úterý 24. února 2009

Plea from Central Europe: We are not the East!

Forget about geography, important is who pays its bills in euro. These countries are more or less safe. For example, Slovakia, which intoduced euro two months ago and is even in larger scale exposed to downturn in automotive industry, has better treatment then Czechia.
So, forget about geographical meaning of the East and the West. At least this is a lesson of recent turmoil on Central European financial markets followed by latest development in politics and economics. There was raised - also due to articles in such prominent publications like The Economist and Financial Times - a question, if Western analysts are aware that Czech Republic has different debt structure than, say, Hungary and that problems of Latvia are not the same like problems of Czechia. "You cannot counter the argument that geographically, Czech Republic is in the region between Latvia and Hungary," was ironic response of one Western colleague to my question what is policy of his newspaper on which it divides Europe into West and East.
I know that Czechia is for many analyst and commentators still wild East (especially, if they ever had encounter with famous Prague's taxi drivers), but from economical and structural point of view, situation here is quite different than in Baltics or in Ukraine or Serbia. For example, we had already our banking crisis in late 90s and our Consolidation bank, which siphoned toxic assets, is quoted in recent days as one of the models for solving the problems elsewhere, especialy in the US.
We are now more part of the West than the East - politicaly (EU + NATO + possible US radar base), economicaly (look at export statistics), even socialy (English as lingua franca and all the "cultural" stuff in TV or travels). So it hurts when Western analysts put you in the same basket with Ukraine, Belarus or even Tajikistan. The work we have been doing in last twenty years is somehow dishonoured...
Euro has become new division line in the harsh times of economic crisis, as I understand from my talks with some economical analysits during last few days. From that point of view, Slovakia is even further on the West and Austria is with its indebtnes (its banks exposure in postcomm countries means that debt of Austrian banks equals its 80 % of GDP) more vulnerable then, say, Czechia. Simply, we are interconnected with the Western financial system as much as with Eastern gas and oil pipelines. We are in the middle, in the Central Europe which I would consider rather special entity than easy described part of West or East.
Czech national bank today has complained about misinformation in Financial Times and The Economist about state of Czech debt (read here). Westerners could in these turbulent times cause us real damage.
I think that part of the problem is in geography and in good old cold war divison between East and West which still prevails in heads of many Westerners (as well as in Kremlin). We can agree we have in common with others that we are postcommunist countries, but definitely we are not the East. And the question is what common economical problems has Czechia with, say, Azerbaydjan. We even have very, very different structure of mortgage debt in comparison with Poland and Hungary, where in both countries there are problems with lending in Swiss francs or in euro (1/3 of Hungarian debt is in foreign currencies). Foreign currency denominated debt in Czech market is - according to Czech natinal bank - around 0,1 percent.
Two weeks ago Czech foreing minister Karel Schwarzenberg had public quarrel with his Russian counterpart Sergej Lavrov about if we are "Central" or "Eastern" Europe. The New York Times today is on the same tone like Lavrov putting us on the East (read here).
On the other side, I can only quote Timothy Garton Ash who wrote in one of his books that there are about 16 definitons of Central Europe in which there is not included only Spain, Portugal and Norway.

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