Sofia Echo

South Eastern Europe

The once and future Emerging Europe

Author: Clive Leviev-Sawyer Date: Fri, Jan 08 2010 4 Comments, 81117 Views
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Those seeking sunshine news about Central and Eastern Europe probably would highlight the expansion of the euro zone and of Nato, the removal of Schengen visa requirements for some countries, the successful conduct of elections in at least some countries, the fact that most economies did not fare quite as badly as had been forecast and, not forgetting where we are, the start of the trial of a high-profile war crimes suspect.

If you like, the fact that the outcome of the Lisbon Treaty saga was decided in the region, thanks to the holdout by Czech Republic president Vaclav Klaus, may be added; CEE also got its first high-profile EU job when Jerzy Buzek became President of the European Parliament.

For all that, the economic crisis maintained a grim hold on the region and notwithstanding all the end-of-year stated optimism about a return to significant growth in 2010 in several CEE countries, many economies had been pushed back severely.

Elections produced changes of governments, notably in Greece, or descended into complex sagas that threatened to defy resolution, as in Romania and Moldova. The Czech Republic ended in caretaker hands while in other countries, such as Hungary, the writing seemed to be on the wall for the incumbents.

With Croatia, Albania joined Nato on April 1 2009, and on December 16, the European Commission agreed to accept Albania’s membership application.
However, the June elections won by prime minister Sali Berisha’s Democratic Party produced a boycott of parliament by the opposition socialists, who claimed election fraud.

Off a very low base, Albania achieved economic growth, but somewhat more moderate than in recent years.

Bosnia and Herzegovina
The EU and the United States sought to help out Bosnia and Herzegovina as it lay in a political quagmire in which its constituent communities, of Bosniaks, Croats and Serbs, could not achieve consensus on any major issue. Failure to make progress in Bosnia and Herzegovina kept the country from making even the slightest progress towards EU integration or Nato membership.

In a year bleak of hope for the state to begin any meaningful steps towards genuine independence, there was just one small, largely symbolic step towards normalisation – the restoration in December, after close to 17 years, of the rail link between Belgrade and Sarajevo, severed during the wars in the former Yugoslavia.

The achievement of a political agreement on ending its border dispute with Slovenia, and the acknowledgement given by Brussels to Croatia’s efforts to co-operate with The Hague tribunal on the former Yugoslavia, were highlights for Croatia in 2009 - apart from a change of prime minister - and the country seemed on track to make serious progress in EU membership negotiations.

However, on the economic front, the IMF estimated that Croatia’s GDP would have dropped by 5.2 per cent year-on-year by the end of 2009, a gloomier forecast than earlier. Many reforms, including to the judiciary, remained outstanding.

The Czech Republic
Prague might prefer its role in the European Union in 2009 to be remembered for the launch of the Eastern Partnership in May with Armenia, Azerbaijan, Belarus, Georgia, Moldova and Ukraine, but it will be other associations for which 2009 will be remembered.

During the Czech presidency of the EU, Mirek Topolanek’s government fell, leaving a caretaker government headed by Jan Fischer in place, with Topolanek next making the news when photographs emerged of him, unclothed and in a state of arousal while surrounded by scantily-clad young women at an Italian villa. This latter episode, however, was no real trauma compared to the tense drama as Czech president Vaclav Klaus held out against signing the Lisbon Treaty until his demands for an opt-out on the rights charter were met.

The irony of this was deepened by the Czech Republic having pledged to get ratification of Lisbon completed by the time of the end of its presidency of the EU.
Like other CEE countries, the Czech Republic heard from the Obama administration that the Bush-era plan for a "missile shield" was being substantially revised by Washington.

On the economic front, with strong financial sector supervision in place, the Czech Republic was among CEE countries that – like Poland – weathered the storm better than others. However, it headed into 2010 with a record-high budget deficit, which will be more than double the accepted EU limit of three per cent of GDP, raising the risk of European Commission intervention.

