The End of the Economic Miracle

Within five years our economy will reach the level of Austria!, shouted the man with the tannoy. I was beside myself with joy, and so were the crowds around me. It was on a freezing November day, I was thirteen years old and the man was Milan Kňažko, actor, people’s tribune and one of the leaders of Slovakia’’s democratic opposition. For many inhabitants of Bratislava, a city just 60 kilometres from Vienna, the non-aligned neighbour Austria was a model, a dream country, an idyllic world of make-believe, a way out of the isolated prison of their really existing socialism. The atmosphere in the square was relaxed, everyone was happy to experience the previously unknown feeling that everything is possible.

In the following twenty years Milan Kňažko’’s career was a typical East European post-communist success story: after serving as Czechoslovakia’s Foreign Minister, he became a close associate of the populist Vladimír Mečiar, becoming Slovakia’’s minister of culture, and later the head of a successful private TV company, a V.I.P. and a talk show fixture. He has kept up his acting career on the side, with appearances in American B-movies such as Hostel 2 where, in the role of the Russian Mafioso Sasha, he delighted in shooting kids in the head in cold blood. For him, his own promise of a prosperous future had no doubt come true as early as in 1994. But what about the rest of the country?

For seven years, from 1999 until 2006, the world hailed Slovakia as a model of successful neo-liberal reforms. The poorer and almost unknown sibling of the Czech Republic, often confused with Slovenia or forgotten altogether, introduced a flat 19 percent tax rate and this was only the start of a rapid structural transformation. The entire chaotic system of communist bureaucracy was finally simplified and the sleepy country’’s financial system became more transparent. The changes elicited an enthusiastic response from economists abroad, and investors from all over the world flocked to Slovakia, adding further impetus to economic growth and dramatically lowering unemployment.

The 10 percent annual growth rate surpassed even the most optimistic predictions and for the first time in its history Slovakia was the leader in the region. Glamour and luxury were the words most frequently encountered on advertising billboards of those days. The place started teeming with nouveaux riches. Want a 250 square metre penthouse with a roof terrace overlooking the Danube? Want your own yacht? No problem! And if you can’’t afford it, you have only yourself to blame.

But those times are long gone. In spite of the fulsome words from abroad Slovak neo-liberals lost the election in 2006 and were replaced by one of the most bizarre government coalitions in Europe, consisting of the enormously popular post-communist Social Democrats and two smaller, right-wing populist parties. Although they won mainly on the back of their promise to roll back all the reforms of the previous regime, in actual fact they changed very little. Nevertheless, Prime Minister Robert Fico claims his government brought about more social justice and got rid of regional divisions. His record breaking popularity demonstrates that the people still believe in him and in his policy of leading the country away from privatization – e.g. of Bratislava airport or healthcare – and towards more government influence. However, this year has ushered in a completely new situation.

The introduction of the euro on 1 January 2009 helped to protect Slovakia – unlike its neighbours Poland, Hungary and the Czech Republic – from the first shock waves of the global financial crisis. The newly-minted euro coins boast the Slovak patriarchal cross, Bratislava Castle and the national symbol, Kriváň Mountain (The Crooked Peak) in the High Tatras. And for the first time ever the switch to euro did not result in price hikes – the prices that shops and restaurants have to display in Slovak korunas as well as in euros have remained unchanged.

Yet the country has not been spared the impact of the global recession altogether. Even Fico, who only six months ago claimed it would bypass Slovakia, can have no doubt about the fact that Slovakia has now been hit by the economic crisis.

Slovakia’’s car producers – apart from Volkswagen, PSA Peugeot Citroen and Kia have built huge factories in the country – expect production to decline by up to 25 percent in 2009. Slovakia’’s car monoculture may soon turn the whole country into one big Detroit. At the beginning of May Slovakia introduced a bonus for scrapping old cars, which did help the economy – albeit that of the Czech Republic which produces cheap Škodas for the Slovaks. This measure has generated a lot of public interest, yet the hyper-consumption of the brief boom period is over and consumer spending has now to be artificially stimulated. Because of the worldwide drop in demand, Volkswagen Slovakia was forced to halt production on 6 April for the second time, this time for a full two weeks.

The Central European tiger is tired. And in these difficult times the government has shown itself to be incompetent, unprepared and corrupt. Fico, the great speechmaker, has been unusually silent, leaving without a comment the fact that a sixth minister had to leave office following a corruption scandal. And the Prime Minister finds it more and more difficult to convince voters that the impact of his predecessors’’ reforms on the social system was purely negative, particularly since the neighbouring currencies – the Polish zloty, the Hungarian forint and the Czech koruna – went through the floor. In addition to this, the country lacks technical expertise, and healthcare and pensions are in a mess. The contrast between the city and the countryside and between the West and East of the country is also becoming more pronounced.

Apart from the introduction of the euro, the first months of this year have been marked by several other events. Following the interruption of gas supplies from Russia and Ukraine, tensions with Hungary have been rising in a vicious circle of mutual attacks related to the minority issue. Growing unemployment has affected disproportionately the under-qualified Roma who cannot find their place in Slovakia’’s market economy. Tensions increased dramatically when six Roma youngsters, aged between 11 and 16, were detained by police in Košice in eastern Slovakia and subjected to abuse and humiliation.

Not only the market but also political life is now in urgent need of a bailout. This won’’t be easy in a country that is a newcomer to the euro and where people are only just beginning to grasp how little they are earning compared with other countries. After 30 years of experience as a teacher specialized in working with children with hearing disabilities, my mother’’s gross monthly salary is 650 Euro, while the cost of living has become dangerously similar to that in the West. And now even this pitiful wage is to be frozen? The government tells the people to economize; but how and on what?

Twenty years after the fall of communism scientists, artists and academics are still extremely poorly paid – earning less than cleaning ladies in Austria, they have to manage on 700 euros a month. If everyone did not have a second job, people would not be able to manage. Slovaks’’ wallets are now weighed down with euro coins instead of being stuffed with banknotes.

The average debt of Slovak families is only one tenth of the European average. There has been no credit crunch. Yet every tenth Slovak lives in permanent poverty and the rate of growth has slowed drastically. The banks have become extremely cautious about giving credit. The construction boom has slowed down. A large section of infrastructure – motorways, pavements, schools, libraries – remains underdeveloped, resembling the Third World. Do we want to maintain this state of affairs? Is this really the best my country can do?

Twenty years after the fall of the Iron Curtain a new generation with no experience of communism has grown up in Slovakia. The freedoms enjoyed by young people in their twenties are the result of the transition after November 1989, when their parents were still young and excited about exploring what the world had to offer. Actor Milan Kňažko was one of those people. So what has become of him? Not long ago we could see him in a thriller playing the part of one of the most infamous mass murderers in Germany at the time of the first economic crisis after World War I. His main job, however, is hosting a new TV show entitled The Way We Were, which squares the circle rather nicely. The show depicts an idyllic picture of the past, when the East was still wonderfully peaceful, innocent and untouched by capitalism.

Translation: Julia Sherwood

This article was originally published in German in the Frankfurter Allgemeine Zeitung on 15 June 2009. 

We are grateful to Michal Hvorecký for the permission to publish this text in English.