CENTRAL EUROPE AND THE FUTURE OF THE EUROPEAN UNION IN THE 21st CENTURY

Debrecen, Hungary, University

In 2018 Jaguar Land Rover ((JLR) opened a new plant with 640 robots on a former farmland in Nitra in western Slovakia. The robots together with 2,800 workers can assemble a Land Rover Discovery every two minutes. JLR was just another carmaker to come to Slovakia. VW arrived in 1991, followed by Kia and PSA. These firms together turn out over one million cars annually; more per head of population than any other country. Nitra is close to the motorway and Slovakia has an impressive supply chain with more than 300 factories making car parts. This spoke for Slovakia. The JLR factory gives a fair picture of Slovakia’s, and more broadly Central Europe’s model of economic development. First, it was built with foreign capital and largely by foreign contractors. Membership in the EU has facilitated the flow of capital from the western members to the eastern ones. Second, the economy of Central Europe depends on customers in economies to the west purchasing goods made relatively cheaply in the hinterland. Third, government support was essential for this economic take off. Government subsidies luring foreign companies into the country are common in Central Europe. Investors flock to special economic zones across the region, attracted by tax advantages. Furthermore EU funds have boosted investment in infrastructure that appeals to foreign investors like, road and rail. Even in Poland, the region’s biggest and most diversified economy, these EU funds matter: by 2022 they will make up 22 per cent of public spending each year.

This foreign-led development model has had much success. Countries from the Baltic states in the north to littoral Black Sea states have become considerably richer over the last two decades. GDP per person in the Czech Republic is now close to Spain. Bulgaria and Romania are much poorer in terms of GDP, but managing to win investment and to grow, too. The European Commission tracks the progress of five EU members immediately east of Germany and Austria, namely the Czech Republic, Hungary, Poland, Slovakia and Slovenia, compared with a group of four western frontier EU countries, namely Austria, Denmark, the Netherlands and Sweden. In 1995 the average GDP per person at purchasing power parity was around 55 per cent lower in the five Central European countries than in the western frontier countries. By 2016 the difference had shrunk to 39 per cent. Average incomes in the five countries are now equal to those in Portugal and far above those in Greece, of course also due to the financial crisis and sovereign debt crisis since 2008. Of all the Central European countries Slovakia saw the most dramatic gains.

But the challenge for these countries, as for any hinterland reliant on supplying labour to produce goods for richer neighbours, is to keep closing the income gap. The next step of economic development is going to be harder, requiring more productive firms, more private capital and more skilled labour. The region was not that hit by the financial crisis and is growing strongly once again. The IMF expects these countries to expand nearly twice as fast as Western Europe and this expansion looks more sustainable than the one that ended with the financial crisis in 2008. Back then cheap foreign loans, including Swiss franc mortgages taken out by individual households had boosted consumption but became hard to pay back. Nowadays banks are in better shape and consumption is less supported by debt and more by rising incomes. Despite nationalistic policies by populist governments in some countries foreign companies are not retreating. Corruption and some political instability seem not to deter investors as long as other economic conditions are beneficial. Building firms are doing particularly well. Construction activity in the region has typically grown twice as fast as GDP in recent years. Central Europe accounts for a fifth of Strabag’s – Austria’s biggest construction company – business. Business in Poland has gone so well that Strabag is branching out from EU-funded infrastructure into hotels, shopping centres and office blocks. Wienerberger, an Austrian building-materials supplier, has 64 plants across Central and Eastern Europe (CEE), including the ones in Austria and Turkey. 30 per cent in the region are not connected to a sewer system, compared with 5 per cent in Western Europe, which means big business for the firm. Subsidies for better housing, for instance in Hungary, have meant a boom in brick sales.

Services are playing a bigger part in this expansion in Central Europe than in the pre-crisis boom. This means that also white-collar work is doing well. Western banks are moving back-office jobs east to pleasant and affordable spots such as Krakow. McKinsey has 1,000 analysts in Poznan in central Poland, serving clients world-wide. Brexit is moving some mid-level finance jobs away from London as well. Erste Bank, an Austrian bank with 16 million customers in Poland, the Czech Republic, Slovakia, Croatia, Serbia, Romania and Turkey, expects banking in the region to grow faster than in Western Europe for many years to come. Central Europe has also transformed Vienna Insurance Group, a nearly 200-year old Austrian institution. Its 21 companies across CEE now provide half of all VIG’s premiums and profits because as income rises, spending on insurance increases, too. So it seems that Central European economies are well set for sustainable economic growth. Yet there are still three reasons for worries, namely a lack of innovation in local firms, a coming demographic squeeze and an over-dependence on foreigners, especially Germans, to drive development.