Prime minister George Papandreou’s government heads into 2010 facing a public debt expected to reach more than 120 per cent of GDP. Papandreou leads a country that, by the end of 2009, was being mentioned along with Dubai as one of the ranking unpleasant surprises of the year on the economic front. Greek voters ousted Costas Karamanlis’s centre-right New Democracy party to give socialist leader Papandreou stewardship of the country, with the new government getting an austerity budget through parliament.

The raft of economic problems includes widespread tax evasion, another issue on which Papandreou has promised action. Even without an economic crisis, Papandreou would have had his hands full, with top foreign policy issues from Turkey – its EU candidacy, the Cyprus question, the long-standing air space dispute – to the dispute between Athens and Skopje about the use of the name Macedonia (see below).

A sign of hope for the government in Budapest was that by the end of 2009, the rate of contraction of Hungary’s economy was decreasing. When that is the good news, it is clear that the trouble is deep.

Real GDP decreased by 7.5 per cent year-on-year in Hungary in 2009. Credit growth decreased hugely, mainly because of scant demand for loans. Meanwhile, an increase in the rate of value-added tax in turn hiked inflation. The IMF estimated that inflation would be about six per cent by the end of 2009, and by mid-2010 would decrease to less than three per cent.

"Hungary ended 2009 with the highest level of unemployment and the deepest recession since its turbulent switch from communism to capitalism 20 years ago," The Budapest Times said.

Former economy minister Gordon Bajnai, named as prime minister in March after Ferenc Gyurcsany resigned, brought in substantial public spending cuts and the VAT increase, measures that contributed to the achievement of an estimated budget deficit of three per cent by the end of 2009. However, the IMF said that it wanted to see strict spending control to meet the 2010 deficit target, and further measures to cut the deficit to less than three per cent in 2011.

Having become the first EU state to ask for multilateral financial help when the credit crunch hit, Hungary appeared to be on the road to recovery; the major change expected in 2010 is that of a new government. Victory is expected to go to the Fidesz party, a centre-right member of the EPP-ED European Parliament group.

For several countries, with Serbia in the lead and closely backed up by Russia, there should be no entry in this summary referring to a country called Kosovo. That is the substance of the continuing international dispute about Kosovo, which unilaterally declared independence from Serbia in February 2008 and found itself – backed up by many allies, Bulgaria among them – in the International Court of Justice in December, as the court heard oral evidence on the question of the legality of Kosovo’s independence.

Kosovo conducted local elections in 2009, producing results that suggested that when next national elections are held – provisionally, in 2011 – there could be a change of government in Pristina. Kosovo and its allies cheered each new recognition of independence, which by the end of 2009 numbered 64, but foreign monitors continually expressed concern about troubling issues such as widespread corruption.

When the latest round of Schengen visa exemptions were handed out in December, Kosovo was excluded, and every reference to it in various multilateral documents was couched in delicate terms, given its disputed status.

It is not difficult to image various politicians in European capitals sighing inwardly, perhaps outwardly, when hearing the name "Macedonia". Apart from Matthew Nimetz, who as UN-appointed mediator has the job of resolving the long-standing dispute between Athens and Skopje about the use of the name Macedonia, sundry other leaders had their turn, at EU level, at Nato headquarters, at embassies in Skopje.

The matter went on hold as Greece held European Parliament and national parliamentary elections, but by the end of the year Greece’s new leader, George Papandreou, who combines the roles of prime minister and foreign minister, had got nowhere.

Macedonian prime minister Nikola Gruevski, for whom the name dispute is the country’s hotplate issue, saw his old rival Branko Crvenkovski decide not to stand again as president, to be succeeded by Gjorge Ivanov, the nominee of Gruevski’s VMRO-DPMNE, defeating Ljubomir Frckovski, the candidate of Crvenkovski’s party. The presidential elections overshadowed municipal elections, held on the same day, and characterised by allegations of irregularities and intimidation, especially in ethnic Albanian areas.

Skopje changed its negotiator in the name dispute, which also made no difference. While getting European Commission backing for the naming of a date for the start of EU membership negotiations, Macedonia ended the year without the EU having decided on a date, although like citizens of Serbia and Montenegro, Macedonians had the fillip of being allowed to enter the Schengen area visa-free as of December 19, provided they had biometric passports.

