THEWORLDTODAY.
ORG MAY 2009
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GLOBAL ECONOMIC CRISIS – EASTERN EUROPE
Seán Hanley, LECTURER IN EAST EUROPEAN POLITICS, SCHOOL OF SLAVONIC AND EAST EUROPEAN STUDIES, UCL
Crunching
EasternEurope
Three governments have fallen, the new
middle classes are feeling the pain, there
is even fear of the emergence of dark
forces. Is Eastern Europe in for a torrid
time as the economic crisis bites? Can
the once magnetic attraction of the
European Union counteract the other
factors at work?
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t HE GLOBAL ECONOMIC CRISIS HAS HIT CENTRAL
and Eastern Europe hard. The drying up of
external credit and the decline of west
European export markets have seen
economies across the region contract, leading
to rising unemployment, currency
depreciation and ballooning deficits. The International
Monetary Fund has already agreed bailouts for the most
vulnerable economies of Hungary, Latvia and Ukraine and
the region as a whole was targeted in the support package
agreed by the recent G20 summit. The position of the new
central and East European members has also been central to
European Union (EU) discussions about how best to respond
to the crisis, given the temptation of richer west European
states to ‘repatriate’ jobs and surreptitiously protect their
national economies.
DA R K P R O S P ECTS
Underlying the current concern is a fear that economic
upheaval will quickly translate into political instability. Mass
protests against austerity measures led to the collapse of
Latvia’s shaky coalition government in February in the so-
called Penguin Revolution, which spilled over into violent
disorder.

The economic crisis also formed the backdrop to the
resignation of the Hungarian Prime Minister and the fall of
the Czech Republic’s minority government in March. Many
commentators have written darkly of the possibility of further
unrest, some even noting eerie parallels between the current
downturn and the economic collapse of Central Europe in
1920s and 1930s when democracy rapidly broke down across
the region.
Such fears are undoubtedly misplaced. Despite the depth
of the crisis, there are no serious political forces in
contemporary central and Eastern Europe seeking full blown
ideological alternatives to capitalism and democracy. A more
realistic worst case scenario might be that, beset with
economic problems, the region could become mired in a cycle
of protest movements, weak and ineffective governments,
alternating between stalled austerity measures and
nationalist resentment against more powerful western
neighbours. Slovak Prime Minister Robert Fico’s recent threat
to send French electricity companies packing if Paris
engineered the relocation of Renault’s Slovak car plants to
France, provides an early flavour of such a world.
Indeed, such a Latin American style vicious circle of social
upheaval, populist politics and stop-go economic policy was
precisely the future many informed observers envisaged for
Eastern Europe in the early 1990s. That this did not occur
then was a result of the region’s demobilised societies, more
developed welfare systems, and the magnetic attraction of
European Union membership. The prospect of joining the
EU anchored the transition process in much of the region,
serving as both incentive and symbolic focus for painful
reform.
However, many of the factors that made post-communist
transition relatively smooth and uncontested no longer hold.
Two decades of open, competitive politics have made central
and East Europeans more, not less, able to criticise and
protest against their elected leaders. Those affected by the
current recession are not simply the classic ‘loser’ groups of
post-communist transition – workers in heavy industries,
older people in rural locations and Roma – but embrace many
of the erstwhile ‘winners’, such as the nascent middle classes
and employees in competitive exported-oriented industries,
or the service sector.
Established democracies in western Europe no longer
represent an external zone of stability and prosperity to which
those further east can look for political support and policy
models. Instead, the states of the ‘old’ EU are themselves
caught in the global economic crisis and are, in some cases,
suspected by many in the region of wanting to put their own
interests first, abandoning weaker new member states to their
fate.
Finally, despite many vicissitudes in practice, post-
communist reform was at bottom a straightforward political
project of moving from one system to another by applying
tried and tested economic and political principles. The politics
of the current crisis, by contrast, offer few such certainties of
direction, or any guarantees that the policy instruments
deployed will yield results.
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ST R E S S T E STS
The exact nature of the coming political challenges will
depend on the depth and duration of crisis and the broader
success of measures to tackle it. For all the talk of ‘contagion’,
such challenges are likely to vary significantly between states,
given their differing social make-ups and experiences of
political and economic reform.
Small, ethnically homogenous, successfully reforming
states with strong social safety nets and good economic
fundamentals, such as Slovenia and the Czech Republic, for
example, were rated in the Economist’s recent Political
Instability Index as among the most internationally stable
political systems. Ukraine’s uncertain national identity, high
levels of inequality and corruption and proximity to a restive
and powerful Russia saw it rated alongside African and South
American states as among the world’s highest risks for
political instability.
Other central and East Europe countries emerged with
more mixed scores. Estonia’s success in democratic and
market reform, for example, was offset by the higher risks
associated with its ethnic diversity and weak welfare state.
In many ways, therefore, the current crisis seems likely to
act as a brutal stress test of present political arrangements,
exacerbating existing trends rather than setting new ones.
Indeed, on closer examination, this pattern is already clear.
Latvia’s Penguin Revolution was the latest in a series of
protest movements directed against incumbent parties –
widely seen as little more than vehicles for vested business
interests – and followed a similar ‘Umbrella Revolution’
movement in November 2007.
Hungarian Prime Minister Ferenc Gyurcsany, an ex-communist
technocrat who has faced intense well mobilised right-wing
opposition since his election in 2006, was already unpopular
and politically beleaguered before the global credit crunch.
Similarly, the divisions in the Czech Civic Democratic Party
which brought down Prime Minister Miroslav Topolánek last
month are rooted in disagreements about the strategy of the
Czech right which date back to the late 1990s.
P R E S S U R E O N G OV E R N M E N TS
Despite such different points of departure, a number of
common if unquantifiable factors are likely to shape political
dynamics across the region as the crisis unfolds. The first of
these will be the ability of established parties and politicians to
connect with and channel voices of protest.
Where opposition parties are well organised and have a
strong social dimension to their message, as with Hungary’s
Fidesz or the Czech Social Democrats, changes of government
in coming elections may be the most likely initial
consequence. Where parties are more unstable or more
discredited in the eyes of the public, as in Latvia or Bulgaria,
the capacity and willingness of East Europeans to protest –
and to sustain protest – in the face of economic adversity
becomes relevant.
Of particular significance is whether the as-yet largely
uncoordinated protests of groups such as pensioners, farmers,
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students and the public sectors gel into more unified, more
durable social movements capable of exerting sustained
pressure on governments.
A more likely scenario is that, as in the 1990s, East
European voters will choose to register their protest at the
ballot box by backing radical, anti-establishment and anti-
cumbent candidates. June’s European elections will offer an
important weathervane for such trends.
Finally, there is the overarching political context of the EU.
The extent to which member states and European institutions
can act cohesively together in the crisis is crucial to
developments in central and Eastern Europe. Any perceived
failure by the EU which is seen to penalise central and East
European states and societies may impart a sharply
eurosceptic and nationalist edge to the region’s responses
to popular economic distress.

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