• The Eastern Collapse of the EU Model

last modified March 10, 2016 by Tord


The Eastern Collapse of the EU model

 

Introduction

 

This article can be summarized as stating: Forget about the transition identity in Europe, welcome the common interest among rural and urban periphery. We can now claim that the transition period for former planned economy countries is over. Only some ten percent of them have the chance to reach what was hoped for, a standard of living comparable to the West. Many still have not reached the level they had when the Soviet Union collapsed. But more important, they share their destiny after 2008 with several countries in the periphery of Western Europe. It is especially the case of Finland that shows that since 2008 nothing helps if you belong to the periphery. Your destiny within the present EU model whether you are inside or belong to neighboring countries is the same, to get a widening gap compared to the central countries of EU able to control the economic model in their favor. Below you find an assessment of the situation in each country in the inner and outer EU Eastern periphery. I am not a scholar and there are certainly mistakes made in the balance of the short description of each country. Yet I hope that it gives a scetchy view of a region seldom looked at in its enterity. But the situation can be summarized in a chart showing the GNP development of all these countries showing how countries in the centre like Sweden and Germany leaves all periphery countries behind whether they are long time members of EU like Finland, Cyprus and Greece, newer members or seen as neighbours on their way to become members or getting a regulated neigbourhood agreement. It is my hope that in this show that so called Eastern periphery have an important role and can contribute to building stronger alliances among the periphery not only in this eastern region including Finland, Greece and Cyprus but also in making crossborder alliances between peripheries inside countries including the countryside and working class urban areas in Sweden and other Western countries in need of building a common struggle with the periphery inside Eastern countries.

 

Prosperity or periphery for ever?

It would bring happiness and prosperity. The idea of ​​European values ​​with inherent cultural superiority. If only more and more countries adopted these European values claimed to underpin the EU's model of economic policy and the way to govern society would wealth, peace and democracy follow automatically. Corruption and authoritarianism would become a thing of the past through this European cultural model, the separation of powers doctrine and enlightened legislation. That did not happen.

There has not been any doubts that the economical side of the model was the right one. Already in 1957, the market economy was inshrined in the Rome treaty as the basis for EU. One idea when implemented in full meant that increasingly functions in society would completely be controlled by who is the strongest on the market. From the beginning in coal and steel industry, later on goods of all kinds and even agriculture. It has been been made more and more dominating of larger portions of economy and expanded geographically with stronger enforcement mechanisms through more and more treaties. The success seemed evident. Right dictatorships such as Greece, Spain and Portugal became democracies and members of the EU and the economy went ahead.

In 1991, the EU prepared to proceed by the Maastricht Treaty. Now, the EU would not only be a trade agreement, but a political and economic union as well. The road towards an increasingly comprehensive common policy with strict rules on how States regulated their economies began. Now it was not only trade in goods. Also, services and infrastructure should be managed according to market economy ideology, the public sector privatized whenever corporations could make a profit out of it and budgets put under control. A single currency and the European Central Bank came into being albeit stopped in some countries through referendums. Intergovernmental cooperation in foreign, defense, refugee and police cooperation began to take shape. Finland, Sweden and Austria became members. The future continued to look very bright when the new independent states of Central and Eastern Europe stood up and applied for membership. The conflict when the dissolution of Yugoslavia took place due to both external and internal pressure and the subsequent wars led to a setback in optimism. Not least was German interests exposed when the country pressed other EU countries to accelerate the secession of Croatia by acknowledging the country prematurely before minority rights were guaranteed, a policy that worsened the conflict in all of Yugoslavia.

The main trajectory was anyway continued, the EU model was the right one. What was needed was only ever closer cooperation and further enlargement. The EU summit held in Gothenburg 21 had the eastward enlargement as a major theme. 2004, Estonia, Latvia, Lithuania, Poland, Slovakia, the Czech Republic, Hungary, Slovenia and Cyprus became members, in 2007 Romania and Bulgaria.