While the politicking was going on, Macedonia’s economy contracted into recession, shrinking by 0.9 per cent in the first quarter, 1.4 per cent in Q2 and 1.8 per cent in Q3; forecasts were that Macedonia in 2010 would see worsening unemployment. In late December, the parliament in Skopje approved a 2.5 billion euro national budget that foresaw a deficit of 2.5 per cent of GDP, with increased capital investments but overall lower public spending, and facing the risk of decreased revenue in 2010.

Bulgaria and Macedonia continued their ambivalent relationship, though for a short while tensions were set aside with a shared sense of tragedy with the September 5 Ilinden tourist boat disaster, in which 15 Bulgarian tourists on a cruise on Lake Ohrid died. After the tragedy, transport minister Mile Janakievski offered his resignation, but Gruevski declined to accept it, a decision that did not pass without public criticism.

To borrow from Elias Canetti via Robert Kaplan, Moldova’s crowd symbol for 2009 should be a marked ballot paper. The photo that went around the world from Chisinau was the April image of anti-Communist protesters who attacked the presidential and parliamentary buildings in protest at rigging of parliamentary elections.

A recount failed to stabilise the political situation, and parliament was dissolved after two attempts to elect a president of Moldova proved abortive. A new parliament, elected in July, and with the Communists holding the largest individual share of seats (48 out of 101) also could not elect a president.

The final episode in this saga was on December 7, when failure by MPs to elect a president for the country meant that Moldova will face early elections in 2010.

Marian Lupu, the nominee of the four parties that make up the ruling coalition, got 53 votes at the second attempt for parliament to elect the head of state. He needed 61.
Lupu, a former high-ranking Communist who defected from the party in May, said that his Democrat Party refused a last-minute deal offered by the Communist Party to form a new governing majority. Together, the two parties had enough votes to have Lupu elected.

The 2010 election is expected to see a change of rules to allow a widening of expatriate voting, in turn expected to bring a blow to the Communists, who have used sundry instruments including control of the media to bolster their electoral fortunes.

There is a debate about by how much Montenegro’s economy will contract in 2010, after shrinking by an estimated five per cent in 2009. Prime minister Milo Djukanovic, however, believes that his country’s economy will return to growth in the second half of 2010. The country hopes to be granted EU candidate status in 2010, but some of the economic solutions it has advocated, such as tapping into private banks’ reserves, do not sit comfortably with Brussels rules.

Djukanovic took office in June 2009 to start his sixth term of office as prime minister after his party won an overwhelming majority in March elections. He promised to lead his country into the EU and Nato, but prospects for the timing of either of these scenarios remain uncertain.

The beginning of 2010 saw unemployment in Poland estimated at more than 11 per cent, and with an estimated 1800 firms having gone bankrupt in 2009, but with expectations that full-year growth for 2009 would turn out at 1.5 per cent and that prospects for growth in 2010 were healthy in the circumstances – and that job losses had not been as bad as they might have been.

Poland is scheduled to hold elections in 2010, with not only the economic crisis and troubles in the reform process on the agenda. Even though Polish prime minister Donald Tusk described his country as a "green island" of growth as the rest of Europe shipped water, it had to postpone plans to trade in local currency the zloty for the euro in 2012. Accession is now expected to take place three years from the previously estimated date.

The "gambling scandal" shook up politics when, on the basis of recordings of telephone conversations between members of the ruling party and gaming industry representatives, Tusk fired a number of ministers. His subsequent move, to axe the head of the country’s anti-corruption office on the grounds that the office was being used against the government, caused harrumphing elsewhere in Europe.

If Romania can pull it off, its first achievements in 2010 must be to achieve political stability and persuade multilateral lenders to restore the flow of loans; if it cannot do this, it will mean the first part of the New Year will be little more than a sequel to the political bathos that seized the country in 2009.

After a perplexing saga of disputed presidential elections, Traian Basescu is back as head of state, and has won parliamentary approval for the appointment of Emil Boc as prime minister – even though the same Boc was ousted earlier in 2009 for, the opposition said, failing to act appropriately against the economic crisis. Boc has proposed an austerity budget for 2010 in what has become a standard move across CEE, but in this case in the context of an economy already stumbling in the quicksand of recession.

