Central and Eastern
European Economies
David Chelly
ESC Dijon
American students
February-May 2005
1
Aims of the course
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This course provides students with an introduction to
Eastern European economic and social systems
This course may interest young graduates, as Central
and Eastern European countries offer excellent job
opportunities for western European and US students
in management.
Students are introduced to specialized research
sources, which may be useful to them in their careers
2
Your instructor
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David CHELLY
Ph.D in Management Sciences, postgraduate diploma in Finance, degrees in
Money and Banking, Law, Accounting
and Sociology.
Head of a consultancy firm and a
website (http://www.centreurope.org) contacts@centreurope.org
specialized in business with Central &
Eastern Europe
Former expatriate in Prague and Sofia,
professor of management in various
business and engineering schools
3
The course’s outline
•
•
1. (2nd of February). Central and Eastern Europe
basics
– A Brief History of the region, current social and
economic realities, the gap between Central and
Eastern Europe
2. (9th of February). From the socialist economic
model to the transition process
– The failure of the socialist economic and political
system; The setting of a new institutional
framework
4
The course’s outline (continuation)
• 3. (23rd of February) An Economic overview
– Comparison of macroeconomic indicators and
underlying socio-economic variables
• 4. (2nd of March) Restructuring and current situation of
financial and production systems
– Privatisation of banks and companies, the new
financing systems, evolution of industrial structures
and specialisation
5
The course’s outline (continuation)
• 5. (9th of March) The shift of the Central and Eastern
European economies towards less industry and more
services
– Central European industries in the new international
division of labour, new competitive advantages and
declining sectors
• 6. (16th of March) Nature and extent of Foreign Direct
Investments
– The main reasons for investments in the past ten
years, the role of FDI vs. local businesses, the
different ways of FDI, management issues
6
The course’s outline (continuation)
• 7. (23rd of March) The evolution of social structures: winners and
losers
– Labour and labour markets, unemployment, income and income
inequalities, impact on growth regimes, regional discrepancies
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8. (6th of April) Country focus: doing business in Moldova
9. (6th of April) Country focus: doing business in the Czech Republic
10. (30th of March) Team work (see next slide)
11. (13rd of April) The enlargement challenge
– The enlargement round, impact of enlargement on Central European
economies, the euro in Central Europe.
– The new shape of the European continent, its future and its
relationships to the United States.
– Oral presentations
7
Methodology
• REQUIRED WORK AND FORM OF ASSESSMENT
– Preparatory works: short assignments dealing with
Eastern Europe leading to individual presentations
(20 % - Lecture 10)
– Team works during classes: cases, text analysis and
comments (10 % - Lecture 10)
– Final examination: questions and case (30 %).
– Final assignment: 5-page document on a topic of your
choice (40 %). 11th of June, 2005.
• The documents of this course will be fully available
through the internet, in English and in French, at the web
address http://www.centreurope.org
8
Oral presentation (the slides)
• 1. Powerpoint slides with pictures, photographs, maps,
sound
• 2. Slides not too dense and well presented (spelling,
ergonomy, punctuation…)
• 3. Sobriety (e.g. absence of !!!)
• 4. Synthetic and relevant information
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Oral presentation (the presentation)
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5. Quality of the expression
6. Coordination between the members of the group
7. Capacity to capture the attention of the class
8. Technicity, use of specific sentences
9. The speakers must not read their notes
10. Prohibit laughing, puns, remarks without link to the
subject
• 11. Respect of the assigned timing
• 12. Respect of the deadlines
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Oral presentation (the content)
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13. Effectiveness of the introduction
14. Quality of the outline and of the transitions
15. Quality and exhaustiveness of the presentation
16. Quantified and recent information, indication of the
sources
17. Use of examples: company practices, quotes…
18. Objectivity of the presentation
19. Prohibit developments not related to the topic and
obvious information
20. Indication of references and complementary sources
of information
11
I. Central and Eastern European
basics
12
How can we describe Central and
Eastern European countries?
• Discovering Latvia
13
Economic structures as a product
of History
• History is essential to understand the
functioning of the firms.
– Philippe D'Iribarne, who wrote « The Logic of Honor
: National Traditions and Corporate Management »,
shows that the way of working and the corporate
processes in a given country originate in a main
historical event.
– According to him, management practices in the
United States reflect a particular way of living in
society, inherited from the contractual relationships
of the religious merchants of 1620.
– France is marked by the logic of Honor, inherited
from the pre 1789 times, where people used to fight
duels in order to defend their honor. This tradition of
social inequality is according to D’Iribarne the
reason why French companies are still so
14
segmented and why hierarchy is so present.
A rich and ancient history
• It is not because we (French people)
don’t know Central and Eastern Europe
history that these countries do not have
any history.
