Tag: Czech Republic

Can the Communist Party Take Back the Czech Republic?

PRAGUE, CZECH REPUBLIC—The Czech Republic is one of the most successful members of the former Soviet Empire. Yet Czechs with whom I recently spoke fear liberty is in retreat. The former Communist Party might reenter government after elections later this month. 

Czechoslovakia was “liberated” by the Red Army at the end of World War II. After the Berlin Wall fell on November 9, 1989, the so-called Velvet Revolution ousted the Czech Communist Party. Czechoslovakia soon adopted wide-ranging free market economic reforms and split into the Czech Republic and Slovakia. 

In March Milos Zeman became the country’s first popularly elected president. The former Social Democratic prime minister has roiled Czech politics by claiming ever more expansive authority. 

Most dramatically, after the prime minister’s summer resignation President Zeman appointed a leftist government against the wishes of the parliamentary majority. The new cabinet lost a vote of confidence, but remains as caretaker until the upcoming election. 

Equally controversial are the president’s policies.  As I wrote in my new Forbes online article:

Moreover, the president reversed course on the EU after appealing to supporters of the Euro-skeptic [former President Vaclav] Klaus during the presidential campaign.  Once in office President Zeman hoisted the EU flag over the Prague Castle, which hosts the presidential office, and signed the European Stability Mechanism, the EU bail-out fund.  He describes himself as a “Euro-Federalist,” advocates common European fiscal, tax, foreign, and defense policies, and supports adopting the Euro as the Czech currency.

The greater worry is the revival of the Communist Party. As memories of Communist repression fade, some Czechs long for the perceived stability of the past. 

The Egg on the EU’s Face

The European politicians love to talk about the “huge” benefits of membership in the European Union. It is certainly true that the “single” market between the EU member states has brought tangible benefits, but those have been declining in importance as technological change made access to services and capital cheaper and easier, and trade liberalization progressed world-wide. Moreover, as the Brussels-based EU bureaucracy expanded, economic liberalization gave way to regulation that helped to strangle European growth (see the graph below). Consider the latest absurdity to emerge from Brussels—a poultry regulation, which aimed to increase the comfort of the egg-laying chickens, but resulted in a drastic cut in egg production and a 100% increase in the price of eggs.

The EU bureaucracy may not appreciate the problem of unintended consequences, but ordinary Europeans are beginning to realize that the EU no longer is what it used to be—a byword for prosperity and stability. In the Czech Republic, for example, a record number of citizens do not trust the EU (63 percent) and the EU Parliament (70 percent). If the EU elite persist in killing jobs and growth, it may bring about the ultimate unintended consequence—the break up of the EU.

Austrian Government Moves to Undermine Freedom of Movement in Europe

The European Union was meant to create a common market with free movement of goods, services, capital and people. The citizens of the “new” member states, such as the Czech Republic, should have been free to work in the “old” member states, such as Austria, from the date of accession of the “new” members to the EU on May 1, 2004. The Austrian government managed to postpone the horror of having laborers from ex-communist countries offer cheaper services to the Austrian citizenry until 2011.

With the 2011 deadline looming, Austrian politicians came up with an ingenious way to make it more difficult for the Czechs and other hoi polloi to enter the Austrian labor market. Beginning next year, it will be “illegal” for Austrian employers to pay less to a foreign laborer than they would to an Austrian. I am looking forward to seeing how this is to be accomplished without further wage regulations (collective bargaining and wage minimums in different sectors of the economy are widely used) and accompanying corruption.

I hope that the Czechs take the Austrian government to the European Court of Justice and pronto. If the Austrian measure is allowed to stand, it will undermine one of the four freedoms, and destroy an important source of competition and wealth creation in Europe.

Travel after the Fall of the Iron Curtain

In the sumer of 1992, I lived and studied in Prague. I was keen on seeing life in Eastern Europe after the end of Soviet domination.

It was invigorating to think that my local law professor headed over the Vltava River in the afternoons to work on the new constitution in the Prague Castle. It was fascinating to learn of the “lustration” process by which participants in Soviet-era wrongs were penalized but not ostracized. Out of habit, no Czechs ever talked on the subway. Americans did.