THE BALKANS & THE AUSTRO-HUNGARIAN EMPIRE AROUND 1914

Novi Sad, Serbia

In the context of World War I the marginalization of the Serbian and thereby of the larger Balkan dimension already began during the July crisis itself. Serbia and its actions occupied a subordinate place. Furthermore the fact that Serbian-dominated Yugoslavia emerged as one of the victor states of the war seemed implicitly to vindicate the act of the murder of the Austro-Hungarian crown prince and his wife on 28 June 2014. In an era when the national idea was still full of promise, there was sympathy with south Slav nationalism and little affection for the ponderous multinational commonwealth of the Habsburg Empire. But our moral compass has shifted by now. The Yugoslav wars of the 1990s have reminded us of the lethality of Balkan nationalism. Since Srebrenica and the siege of Sarajevo, it has become harder to think of Serbia as the mere object or victim of great power politics and easier to conceive of Serbian nationalism as a historical force in its own right. From the perspective of today’s European Union we are inclined to look more sympathetically on the vanished imperial patchwork of Habsburg Austro-Hungary. Putting Sarajevo and the Balkans back at the centre of the outbreak of World War I does not mean demonizing the Balkans or their politicians. We need to understand the July crisis of 1914 as a complex event. Far from being inevitable this war was in fact inconceivable for most Europeans of the time, at least until it actually happened. So the conflict was not the consequence of a long-run deterioration, but of short-term shocks with the Balkans at the centre.

ROMANI COMMUNITIES IN THE DANUBE BASIN

The ancestors of the Roma communities in Eastern Europe migrated from the Indian subcontinent to Europe over a millennium ago. The boundaries of this community are determined not by its members, but by the surrounding population that has been living alongside them for centuries. Roma have existed in “two dimensions” for some time, namely as a separate community and as an ethnic society within the respective nation state. Roma are an inhomogeneous socio-cultural unit that is hierarchically structured on different taxonomical levels. A main scientific category, which is traditionally used by the Romani studies’ scholars is the Roma group or tribe or nation or caste. …

MINORITIES IN THE DANUBE REGION AT THE BEGINNING OF THE 21st CENTURY

 

The current revived nationalism in the region clearly has consequences for minorities, bringing about tensions within and between countries. The present minority issue in the Danube basin most of all concerns the sizable Roma communities in the accession countries of 2004/2007. In the whole of the European Union an estimated 10-12 million Roma live as a transnational minority. Although the adverse situation of the Roma was addressed during the accession process, discrimination and exclusion continue to persist; the situation is sometimes even exacerbated. Many populist and nationalist politicians are hostile towards the Roma, using them as scapegoats and reproducing discriminatory practices. Above all, Roma cannot be regarded in the same manner as other national minorities because they lack a clear territorial base or connection to any nation state. They are transnational people. Clearly the parallel to the position of Jews in the region before World War II is jumping to the eye.…

JEWS IN THE AUSTRO-HUNGARIAN MONARCHY

Synagogue Pecs, Hungary

The first mentioning of Jews on the territory of Austria proper goes back to the “Raffelstettner Customs Regulation” which was formulated between 903 and 906. The first Jews came as travelling merchants who traded between the Carolingian Empire, where they were already mentioned in the 8th century, and the Slav territories in the East. At that time several Jewish merchants had already settled on the territory of the duchy of Bavaria, of which Austria was a part. The Jews were expelled from the duchy of Austria several times. After the battle of Mohacs 1526 and the expansion of the Habsburg Empire into the Danube basin including now Bohemia, Moravia and Hungary many Jews who lived in the kingdom of Bohemia moved to Vienna and the surrounding lands, but they fled again to Bohemia after another pogrom of Viennese Jews between 1669 and 1671 because bigger Jewish communities had already existed there in the 16th century. In Moravia the Jews were expelled from the cities already in the 15th century and mostly lived on noble estates on the countryside. Also in Hungary bigger Jewish communities were established on the estates of the Hungarian nobility after they had been driven out of the cities. But most of the Jews in the Eastern Danube basin in the 17th century lived on the territory that was still part of the Osman Empire because the more tolerant attitude of the Osmans towards Jews guaranteed them relatively more legal security.…

THE MULTICULTURAL EMPIRE: “KRONPRINZENWERK” published 1885-1902 by the Habsburg Crown Prince Rudolf

Before the dramatic rise of nationalism, the monarchy officially still celebrated its ethnic and cultural diversity. One important and interesting scientific project had as its patron the crown prince Rudolf. In 1884 he asked the permission of the Emperor to carry out a comprehensive survey of the ethnic diversity of the Austro-Hungarian Empire. In 17 years (until 1902) all crown lands, peoples and regions of the monarchy were researched and the results were published in 24 German and 21 Hungarian volumes. Subscribers could buy the individual issues at a subsidised price of only 30 Kreuzer per issue very cheaply. The political character of the scientific project was to propagate the pride of the Empire in its ethnic and cultural diversity. Despite this propaganda attempt, the knowledge about the lands of the Habsburg monarchy in the West was marginal. Still in 1938 Neville Chamberlain spoke out against a declaration of war against Hitler by saying British solders should not be sacrificed for a conflict “in a far-away country between people of whom we know nothing.” – meaning Czechoslovakia.…

INDUSTRIALISATION IN THE HABSBURG EMPIRE

Budapest, one of the iron bridges

 

The Austro-Hungarian Empire was one of the latecomers in industrialisation together with Switzerland, the Netherlands and Scandinavia. Its reputation of economic backwardness in the 19th century is largely unjustified as only some portions of the empire were really backward, as can be seen above. To an even greater extent than France or Germany the empire was characterised by regional diversity and disparity. The western provinces – “Cisleithania” -, especially Bohemia, Moravia and Austria proper, were economically far more advanced than the eastern part – “Transleithania”. In the west the first stirrings of modern economic growth could be observed as early as the second half of the 18th century, but the topography made internal and international transport and communication difficult and expensive and the poverty of natural resources, most of all coal hindered economic development.…