Politics confounded Serbia’s economic woes in 2009 as its free trade agreement with the EU was kept on hold pending The Netherlands and Belgium being satisfied that Belgrade was co-operating adequately with The Hague tribunal.

With the help of the IMF and EIB, among others, the government in Belgrade sought to get the economy back on track as the difficult days of 2009 saw unemployment climb and other economic indicators worsen, a reverse after previous years of good economic growth. The country went through 2009 on a restrictive budget as a key measure towards recovery.

It was in foreign policy that the government was most preoccupied, as it fought Kosovo’s self-declared independence in international court and through an international diplomatic campaign. Kosovo inevitably caused some tensions with neighbours: Bulgaria’s support for Kosovo in international court, Macedonia’s border demarcation deal with Kosovo and the announcement by Montenegro that it would establish formal diplomatic relations with Kosovo caused serious irritation in Belgrade.

Serbia’s inclusion in the list of countries to be exempted from Schengen visa requirements, and positive signals towards eventual accession to the EU, may have been psychological fillips, but wider politics – especially, but not only, the Kosovo issue saw ever-warming relations between Belgrade and Moscow.

On December 22, Serbian president Boris Tadic formally submitted his country’s application to join the EU. While it was expected that this application would be processed quickly, unofficial estimates were that actual accession would take several years.

Making headlines on January 1 2009 by becoming the newest member of the euro zone, Slovakia endured difficult months through the year until by the end of the year it could at least claim that the rate of contraction of its economy had decelerated.

Slovakia’s GDP decreased by 5.3 per cent in the first nine months of 2009, but the Q3 contraction was 4.8 per cent. A reduction in demand for Slovakian imports hit production and, in turn, employment, which towards the end of 2009 was more than 12 per cent. But local economists foresaw recovery in 2010 at a rate faster than its neighbours.

Slovakia held presidential elections, in two rounds on March 21 and April 4 2009, returning Ivan Gašparovič, who defeated conservative challenger Iveta Radičová.
Prime minister Robert Fico appears popular enough to face the elections expected in summer 2010 with confidence, in spite of controversies such as a battle within the judiciary over reforms, restrictions on media freedom, and allegations of cronyism and corruption in governance.


In its protracted dialogue about getting help from the IMF, Ankara signalled that it did not really need the IMF. This turned out, in the short-term, to be true; economists said that Turkey was so used to crises that it had, so far, weathered the current economic troubles precisely because doing so was an accustomed practice for the country.

The impact was serious – mounting unemployment, to peak at levels not seen for 20 years, shrinking exports – but by no means as catastrophic as some had forecast.
In future years, sometime beyond 2010, it is possible to image writing the first sentence of these notes on Turkey, but substituting "the EU" for "the IMF".

Turkey was an issue throughout the EU throughout 2009, from the grandstanding by politicians in the European Parliament elections to the more profound question of the EU’s elected leaders deciding whether the country should be allowed to progress towards accession.

There is a certain street wisdom among some of those who want Turkey to join; for Greece and Cyprus, notably, getting Ankara on to the EU path means having a way of getting it to keep to the rules.

In international relations, Ankara was under pressure (how much is debatable, however) to settle the Cyprus issue by – among other things – admitting Cypriot ships to its ports and withdrawing military personnel from occupied Cyprus, the better to improve Turkey’s EU chances.
Greece wanted Turkey to live up to stated agreements against illegal immigration and to stop sending fighter aircraft into air space claimed by Greece. All of these issues were certain to linger into 2010.

On foreign policy, Turkey has been treated as an important player by the Obama administration, with cordial meetings between the US president and Turkish prime minister Recep Tayyip Erdogan.

Turkey’s ruling Justice and Development Party (AK Party) will face national elections in 2011, possibly earlier. Domestic reforms have been few, caught up in the turmoil of politics in parliament. Violence came to some streets after the constitutional court shut down the pro-Kurdish Democratic Society Party (DTP).
Domestically, another major story is the Ergenekon trial, of numerous people from various parts of society that the government alleges were plotting to overthrow the constitutional order of Turkey.