 

Eastern Partnership

With growing economic problems it became clear that there was a certain fatigue in the EU regarding further enlargement. Thus a new model for extending EU influence was launched in 2004 called European Neighbourhood Policy. Countries was invited to accept becoming part of the EU economic model but not have the right as a member state to influence EU decisions. In May 2008 Foreign ministers from Sweden and Poland foreign brought such an initiative called the Eastern Partnership to the EU General Affairs and External Relations Council and later the same year to the European Council. It aimed to promote European "common values", "collective norms" and "joint ownership". The countries that came to be included were Moldova, Ukraine, Belarus, Georgia, Armenia and Azerbaijan. The partnership was seen as part of efforts to establish association agreements with the EU, where particular adaptation of their economies to the EU model was central but without offering the countries membership. It would appear that it also included clauses about military cooperation with security complications and demands that the countries opted out economic cooperation to the benefit of just having free trade with the EU. Hopes were sometimes of countries on visa-free travel to the EU and the membership in the long term.

Today we can see the results of the Eastern Partnership policy with foreign ministers Bildt and Sikorski as its foremost promoters. In country after country this project often achieved the opposite of what it claimed would become the result.

 

Georgia

The Western-minded Georgian President Mikheil Saakashvili felt strengthened by the new EU ideas and close cooperation with the US and NATO. A military attack was launched in August against the capital of the republic of South Ossetia, which never successfully had been incorporated in the new Georgian regime after the fall of the USSR. The attack failed after that Russian peacekeepers have been attacked and troops from Russia pushed back the attackers into Georgia and then withdraw after the peace negotiations. Swedish foreign minister Bildt stated that Putin acted as Hitler. Much of the Western press followed suite and saw the war as an act of aggression by Russia. Later EU and UN could confirm that it actually was the opposite and Georgia that had started the full scale war against the South Ossetian capital.

The so-called Revolution of the Roses 2003 that brought Saakashvili to power led to some reforms in order to prevent petty corruption. But the rapid privatization of publicly owned companies and public sector made oligarchs very rich. Saakashvili also received much criticism for the way he controled the media and suppressed freedom of expression. Now he is wanted for corruption offenses by the new Government and has taken refuge as mayor of Odessa in Ukraine nominated by the Ukrainian government. Georgia continues to have much trade with the EU but has also begun to thaw relations with Russia. Economically the country is more poor than it was when Soviet Union was dissolved

 

Armenia 

Armenia despite the lack of oil resources and the war with the neighboring country Azerbaijan managed their finances well. The country seemed to be heading towards an association agreement with the EU. But the country chose trade agreement with Russia instead and started economic cooperation Eurasian Union. Protests broke out against the increased electricity prices during the summer of 2015 that led to the government decided to subsidize the Russian-owned energy company, energy company so that customers are not affected directly by price increases.

 

Azerbaijan

Azerbaijan does not choose side explicitly in the West-East conflict and can lean on vast oil resources. The country is however so corrupt and autocratic ruled that the EU would hardly wish for a rapprochement even if the country so desired.

 

Ukraine

The mixing of enhanced westerly economic influence with the military component had its most tragic expression in the consequences of the EU's Association Agreement with Ukraine as it was proposed in 2013. The EU not only refused to negotiate on the implications of the association agreement for the comprehensive free trade with Russia. It added moreover a clause on military cooperation, which is mixed together with economic security policy in a country where the majority of the people were for neutrality. When Ukraine estimated that the cost of adapting Ukrainian economy to EU rules would require far more compensation than the 600 million euros that the EU was willing to give the president Janukovitsj postponed the signing of the agreement. This led to widespread protests that over time became increasingly violent, and the elected president was chased out of power and replaced by a pro-EU government.

The new government came to the same conclusion as the previous one that the compensation was too small for siging the EU association agreemnt. Moreover, now the EU came to the idea that it would have been prudent to negotiate consequences for trade with Russia. When the EU and the IMF could offer ca. 10 billion euro in loans the association agreement with the EUcame  to fruition. In April 2014, the EU opened unilaterally markets for Ukrainian goods as a favor while the EU had to wait until the New Year 2016 to Ukraine's economy to adapt and become open to EU businesses. Meanwhile, the conflicts surrounding the EU association agreement led to the civil war with involvement by Russia and the West. The seemingly generous conditions have been accompanied by a drastic reduction in exports to the EU and the disintegration of exports to Russia. EU exports decreased by 35 percent during the first half of 2015 compared with the previous year. Trade with Russia, which accounted for the largest share of exports plummeted by 58 percent. It particularly affects the high-tech exports of heavy machinery and metallurgical products. EU exports mainly consisted of less qualified agricultural products as chickens and fruit juice. The ongoing war has affected the economy and trade but continued corruption and the slowness of reforms also contribute. Ukraine has also deliberately sought damaging trade with Russia by banning Russian air traffic and closing of the border trade with the Crimea and the Donbass as the result of right sector and Crimean Tatar in Ukraine blocking of roads and sabotage power supply. The only social actor able to organize nationwide protests against the new economic policy is small and medium sized peasants that on December 28 blocked roads to oppose new taxation laws introduced to fulfil IMF and EU obligations.

