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partner perspectives

Jun 21, 2013 | 17:19 GMT

9 mins read

Central Europe Feeling Marginal

Partner Perspectives are a collection of high-quality analyses and commentary produced by organizations around the world. Though Stratfor does not necessarily endorse the views expressed here — and may even disagree with them — we respect the rigorous and innovative thought that their unique points of view inspire.

For a good while after the fall of the Berlin Wall, Central-Eastern Europe (CEE) has felt safe and sound in the bosom of 'mother Europe' — a Paradise regained through EU and NATO accession after the long years of perceived banishment behind the Iron Curtain. Safety, freedom and the perspective of a better tomorrow were essential newly-found blessings which provided a good basis for the economic growth, political and social development which ensued. If the peoples of CEE proved more resilient in the face of far tougher austerity measures than in Western Europe, that is partly because, very much used to hardships during communism, they were less 'spoiled' and used to the good life, but also because they still valued other things more: political liberties, freedom of travel, appurtnence to a family of values, democracy, security, economic opportunity (worth the temporary sacrifice). In many ways, the original idea of a united Europe is more alive here than elsewhere on the continent, since countries of the Eastern bloc remember too well the high price they paid for privileges others had enjoyed for much longer.

Recently though, Central-Eastern Europe has been feeling the earth slipping beneath its feet, as it has been losing precisely these cherished boons. Instead, it has found itself sandwiched between an increasingly aggressive Russia, an EU in crisis and growing disunity, a more stand-offish and disengaged United States and now a more and more unstable and unpredictable vicinity (Turkey in turmoil, Ukraine in confusion, the Eastern Partnership unsuccessful in its original ambitions, the Caucasus in fragile and fearful balance etc). Gone is the feeling of safety; going-going-almost gone the political freedoms, as Romania and Bulgaria find themselves shunned by Schengen countries and accused of sending waves of migrant workers and Roma to a more prosperous but also more xenophobic, racist and economically nationalistic West. That also doesn't contribute to the feeling of belonging either. Democracy is still fledgling in many places, most of all in Hungary, while the promise of economic growth and rising standards of living seem to have been temporary illusions of an age when they were the beneficiaries of European solidarity.

The recent summit in Bratislava of Central-European heads of state marks only one of many recent attempts by the region to establish itself more firmly within Europe and make its own claims with one single voice — hoping it will thus be heard by an EU core which is often reluctant to truly listen. The summit has restated the shared commitment to the EU, to unity, solidarity and joint problem solving; its continued interest in integrating the EU neighborhood; and concern for austerity measures to translate into rising living standards for the population.

Much of this only declaratively meets with the same interest at overall EU level. The Western part of the continent is marred by disputes between the UK with its hand on the door knob, Germany accused of dictating policies to its sole selfish benefit, France in internal disarray and frustration over external loss of influence, a more unaffected Scandinavian Peninsula and a South almost in shambles. Little trace left of unity and solidarity. Such internal crisis does not make for a very active and efficient policy or for traction in the EU neighborhood. Enlargement had entered a slow phase anyway, now doubled by a fear of 'strategic overstretch' while problems at home remain and unsolved issues tend to put stress on the entire Union (as problems in new member states do, in corruption, rule of law etc). Under the circumstances, it is no wonder that perhaps the main attraction of the summit was the first meeting of Serb and Kosovar presidents, after their recent historic deal. Concerned with multiple failures and shortcomings in the Eastern Partnership, countries of the region are sensibly becoming more and more involved in stabilizing the Balkans, as the last thing they look to is an expansion of the geography of trouble. One side effect is that prospects are increasingly good for Kosovo, since the EU as a whole will want to get one problem off its back if at all possible and as soon as possible, to be able to worry about the rest. Therefore Slovakia, a non-recognizer, has hosted this first high-level meeting between the two presidents, while the Romanian president (another non-recognizer) has praised the wisdom of 20 member states in so doing.