Notably, in what was trivialised as "football diplomacy" but is of much more far-reaching consequence, Turkey and Armenia achieved progress in the restoration of ties, against a background of historically deeply troubled bilateral relations, notably because of the Armenian genocide of which Turkey denies the historical validity.

  • Bulgarian and Romanian presidents speak of future co-operation
  • European Union signs visa facilitation agreement with Georgia
  • European Commission proposes new visa deal with Georgia
  • EU urges Turkey, Armenia to complete normalisation of relations
  • Armenian genocide row: Turkey's ambassador not yet returning to the US
  • European Parliament eases travel rules for non-EU nationals
  • US congressional committee approves resolution on Armenian genocide
  • Row over US congressional committee proposed resolution on Armenia genocide
  • Anti-Turkish posters mark Bulgaria's liberation day
  • Bulgaria responds to Russian diplomatic note about missile shield
  • Bulgaria: More messages on missiles
  • No negotiations, just ‘discussions’ about missile shield in Bulgaria – US ambassador
  • Officials warn that extremist parties threaten Eastern Europe's stability
  • Macedonia name dispute mediator to visit Athens, Skopje
  • Cyprus negotiators ‘confident’ solution can be reached soon
  • IMF board approves $574M loan to Moldova
  • UN Secretary-General ‘confident’ that Cyprus solution is in reach
  • Greece, Macedonia in London talks
  • Euro area unemployment hits 10 per cent – Eurostat
  • Belgrade receives 45M euro from European Investment Bank
  • Brussels pronounces judgments on EU states’ deficits
  • 2010 will be ‘key year’ for Western Balkans, EU Presidency says
  • EU to expand military mission in Bosnia and Herzegovina
  • Serbian president to boycott inauguration of Croatian counterpart
  • Ukraine presidential election heads for February 7 runoff
  • Serbian president may skip Croatian president’s inauguration
  • Murder of Cypriot media boss Hadjicostis outrages colleagues
  • Serbian minister again barred from Kosovo
  • Bulgaria and Greece will launch new border crossing point
  • Analysts: Serbia EU membership bid faces range of hurdles
  • Social democrat Josipovic elected president of Croatia
  • A year of elections
  • A year of controversies
  • Hamstrung by recession
  • Happy New Year, we’ll be hearing you
  • Fair cop?
    • Anonymous
      Epaminondas Rating:
      #4 19, 28, Fri, May 13 2011

      Greece has rather more basic problems to deal with than the "Macedonian name issue" - like national backruptcy and a possible return to civil war. Get real, Athens - or, as the old Greeks put it "gnwthi sauton".

    • Anonymous
      1 Rating:
      #3 20, 29, Fri, Feb 26 2010

      get your facts right and besides if greece wants to realy hurt fyrom all they have to do is stop doing business with them even though greece has these economic problems it is still the top invester in fyrom so you see it is not greece causing the problem it is the slavo -bulgarians in fyrom who are ashamed of their true heritage and are trying to steal the greek culture but than again if i could become part of a glorious heritage and i can call it Macedonian i 'd be crazy not to try and steal it [...]

      Read the full comment

    • Anonymous
      Peter Rating:
      #2 22, 59, Thu, Jan 28 2010

      Well, the alternate FM of Greece Droutsas finaly has no objections to allow the Republic of Macedonia into NATO as long as Macedonia enters by FYROM.Was it not in 2008 Macedonia did attemp to join NATO by FYROM.There is a catch to this,provided that Macedonia withdrew the ICJ complaint.Finaly, Greece recognised one very importent reason,and that is;they did break the 1995 UN brockered agreement.Republic of Macedonia does not have to negotiate its constitutional name. No other independent State had to go through this proccess.Under the Human Rights,you declair your identity as you feel.

    • Anonymous
      Ron in Sofia Rating:
      #1 13, 43, Sat, Jan 09 2010

      A really comprehensive summary. Well done!

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