 

Belarus

Belarus has long gone its own way and performed better than the neighbor Ukraine. They started by being more poor than Ukraine when the Soviet Union collapsed. Today, GDP per capita is twice as high as in Ukraine without having been able to ride on the high prices for oil deposits or other natural resources. The country did not chose the neoliberal chock therapy that had disastrous results in Russia and Ukraine. The country is ruled by authoritarian President Lukashenko, since 15 years but the oligarchs have not been given as much leeway as in Ukraine and corruption at the lower level is less than in Ukraine. Economically it has joined the Eurasian Union but politically it has kept the distance to Russia over Ukraine conflict. EU that has just exposed the country and the leading members of sanctions have begun to ease them. The stakes for the peace negotiations in Ukraine conflict conducted in the capital Minsk have begun to yield results.

 

Moldova

The only country in the Eastern Partnership, which achieved something especially attractive as a sign of the assessment that it share European values is ​​Moldova. The country has been led by very EU-friendly politicians in the Alliance for European Integration. Everything seemed to go the same way as in Ukraine. In election after election the pro-EU parties won increasing influence and appointed government. In Chisinau, the streets of the capital looked seemingly like during Euromaidan in Kiev when EU parties won in last year's elections. An association agreement with the EU was completed. But above all the highly coveted visa-free regime for Moldovians into the EU was achieved.

But the picture changed drastically. Mass demonstrations were suddenly directed against the pro-EU government and the parliament voted to force the EU-friendly government to resignation. The Western response was now completely the opposite to the response towards demostrations in Ukraine in spite of that this time the protests was not supported by violent mainly fascist groups. Joseph Daul, Chairman of the European People's Party (EPP), the largest political group in the European Parliament, said to prevent the vote of no confidence vote and the ousting of the government' that it "would reduce the country's rapprochement with the EU and would bring the country into unprecedented economic and social chaos." The continous response from the West has been to try to stop any change, this time by demanding all actors to avoid violence and not as in the case of Ukraine, first only demand that the government avoided violence against the protests that by the West was claimed to be peaceful and then with a new western friendly government in power turn its eye the other way and not objecting at the use of violence in different form of the EU-sceptical opposition recently in majority, weather this opinion started separatism in small parts of the country or tried to raise its voice before separatism started or tried to continue to do so in the rest of Ukraine.

The reason Moldavians were not listening to Daul was simple. The leading pro-EU politicians were accused of being bribed for huge sums of money in a swindle in which $ 1 billion dollar were stolen from the country's three leading banks. The sum is unimaginably large for the small poor country whose entire GDP includes around $ 6 billion dollar. A similar banking scam in proportion of GNP would in Germany entail a theft of 650 billion euro.

The former EU-friendly Prime Minister Vlad Filat was arrested on the floor of parliament accused of having helped the bank theft getting a bribe of more than 200 million euro to enrich himself. There are now hundreds of thousands on the streets but they are not waving blue and yellow flags to support EU-friendly politicians in this eastern European capital enabling them to continue govern.  Instead they express their anger against the supercorrupt EU friendly politicians showing an anger that makes Western representatives concerned. What the West wants to avoid is a new election which could easily lead to parties critical of the EU could get the wind in its sails. Pro-EU parties they hope could form a new government without new elections. European People's Party urged Moldova to "abandon political games". Instead they urged that the pro-EU politicians would not be accused, but rather what was now needed to be promoted was "reform, development and modernization". Rarely has the guardians of European values ​ in an Eastern country and in the EU become so stripped naked and had their words exposed as false.

 

Countries outside EU in the former Yugoslavia

 

Kosovo and Bosnia

Although Kosovo and Bosnia are under financial administration of the EU since the dismembering of Yugoslavia. They are in effect the EU's colonies in Europe with an economy completely stalled resulting in many economic refugees trying to reach the more affluent parts of Europe.

