The Financial Times
By Stefan Wagstyl
Published: February 27 2009 19:59 | Last updated: February 27 2009 19:59
Seen from London and other places that might still be called the commanding heights of global finance, the countries of eastern Europe look much of a muchness. With the big exception of Russia, the rest tend to merge when viewed by crisis-weary traders glued to their screens. Sell one, sell all has been the motto. And down they all have gone – the Polish zloty, the Romanian leu and the benighted Ukrainian hryvnia.
Journalists too, including this one, often put everything together under one headline. “Turmoil over eastern Europe”, “Eastern Europe fears trigger rush for safety”, and so on. With little space and time what else can be done?
All this irritates friends in Warsaw, Prague and Bucharest. They cannot understand why, if they take the trouble to distinguish Spain from Portugal and Belgium from the Netherlands, west Europeans struggle to separate Czechs from Slovaks and Ukrainians from Russians (though the last one can be tricky since there are Ukrainians who think they are Russians).
In the crisis this matters. Countries doing better than their neighbours – Poland, for example – hate to be lumped with those that are not, such as debt-laden Hungary. So they plead for differentiation from bankers (and journalists). But they cannot go too far in emphasising the distinctions for fear of criticising their neighbours’ policies – and finance officials are normally too polite to do that.
So, it was a bit surprising to hear Jacek Rostowski, the very polite Polish finance minister, last week comparing his nation’s finances with Hungary’s. Explaining why he was not relaxing the budgetary purse strings, he told parliament: “There is some danger that going in the direction of increasing the deficit, we would end up like Hungary.” To make sure dozy backbenchers got the message, he said: “We are looking for a Polish answer to a Polish problem.”
Mojmir Hampl, deputy governor of the Czech central bank, struck a similar note this week. Writing in the FT, he said: “Some countries east of the Danube are suffering under the burden of huge franc-, dollar- or euro-denominated debts, accumulated either by the government or by the private sector, or both.”
Even if they are being rude about the neighbours, they are right to say important distinctions are lost. In financial terms, the region divides into three categories. First come Poland, the Czech Republic, Slovakia and Slovenia (readers unfamiliar with the territory should note that the last two are not the same, even though one regional financial institution once mixed them up, illustrating a report on Slovakia with a map of Slovenia, or perhaps it was the other way around.) These four states insist they have their external and fiscal positions under control and believe they can contain emerging difficulties in banking. No way are they going to the International Monetary Fund.
Next come countries with potential difficulties financing their external deficits, including Romania, Bulgaria, Estonia and Lithuania. One or more may have to go to the IMF. Finally, there are Hungary, Latvia and Ukraine with problems so urgent they are already on IMF support.
All except Ukraine are inside the European Union, which is of considerable help, even when some rich western EU members have been unenthusiastic about a whip-round for eastern Europe. Slovakia and Slovenia are also in the eurozone. The rest would like to join them but may have to wait until the storm blows over, when, for some, it might be too late.
More is at stake than weathering the crisis. These countries have never liked being lumped together as eastern Europe. The phrase is geographically inaccurate as Europe’s cartographic centre lies in Poland, Lithuania or Belarus (depending on whom you ask). Central Europe suits the Poles, Czechs, and Hungarians quite well. But it cannot be stretched to include Ukraine or Bulgaria.
Historically, the region is divided by fault lines – between Slav and non-Slav peoples, between western Christendom and Orthodoxy, and between the region’s former empires – Russia, Germany, Turkey and Austria-Hungary.
In fact the only time the region was united was under communism, when the distinction between unfree eastern Europe and free western Europe was painfully real. After the fall of communism, countries are becoming diverse as the common socialist experience fades. Joining the EU has not blurred these distinctions any more than it has made Frenchmen out of Germans. Quite the opposite, the liberty to rediscover the past and build an independent future has increased the variety of life.
Even casual visitors, except perhaps the participants of British stag parties, cannot fail to appreciate each country’s special characteristics: the easy charm of Prague, the grandeur of Budapest, or the half-French half-Oriental corners of Bucharest. In remote places, each nation’s uniqueness is even more apparent – in the painted monasteries of northern Transylvania, the old mosque in Pecs, in Hungary, and the wooden churches of the Carpathian mountains in Poland. Hungry tourists cannot eat in an “East European” restaurant because there aren’t any. They must choose between Hungarian (or Romanian, Polish etc) and the ubiquitous Italian. Nor can they wash down their food with “East European” beer or “East European” wine.
In fact, among the few benefits of the “Crisis in Eastern Europe” is that currency swings have made these pleasures cheaper now for most west Europeans. Except, of course, for the British, but that is another story.