Another East European country can get a populist, anti-immigration and Eurosceptic government - the billionaire's Andrzej Babis' party ANO has had a significant lead in the polls before the Czech parliamentary elections in October. So the country will be in the company of Poland, Hungary and Slovakia.
If that scares you, you should know that there is at least one protective shaft to extremism in the region - Western European capital, writes in a commentary on Bloomberg View analyst Leonid Bershidski. In fact, Western investment plays such an important role in the economies of these countries that nationalist politicians create their country's image of rebellious colonies rather than partners in a major integration project, he commented. In a recent report, Philippe Novochet, Thomas Picquet, and Gabriel, the East European countries have just been called "foreign-owned countries." "Their owners are usually from EU countries (especially from Germany)," they write and add: "So in a sense, the situation is similar to that in which peripheral areas are owned by more prosperous central areas in a large federal state. " For Piquet and his associates, this is not right because it distorts the measurement of inequalities: much of the wealth of one country accumulates in the accounts of foreign shareholders who are not part of the local richest 1%, so the country appears to be more egalitarian, but it also has a number of wider consequences.
Compared to their economic output, Eastern European countries have the largest negative net investment positions in the European Union, with the exception of Ireland, Greece, Cyprus, Portugal and Spain. The last five have received major rescue packages during the recent financial crisis. Unlike the hit countries hit by the crisis, eastern European economies have come to these positions after they have long attracted more foreign investment than they have done abroad. Foreign investment in these economies relative to gross domestic product is higher than the average for developed countries.
The countries of Eastern Europe were proud of the high levels of foreign investment, demonstrating their openness and sincere desire to integrate into the richer part of Europe. But when the economic storms hit the EU, these countries realized that foreign ownership also had a price. During the financial crisis, local companies have found that foreign banks are the first to cut lending. In other sectors, large foreign presence would mean high unemployment if the country suddenly becomes less hospitable to foreign capital. In Poland and the Czech Republic, one third of the workforce is engaged by foreign companies.
In addition, they are usually the largest, economically significant companies. In Poland they produce two-thirds of all exports, accounting for 42% of the value added in the Czech Republic. The loss of even a small part of these companies would cause painful reversal of economic trends - something Babysh, as a businessman and former finance minister, understands well. Germany, the Netherlands and France are the largest investors in Eastern European economies. The benefits of investing in the region are clear to companies in these countries - they can cut their labor costs without moving production too far from their traditional markets. Semitic governments can hit foreign banks and supermarket chains with special taxes, as Hungarian Prime Minister Viktor Orban and the Polish government have done, and Babysh will probably do if he gets to power but only to a certain extent - if you overdo it, foreigners can decide to leave.
The Hungarian, Polish and Czech governments refuse to implement EU resettlement allowances and respond in a challenging way when their efforts to control the judiciary are criticized - "We will not be a colony," Orban and the leader of the ruling party in Poland Jaroslaw Kaczynski representatives of the EU in individual cases. However, this will not actually change their status as de facto economic colonies of the richer West unless their populist governments decide to confiscate foreign companies - and that is unthinkable. Czech President Milos Zeman recently said that it might be better to lose European subsidies - such as Western Europe threatens to move - than to be forced to accept Muslim migrants. The real threat, however, is not the loss of subsidies - it would come from the allegations of foreign business from changes in the business climate. The dismantling of cohesion in the EU, and in particular the resistances of the European courts' decisions implementing the Union's policies, over time may lead to it because they would weaken the protection of Western European investors. Orban, who has been in power for longer than his ideological allies in neighboring countries, understands this well - several times he has mitigated his policies as a result of European court rulings. Orban has not directly attacked the latest ruling of the Court of Justice of the European Union, which has obliged Eastern European countries to participate in the Resettlement Block. Nationalist rhetoric may mislead some voters that their leaders are truly independent. But the choice faced by politicians in Eastern Europe is ultimately clear: either they will be satisfied with mostly seeming revolts or they have to raise bets and risk losing the investments that their economies depend on.
In fact, it is not even a matter of choice - after all, Eastern Europe will have to fight for integration, as it once struggled for membership, Bershidskiy said. His personal opinion is that in the end it will not matter where a European company is based because a united Europe will have a common budget and economic cohesion will become inevitable. Nationalism may be gaining power, but it is too late - Eastern European countries have been open to investors for too long and have lost too much control of their economic future to exercise political control.
The countries of Eastern Europe were proud of the high levels of foreign investment, demonstrating their openness and sincere desire to integrate into the richer part of Europe. But when the economic storms hit the EU, these countries realized that foreign ownership also had a price. During the financial crisis, local companies have found that foreign banks are the first to cut lending. In other sectors, large foreign presence would mean high unemployment if the country suddenly becomes less hospitable to foreign capital. In Poland and the Czech Republic, one third of the workforce is engaged by foreign companies.
In addition, they are usually the largest, economically significant companies. In Poland they produce two-thirds of all exports, accounting for 42% of the value added in the Czech Republic. The loss of even a small part of these companies would cause painful reversal of economic trends - something Babysh, as a businessman and former finance minister, understands well. Germany, the Netherlands and France are the largest investors in Eastern European economies. The benefits of investing in the region are clear to companies in these countries - they can cut their labor costs without moving production too far from their traditional markets. Semitic governments can hit foreign banks and supermarket chains with special taxes, as Hungarian Prime Minister Viktor Orban and the Polish government have done, and Babysh will probably do if he gets to power but only to a certain extent - if you overdo it, foreigners can decide to leave.
The Hungarian, Polish and Czech governments refuse to implement EU resettlement allowances and respond in a challenging way when their efforts to control the judiciary are criticized - "We will not be a colony," Orban and the leader of the ruling party in Poland Jaroslaw Kaczynski representatives of the EU in individual cases. However, this will not actually change their status as de facto economic colonies of the richer West unless their populist governments decide to confiscate foreign companies - and that is unthinkable. Czech President Milos Zeman recently said that it might be better to lose European subsidies - such as Western Europe threatens to move - than to be forced to accept Muslim migrants. The real threat, however, is not the loss of subsidies - it would come from the allegations of foreign business from changes in the business climate. The dismantling of cohesion in the EU, and in particular the resistances of the European courts' decisions implementing the Union's policies, over time may lead to it because they would weaken the protection of Western European investors. Orban, who has been in power for longer than his ideological allies in neighboring countries, understands this well - several times he has mitigated his policies as a result of European court rulings. Orban has not directly attacked the latest ruling of the Court of Justice of the European Union, which has obliged Eastern European countries to participate in the Resettlement Block. Nationalist rhetoric may mislead some voters that their leaders are truly independent. But the choice faced by politicians in Eastern Europe is ultimately clear: either they will be satisfied with mostly seeming revolts or they have to raise bets and risk losing the investments that their economies depend on.
In fact, it is not even a matter of choice - after all, Eastern Europe will have to fight for integration, as it once struggled for membership, Bershidskiy said. His personal opinion is that in the end it will not matter where a European company is based because a united Europe will have a common budget and economic cohesion will become inevitable. Nationalism may be gaining power, but it is too late - Eastern European countries have been open to investors for too long and have lost too much control of their economic future to exercise political control.
No comments:
Post a Comment