 

Montenegro

The country is ruled in an authoritarian manner since 20 years by Milo Djukanovic in different roles as president and prime minister. He has been keen to show his Western friendliness and qualify for EU membership. This year, he decided to begin connecting the country to NATO without a referendum, followed by extensive riots also directed against corruption and police violence.

 

Macedonia

Macedonia has been a role model is in accordance with the World Bank when it comes to reforming the economy through the introduction of the flat tax of 10 percent, and many other measures. It has managed to attract some foreign investment, but the unemployment rate is 27.3 percent, and poverty is widespread. This neo-liberal policies have been supported by the Social Democratic Party which mainly have its supporters in the cities and among those with higher education. Ruling party is now Christian Democrats, with more support in rural areas. Major protests led by by the Social-Democratic Party broke out against the government in May 2015. Security services were accused of illegal wiretapping, several ministers and security police chief resigned, but the prime minister remained in power.

 

Serbia

Serbia has received the most refugees from ethnic cleansing in the Yugoslavian wars. It was  moreover severly bombed by NATO. The country has still not reached the standard that they had during the Communist regime. At the current rate may the level in 1990 be achieved in 50 years.

 

EU internal Eastern periphery

It is not only the Eastern Neighbourhood Policy countries on former Yugoslavia which is worrying. Also the internal Eastern EU periphery has been a growing concern from south to north.

 

Cyprus 

EU's most easterly outpost is Cyprus. Here the regulation of Greece's debt brought the country into deep trouble. Cyprus banks had a higher proportion of loans to Greece than any other country, something that the settlement did not take into account. The country had followed all the advice on how the country would manage its economy by investing in so-called comparative advantages in financial services, which went well for quite some time. But with the extra large burden resulting from the settlement of Greek debt the whole banking sector in Cyprus faced bankruptcy rand and thus the entire country's economy. 

Previous models within the EU to solve the periphery growing crisis in southern Europe and other parts of the EU's periphery was not enough in Cyprus. This model was based on diminishing public service and public sector salaries, raising taxes and other ways to increase government revenue at least temporarily to pay bank debts so they did not go bankrupt. But in the case of Cyprus, it did not help. The money achieved by these austerity measures would anyway be insufficient. It was therefore decided that money from bank customers deposited in the bank should be taken to pay the debts, a so called bail-in. From the beginning, it was proposed that sums from all accounts should be confiscated, but then great anxiety broke out in several parts of Europe. Now those in power demanding Cyprus what to do allowed the bank guarantee in effect in most or all countries in Europe since the Second World War that a sum which is currently at 100,000 euro guaranteed by the state to still be in effect. But a large share of the holdings exceeding this sum was seized to pay according to the demands by the EU, IMF and European Central Bank. That a large proportion of bank holdings in Cyprus was owned by Russians became an argument that it was not so dangerous to carry out the action. That Russians would be most affected seemed more to be a plus. The model to seize assets in bank accounts without the owner's permission was not permitted under any applicable law, but afterwards elevated to the principle of the EU. Cyprus became a test case for possible models for future economic crises on how to implement EU neoliberal austerity politics.

 

Greece

For Greece, the crisis has been protracted. The country joined the euro zone in 2001 which export countries like Germany saw positive despite doubts about the credibility of the country's economic data. Later it was made clear that the data had been tampered with the help of US financial firm Goldman Sachs and others, but it cannot have been any secret to key politicians in the EU when Greece entered the euro but seen as in the interest for other important nations in the euro zone as well. As long as growth was high and the experts advocated increased debt at low interest rates made favorable by the euro the probelms was barely noticed. But when the financial crisis came in 2008 the economic recovery was replaced by a sharp decline. It was no longer possible to postpone the problems with new loans. Instead, a program based on demands made by the EU and the IMF which had previously given the generous loans would have their assets secured. Private debts were truned into public debt anbd the benefiting German and French banks at the cost of the Greek people. Social cuts has been enforced in area after area, despite widespread protests and voting against the parties that constructed the crisis and a referendum where voters opposed the austerity policies. In practice Greece is ruled from outside with EU inspectors appointed in all ministries who make decisions that can affect the ability to pay to foreign banks. No improvement is in sight with an extremely high unemployment and a mountain of debt that seemingly can not be paid with the sharpest recession in any European economy since WWII.