Along with the dwindling safety, economic insecurity (in close connection with the seat of the region at the EU decision-making table and its political clout) has been the focus of debate. Before it gained enough economic strength of its own, the region was first seen as a market by the rest of the EU, and then it placed its bets as a strategic corridor of transit for energy, trade and even the military between Europe and Asia. US troops and the missile shield were located in Eastern Europe. The region has been struggling to gain access to alternative oil and gas transit routes (Nabucco, Nordstream, Southstream, etc.). Strategic partnerships have been built between main powers of the region Poland, Romania and Turkey on the one hand and then Central Asian energy 'giants' on the other hand to facilitate cooperation to this end — the interconnection between Europe and Central Asia becoming key to any future development.

Perhaps more importantly, as imports from Asia are rising, as is the Eastern continent as a whole, the land bridge status of the region and its maritime connection capacity have become extremely important to both Europe and Asia. China has been seeking entry gates through Poland and Hungary. India has been trying to enter the competition too. Kazakhstan, Azerbaijan and even Japan or Malaysia have been interested in connecting to a region which was as 'emerging' as themselves, although at a different scale. The courtship has not been all moonlight and roses though. From the point of view of security, the region has felt threatened by powerful interests which clashed in good part with its own and added to pressure from Russia, itself using its economic might to buy out its past sphere of influence, from metallurgy in Romania (ALRO, Mechel etc) to energy in Hungary (MOL) and Croatia's Plinacro.

Underdeveloped infrastructure, perception of the region as a mere set of transit routes, lack of more substantive regional cooperation, privatization of state resources to the benefit of power elites, corruption and the interest of multinationals to keep their costs down have all brought additional challenges to the actual economic development of Central-Eastern Europe home-grown capital and economic prowess. Moreover, as the crisis set in, they found that Western banks were externalizing profits (to the home countries) and internalizing losses, while the states themselves were required to undergo painful restructuring and austerity (with the exception of success stories Poland and Estonia).

As a result, now that labor is not so cheap here anymore and infrastructure still lags behind after 20 years, the region sees itself at a new disadvantage: few are the indigenous strategic companies that can aid economic growth and project influence outside borders, to make the voice of the respective states count more in EU negotiations on budget and crisis management measures. Although a favored place for business, Poland has few national champions: PKN Orlen, the state-owned fuel group, the largest company in Central Europe, the petrochemical Lotos, or the state-owned bank PKO BP; Hungary has MOL; the Czech Republic has the energy giants CEZ, RWE Transgas and the carmaker Skoda — finally an exception to an almost all-energy-focus market. The other exception is to some extent (by far not enough, given its size) Romania, where, apart from the national energy company Petrom (now belonging to Austrian OMV however), other successes are the car-maker Dacia-Renault, with high sales on its low-cost concept on emerging as well as developed markets, IT companies like SIVECO, with international expansion and the rail operator GFR/GRAMPET, the only one which has strategic outreach in infrastructure (connecting the Northern Sea to the Black Sea and Adriatic), branded as the key development solution of the entire region. In fact, talking about railways, ongoing privatizations across the region (in Romania, Bulgaria, Croatia etc) of national operators have surprisingly met with reduced interest from the largest and strongest global companies such as Deutsche Bahn or others, demonstrating that the region as a whole is simply not interesting enough yet, while the political linkage with Central Asia is not yet fully made.

This seems to be in fact the main problem the region is now facing: shunned by a core EU which had so far given it a hand to help it catch up, Central-Eastern Europe is still struggling to define its attractiveness and strategic advantages, to advance negotiations of its interests in Brussels and Berlin, but also with potential "economic predators" like Russia or China. Countries of the region are increasingly coming together to do this — the recent Globsec conference in Bratislava was mainly a Polish show destined to promote Polish candidacies to high office in international organizations like NATO or the UN, but also V4 cooperation (especially economic, in articulating Brussels positions and in defense); Wroclaw Global Forum, in Poland, just a few days ago discussed the way European politicians may have destroyed democracy; the Summit of Heads of State in Bratislava has shown off the region's support for Kosovo-Serbia reconciliation efforts and Vilnius summit — worthy indeed, but also for lack of better options. Many of these conversations have taken place in the absence of the Other: Western partners which may engage in meaningful and substantive cooperation with individual states in specific sectors, but largely disregard the interests of the region as a whole when they make decisions for the entire EU. Central Europe is making a strong effort to go central again, after it has found itself unawares at the periphery of a more and more loosely connected Europe.

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