There were other reminders of the old order. My overnight train to Katowice, Poland, from which I planned a connection to Krakow, stopped in the middle of nowhere. In the pitch black night, the sound of border guards throwing open train compartments and making demands in a foreign tongue brought forth fearsome movie-memories of life under totalitarianism.

They pulled a young man from my compartment and took him off the train. I don’t remember if it was a Central or South American passport, but it was one that doesn’t afford its bearer the luxury of easy international travel that Americans enjoy.

I honestly don’t remember if he was allowed back on the train. I’m just glad that era is over.

Did the IMF Deliberately Exaggerate the 2008 Financial Crisis?

This month, two vice-presidents of the Czech National Bank (CNB) have made very serious allegations against the International Monetary Fund. Below is the summary of their claims so far:

  1. Speaking to the Austrian daily newspaper Der Standard on April 2, Mojmir Hampl, the vice-president of the CNB, said that the IMF under Dominique Strauss-Kahn “wanted to expand its role in Eastern Europe and obtain new financial resources.” Hampl claimed that the IMF exaggerated problems with the financial systems in Eastern Europe. “We have always emphasized that the instability of the financial system [in 2008] was a Western European problem. That proved correct… According to a recent EU report, only nine out of 27 EU member states did not have to introduce any financial stabilization measures [during the crisis]. All nine were new [mostly Eastern European] member states.”
  2. Hampl’s claim was echoed by his colleague, CNB vice-president Miroslav Singer, in today’s edition of the Czech daily Hospodarske Noviny. According to Singer, “I cannot say nice things about the IMF’s role in the 2008 crisis.” The Financial Times, Singer continued, carried a lot of nonsensical stories about the state of the Czech financial sector prior to the crisis. Instead of dispelling those stories, the IMF produced a study about the Czech Republic based on incorrect data and then leaked it to the Financial Times.  “It is difficult to be certain… that the IMF wanted to harm the Czechs, Slovaks or Poles on purpose… More likely it was a combination of panic, lack of expertise and a desire to see problems everywhere.”

If true, these claims raise troubling questions about the incentives behind the largest increase of resources in the Fund’s history.

Liberty Most Deer

As a footnote to Chris Moody’s post about Monday’s 20-year anniversary of the fall of the Berlin Wall, I just came across this article about red deer refusing to cross from Germany into the Czech Republic.  This, of course, is a border that was the once heavily fortified dividing line between free West Germany and captive Czechoslovakia.

Even deer who weren’t born when barbed wire, watchtowers, and armed guards prevented the natural extension of their happy grazing grounds act as if the Cold War never ended — apparently because they learned their habits from their parents, who learned them from their parents.

Still, as with the new generation of Eastern Europeans who have no memory of Communism, some young deer are starting to break the mold, taking advantage of — and even taking for granted — their newfound freedom.  I wonder if the grass (and ferns, and whatever else deer eat) is any greener on the other side of the former Iron Curtain.

Czech Support for Klaus at 65%

According to press reports, the most recent opinion poll shows that 65% of Czechs support President Václav Klaus’ refusal to sign the Lisbon Treaty that would take more power from national parliaments and give it to the unelected bureaucracy in Brussels.

Klaus, who has been at the pinnacle of Czech politics for the last 20 years (as minister of finance, prime minister, speaker of the house and now as president), has an unmatched understanding of the Czech people. Clearly, once again, he was able to discern the public mood better than others. That includes his successor as the leader of the center-right Civic Democratic Party (ODS), Mirek Topolanek, who once opposed the Lisbon Treaty but now supports it. It seems that the ODS is in a state of revolt against him and may unseat him at the ODS Party Congress in November.

Klaus will be much encouraged by the above poll. As a consequence, it is less likely that he will give way under pressure and sign the Lisbon Treaty anytime soon. If he can hold out until the likely British referendum on the Lisbon Treaty midway through 2010, he will likely be remembered as the man who put an end to the most ambitious attempt to create a centralized European super-state in modern history.