 

Bulgaria 

It is estimated that in Bulgaria more than one million have migrated to find employment which corresponds to 15 percent of the population. Only after the neoliberal shock therapy there could be an economic recovery take place at the macro level in Bulgaria at heavy social costs. 22 percent of the labor force work for the minimum wage of 1 Euro per hour. With the EU's lowest labor costs and corporate taxes, Bulgaria has sought to get its economy back on its feet. With the financial crisis of 2008 the recovery at the macro-level was reversed and unemployment increased again. Nationwide protests erupted in 2013 against the massive increases in electricity and water costs after privatization to foreign companies. The protests included five people committing political suicide. Spontaneous actions and demonstrations converted into public protests against right-wing government and all parties. A new government was met by protests again followed by new elections in 2014.

 

Romania

Bulgaria and Romania joined the EU later than the other eastern countries in 2007, and got worse conditions. The dissolution of the Eastern Bloc was followed by a dramatic de-industrialization and the decline of agriculture in both countries, which was followed by a temporary rise of the economy after 2000. In Romania a major housing bubble contributed to  the upturn in the economy after 2002 that led to tenfold increase in housing prices. Communist era apartments in large and small towns transformed into objects of speculation which led to the most extreme relationship between housing prices and wages in any country in the world. The country was hit hard by the financial crisis in 2008 due to very hard austerity measures cutting social welfare. In early 2012, mass demonstrations and riots started against the neoliberal policies and the government resigned. The economy improved again but the problem has continued for healthcare, education, infrastructure and public corruption.

After a fire at a nightclub in November 2015 with over 40 dead new protests broke out. Rather then addressing the profit interests of the owners of the club who did what they could to avoid security regulations and get localities as cheap as possible against was not voiced as a concern. Instead focus was only put on alleged corruption among politicians and the authorities giving fire permission to the club. The protests led to the prime minister's resignation. The political divisions in the country leads to frequent mutual accusations of corruption and political manipulation. All leading parties could in spite of this earlier in 2015  behind exceptional measures to increase the country's defense budget to 2 percent, as NATO demands. The country has the longest land border with Ukraine and worry about what might happen with the Republic of Moldova and Transnistria whose inhabitants refused to conform to Moldova after the collapse of the USSR.

One of the solutions for the Romanians was to emigrate to seek income elsewhere within the EU, not least the Roma have been forced to because of persecution and misery. A total of 2.5 million Romanians work mainly in Italy and Spain, which represents 12.5 percent of the population.

 

Hungary

The introduction of capitalism in Hungary became a painful time with a sharp decline in GDP and social cuts. The pro-EU Social Democratic prime minister made an internal speech before the 2006 election speaking about of the consequences of the hardline neoliberal policy saying it must be kept secret. When it came out in the media widespread protests followed. The 2008 financial crisis hit the country particularly hard, and the right-wing Fidesz could win an absolute majority in the next election. Something the party used to expand its power over judiciary and mass media curtailing the freedom of expression and get even more votes in the coming elections.

 

Croatia

Croatia was hit hard by the wars in Yugoslavia and became strong right-wing and nationalist. Eventually center-left parties could get in power and the country joined the EU in 2013. The country was hard hit by the 2008 financial crisis causing problems for the tourist industry and other parts of the economy. In essence, Croatia has been in recession since. EU accession coincided with the worsening of the financial crisis which led to that the expected benefits of membership have largely failed to materialize.

 

Slovenia

The two former republics of Slovenia and Croatia broke away from Yugoslavia with EU encouragement. They have had a better destiny than the other republics in former Yugoslavia. But already at the outset where these republics privileged and looked down on the "unproductive South". Slovenia was ethnically homogeneous and suffered hardly at all by the wars in Yugoslavia. It was quickly able to become member of both the EU and later also introduced the euro as its currency. The country is the most prosperous of all countries that once belonged to the Soviet bloc. But when the financial crisis set in, GDP decreased drastically and the risk has been great that the country would need to request an emergency loan to avoid bankruptcy.

 

Czech Republic

Slovakia, the Czech Republic and Poland have had a better economic development than most other former Eastern bloc countries due to the geographical proximity to Germany. Also here, the countries have been hit by a sharp drop in growth since the financial crisis with an increasing gap in comparison to the center countries like Germany and Sweden. But it has nevertheless moved slightly forward, not least because of the country invest in industrial apparatus linked to the German economy.

