in Austria, Czech Republic, Poland and Hungary has confounded that assumption. Just what will be the longer-term impact on economies and societies in the region and, most importantly, just how will this surge in populism affect the European project? Once seen as a beacon of post-Soviet civilisation – a revered club that any CEE country would aspire to join – the EU’s image has become tarnished among the electorates of Central and Eastern Europe.

Or epoch of incredulity ...

In the words of one of the leading figures in the fight against communist dictatorship in the East in the post-war period, Karel Schwarzenberg: “This is not how we imagined it. We thought people learned a better lesson from the communist era. In reality, a lot of this dark past has remained inside us.”

And because it feels somehow appropriate, here’s Mr Dickens again: “We had everything before us, we had nothing before us, we were all going direct to Heaven, we were all going direct the other way.”

I’ll leave you to make up your own mind what to make of that!

If you want some answers to these questions, and more, then please join us at our Central and Eastern European forum in Vienna between 16th and 17th January next year. Senior representatives from governments, business and finance will all be there. More details here: https://goo.gl/izduj2

 


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