Jarolsalav Fiala summarizes the Czech situation in an article at the website Poltical critique in January 2016 as follows ”in 2014, the Czech gross wage was 28% of the German and 29% percent the Austrian wage. That means that for the average salary of one Austrian or German employee, multinational corporations can hire three ‘cheap’ Czechs. The Czech minimum wage is also dismal. The OECD has calculated that a Czech single parent with two children receiving the minimum wage would have to work sixteen hours a day in order to escape poverty. The Czech Republic simply remains in the position of a low-cost economy. On the international scene, it competes with low wages, a low (devalued) exchange rate, and worsening social protection for its citizens. … the outflow of profits from the country has been increasing. In 2014, 8 billion euros of dividends left the country, as opposed to only 3,4 billion of re-invested profits. And lastly, I will mention one more telling indicator. Czech trade unionists have calculated that if the Czech economy will continue converging with the West in the same way as it has up till now, it will attain the level of German salaries in about one hundred years. In other words, after a quarter of a century of ‘catching up with the West’, all that is left of the hope that the Czech Republic will join other developed European countries as their equal partner is only the bitter hopelessness of a second-rate pariah.”

 

Slovakia

There is currently in Slovakia a one-party social-democratic government in power. This centre-leftist SMER-SD is a member of the Party of European Socialists and continuous the right wing politics by the former government. After the separation from Cezch Republic in 1992 the two countries have developed slightly different. Slovakia have followed a more stable privatization path an remain as rich as Czech republic with slightly lower salaries but other sources make the household income somewhat similar. During the first period of transition from planned economy to free market economy the development was slowed by crony capitalism. Then a strong growth period begun. Foreign direct investment increased dramatically helped by the adoption of the euro in 2009. Cheap and skilled labor, a 19% flat tax rate for both businesses and individuals, no dividend taxes, a weak labor code, and a favorable geographical location were main advantages for foreign investors. In 2009 there was a drastic decline in GDP and after this a slow return to a bit better growth. Dire conditions of public hospitals and schools resulting in minor strikes causes no concern, nor the great difference between center and periphery. GDP per capita ranges from 178% of EU average in Bratislava to only 49% in Eastern Slovakia. Instead has the immigration route through the Balkans hardly effecting Slovakia at all resulted in a strong anti-immigration stand across virtually all the main stream political spectrum.

Alena Krempaská and Peter Weisenbacher summarize the present situation in the country by saying ”with an average Slovak median wage of 760 Euro before tax, the shared understanding is that the economic situation of households is unsatisfactory. This is directly linked to what global corporations have learned in China or Bangladesh and are trying to apply in Eastern Europe: how to misuse poverty and precariousness to their profit. There is an abundance of cases in Slovakia, where the employer – a multinational corporation – has violated the rights of employees, refusing to pay for long overtime work, effectively limiting and threatening trade unions, or withholding evidence on work-related injuries, not to speak of the disproportion of workload and salary in comparison with Western European countries. The critique of private employers’ practices or the diversion of public funds into suspicious procurements are nevertheless de facto off the public agenda, which is occupied by either Christian fundamentalists’ attacks against LGBT and women’s rights, or more recently by disproportionately over blowing the “burden” and “threat” of refugee crisis.”

 

Poland

The Polish population belong to the 10 percentage of former planned economy bloc that have seen a better development with possibilities to come closer to Western standards while the rest keeps pace without ever getting closer or do considerably worse and sometimes do not even reach the same level as during communist time in the late 1980s. This is due to a steadfast privatization of the economy causing growth of the economy but negative results for parts of the population due to unemployment and social cuts including reduction of public sector employment and their salaries causing strikes among hospital workers. Some of the problems has been solved by migration to get jobs in other EU countries while the country as well can be seen as benefiting from large number of migrants coming especially from Ukraine to work for very low pay.

Especially contrasting to most other CEE countries is the development after the global recession in 2009. While the GDP for EU as a whole dropped 4,5 percentage the Polish GDP increased by 1,6 percentage followed by better growth until 2013 when growth started to slow down again. The reason for the better results than EU in general and compared to other CEE countries appear to be a large internal market, low level of public debt and also strictly regulated household and corporate debt, tax cuts stimulating consumer spending as well as being outside the Euro zone making a depreciation of the currency, the złoty possible with increased international competitiveness.

The Polish centre left has been wiped out of parliament completely in the last election and the country has switched from neoliberal centre-right to social conservative right wing politics. Following similar patterns from Hungary the right wing party Law and Justice in government have expanded its power over judiciary and mass media which has been seen as ways to curtailing the freedom of expression. Social conservative values concerning abortion and other issues causes wide spread concern. The positive development when Poland publicly started to address the issue of antisemitism even examining participation of Poles in the Holocaust now shows signs of backlash. Jewish organizations working against antisemitism claims that the first appointments at Holocaust commemoration sites went to persons committed to the cause but that there now is a tendency to let traces of extermination of Jews disappear and turn the sites into local history while concrete Holocaust denial by local historians is spreading. At a demonstration to support the recently elected Law and Justice party people shouted, “Wroclaw is being de-Polanized as the Jews are buying up homes in the city.” while radical nationalists burnt a Jewish effigy and later the Far-right Polish MP Paweł Kukiz has claimed that “the Jews, a Jewish banker” is funding the demonstrations protesting against the new government. Widespread xenophobia has also surfaced during the current refugee crisis mainly directed against the possibility that Syrians refugees would be allowed into the country and in general against Muslims.

 

Lithuania

The transition to a new economy in the Baltic countries was fueled by a strong speculative bubble of privatized property and deindustrialization, which until recently resulted in substantial growth at the macro economic level and at times high unemployment. The GDP growth in Lithuania finally spiraled and reached 18,8 % in the first quarter of 2008. This was mostly due to rapid loan portfolio growth as Scandinavian banks provided cheap credit in Lithuania. The loans directly related to acquisition and development of real estate constituted around half of outstanding bank loans to the private sector. Consumption was affected by credit expansion as well. This led to high inflation of goods and services, as well as trade deficit. 

The result was an economic collapse with contraction of the GDP by 15 % in 2009 and rising unemployment which was solved to a large degree by migration to other EU countries. Eurostat projects Lithuania to lose 8.6 percent of its population between 2010 and 2030 adding a loss between 1990 and 2010 of ca. 700 00 inhabitants already reducing the population by almost 20 percent. This is the result of both job migration and low fertility rates which during the Soviet era reached 2 percent or more and thereafter has been drastically lowered to  an estimated sub-replacement fertility rate also called total fertility rate at 1.29 children born per women in 2014, one of the lowest in the world contributing to a demographic problem the country shares with the other Baltic states.

Economically the country has recovered and have now a higher GNP per capita then when the recession started. It followed the other Baltic states entry into the euro as the latest of the countries in 2015. 

Ideologically Lithuania have been the lead country in redefining WWII history as a question of a double genocide committed first by Soviet Union and then by Germany. At first Lithuania started to give attention to the holocaust as part of adoption to what was excepted from an EU membership applicant country. Once the membership was achieved in 2004 a criminal case was started against Yitzhak Arad, the head of the Yazd Vashem Holocaust museum during 21 years, calling him to examine him regarding his role as a Jewish partisan perpetrator in a genocide case. This and several other issues has caused a long term conflict with the Lithuanian Jewish community. The case starting in 2006 is still not closed and also other Jewish partisans, all having a role in exposing Lithuanians as taking part in the Holocaust, has also been searched by the Lithuanian judicial authorities in this case.

 

Latvia

Latvia followed the same pattern as Lithuania resulting in the fastest growing economy in Europe until 2008 followed by the steepest fall with a contraction of GNP in 2008 of 18 %. The consumption-driven economy served foreign and especially Swedish banks well and the middle class, while the often Russian-speaking industrial working class was hard hit. Latvia, fueled the economic contradictions by means of abolishing citizenship for the Russians speaking population if they were not able to manage language tests. In this way more then ten percent of the voters could be excluded from the electorate which suited the chosen economy policy against the industrial workers and public workers in the interest of foreign banks well. EU did not demand that the human rights of these Russian-speaking population should be respected when the option was there during the membership negotiations, later IMF have proposed giving the Russian-speaking non-citizens at least voting rights in local elections.

The Latvian government have followed a strict neoliberal course to achieve both the growth benefiting the middle class and than extreme austerity policies by inner devaluation instead of devaluating the currency which foreign banks protested against. Cuts of salaries among public worker up to 40 % and closing down hospitals was part of policies, at times more restrictive than what IMF demanded. Unemployment reached above 20 % and became the highest in all of EU in 2009. Since then the economy turned better and employment levels as well. A key factor for the latter has been massive emigration which has led to as much as one in five residents leaving Latvia. This causes a serious demographic problem for Latvia in the future. In March 2013, Latvian President Andris Berzins said that if massive emigration from his country does not stop, its independence will be in doubt 10 years from now.

 

Estonia

The transition to a new economy in Estonia followed the same pattern as in the other the Baltic countries resulting in double digit growth in 2006. As in Latvia it was beneficial for the middle class who could borrow money, while the often Russian-speaking industrial working class had a harder time. Estonia fueled the economic contradictions by the same means as Latvia by abolishing citizenship for Russian speaking which meant that they were not allowed to vote if they did not undergo language tests. By now still 7 % of the inhabitants are denied voting rights.

A sharp drop followed the good years after 2008 and industrial production fell most in all of EU with a drop of 33.7 %  in 2009. But economy soon recovered and Estonia has done relatively well compared to other Baltic states and all other former Eastern Bloc countries reaching 2013 an average monthly gross wage in Estonia of 976 euro. In 2011 Estonia entered the euro zone followed by a peak in GNP growth the same year which was followed with less growth especially after 2012. The country is doing well in terms of low foreign debt giving the country possibility even to borrow money to other countries like Latvia during its crisis. The economists Reinert and Kattel have questioned the quality of the economic success of CEE countries in terms of how much high technology industry actually develops. They give as an example a cell phone plant in Estonia assembling parts from 200 subcontractors, none of them Estonian. Telephone equipment is the biggest export industry in Estonia What on paper looks like high technology industry might be less advanced production and furthermore not being a substantial contribution to new high technology development of the economy which in the long run is the only way to achieve parity with nations with a stronger economy.

The Estonian together with the Polish population belong to the 10 percentage of former planned economy bloc that have seen a better development with possibilities to come closer to Western standards. The prime minister from the Estonian Reform Party stated goal of bringing Estonian GDP per capita into the top 5 of the EU by 2022 met some difficulties made right before the sharp recession in 2008. Still when economy and employment have recovered the growing gap between all central countries like Germany and Sweden compared to all periphery countries has not even this economically successful country so far been able to tackle.

 

Finland

Finland has all the cultural advantages that the EU model states as necessary for successful results. Known to have very little corruption, well functioning educational system and democratic constitutions that equals any other country. Yet it fails. Striving to fully embrace EU led the country not only to join the European Union in a referendum in 1994. Finland's politicians also joined the country to the euro, an issue they felt was a decision which could take place over the heads of citizens without a referendum.

The introduction of the euro has led to serious financial problems. Unlike Sweden that can adjust its exchange rate to prevent high or low valued currency when its economy comes out of step with the dominating German in the euro zone, Finland has not had that opportunity and has problems to adjust to so called asymmetric shocks which is built into the euro model. While Sweden and Denmark have fared well during the past two years, growing economic worries in Europe, it is really bad for Finland. Finland's GDP is now 6 percent below its highest position when the financial crisis began in 2008, while Sweden is 8 percent higher.

Centre Party EU parliamentarian and Honorary Chairman as well as former Foreign Minister Paavo Väyrynen says that the euro decision was made due to a whipped up image of a Russian threat that could only be met by the strongest political and economic integration with the EU. He claimed that it led to Finland lost ¼ of its industry since 2008 caused by high salaries which made the industry non competetive. What is called asymmetric shocks have emerged as the dominant tech company Nokia collapsed, the price of forest products has fallen and the loss of trade with Russia as a result of the EU's sanctions policy. These asymmetric shocks, Finland has not been able to respond to with its own currency policy but has been forced to follow the dictates of the will of the dominating euro country's interests thus guided by considerations other than those that suit its national conditions.

The Centre Party is the largest party and Väyrynen has influence. He initiated a petition had 50,000 signatures forcing the Parliament to organize hearings in 2016 on the "Fixit" for an Finnish exit from the euro zone and reintroducing its own currency again. Conservative British newspaper The Telegraph sees what happened with the economy in the exemplary country Finland as a final execution order of the euro. What is certain is that one can no longer say that the main problem is corruption and lack of democratic institutions, there is also something substantially wrong with an EU economical model that constantly makes the centre richer and the periphery weaker at the European level and inside the countries.

 

Tord Björk