• Almost all CEE countries have played a
major role in Europe in their history
• But they have early fallen under the
domination of different empires, which
have shaped their future
Charles the IVth (13461378), King of Rome and
Empereur of the Holy
German Empire
Cyrille and
Méthode,
inventors of the
Cyrillic alphabet
15
The empires and their influences
• Long dominated by the Habsburg Empire, the history of
Central Europe has been marked by education, art and
modernism.
– While in 1789 in France only a third of the citizens
were able to speak and read French (the rest spoke
local dialects), education in German had been
compulsory for a century in the whole Kingdom
• Eastern European countries used to live under the
Ottoman and the Russian Empires rule, which prevented
their economic development.
Vlad Tepes (1428-1476),
a Romanian figure of the
struggle against the
Ottoman Empire.
16
A rich Central Europe
• Central Europe is mainly composed of reformed
Catholics, close to the Protestants in terms of
seriousness and rigor.
• Central Europe comprises the former Eastern block
countries that previously belonged to the Habsburg and
Prussian Empires, but also Germany, Switzerland and
Austria
According to M. Kundera’s « The
Stolen West or the Tragedy of
Central Europe (1983) » , Central
European countries culturally
belong to Western Europe.
17
A less developed Eastern Europe
• Eastern European
countries are mainly
economically underdeveloped.
– None of them have
successfully
managed their
economic transition
to capitalism.
• The religions are
orthodox and Muslim.
18
Exercise : Central and Eastern
European countries on the map
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Central and
Eastern
Europe map
20
Preparation for lecture 2
• Browse the key economic indicators for
Central and Eastern Europe in
Centreurope.org
21
II. The transformation process
22
Exercise : sub-groups in Central
and Eastern Europe
• You are a consultant with the French Center for External Trade (CFCE).
Your task is to promote business relationships with Central and Eastern
European countries.
• Up to now, the CFCE had grouped the countries of this region in a
category called « Pays de l’Est » (« Eastern countries »).
• Until 1991, the region used to comprise eight countries: Albania,
Yugoslavia, Bulgaria, Romania, Hungary, Czechoslovakia, Poland, and
USSR. But now they count up to more than twenty.
• Your mission is to split them in different subgroups, that should be
geographically close and economically homogeneous. Explain your
decisions.
• The countries are : Albania Armenia Azerbaijan Byelorussia BosniaHerzegovina Bulgaria Croatia Estonia Georgia Hungary Latvia Lithuania
Macedonia Moldova Poland Czech Republic Romania Russia SerbiaMontenegro Slovakia Slovenia Ukraine
23
The influences of capitalism and
communism for Central and
Eastern European economies
• Europe has given birth both to:
– capitalism: the Industrial Revolution started at
the end of the XVIIIth century in Great-Britain
and spread in Central Europe and partly in
Eastern Europe
– communism: the spirit came from philosophers
such as the Swiss J-J. Rousseau and
politicians like the Prussian K. Marx.
• According to some historians, Russians used the
communist ideology as a pretext to perpetuate
their tradition of imperialism.
24
The communist era
After World War II, a Soviet-style
Communist regime was imposed to
Central and Eastern European
countries.
Central planning biased the
structure of employment by placing
a disproportionate emphasis on
industry, to the detriment of the
services sector.
Like dominos, several revolutions
brought about the downfall of the
Communist regime, and
reintroduced people’s rights.
Like Albania and
Yugoslovia, Romania had
its own communist regime,
independent from Moscow.
25
The communist heritage
• Central and Eastern European countries have lived forty
(seventy) years of communism, which still influence local
behaviors and habits.
The communist heritage:
Corrupted civil servants, unreliable
businessmen, opportunist politicians…
26
Young democracies
• Central and Eastern democracies are ten year old or less
• Except in Czechoslovakia with the Velvet Revolution, the
communist rule has violently been rejected in 1989 such
as in Romania where thousands of people died in a civil
war and Dictator N. Ceaucescu and some members of
his family were executed the day of Christmas 1989.
But the
political risk is
limited to only
a few
countries in
the CIS and in
the Balkans
27
A lack of political maturity
• Demagogues may be elected on the basis of their
unrealistic pledges and political scandals concern
all parties and all countries.
– As an example, Polish President Kwasniewski, who was
elected boasting a diploma he had never obtained, has
recently appeared in a commercial for Polish agricultural
machines…because this company employed two of his
relatives.
• The leading coalitions are not able to keep the
power due to a too large number of political
parties.
– In Central and Eastern Europe, people tend not to vote
for opinions but for the defense of certain categories of
people: a Czech pensioner will tend to vote for the Party
of the Pensioners, a Polish farmer for the Party of the
farmers, a Hungarian in Slovakia for the Parties of
Hungarians in Slovakia, etc.
28
An inefficient legal framework
• In Central and Eastern Europe, the new legal
framework is very similar to those of Western
Europe.
– As an example, the Czech accounting law is almost a copy of
the French one.
– Central and Eastern European countries have done so
because they sought to enter the European Union
•
But in practise, the legal environment is a “jungle”.
Laws are:
– Incomplete (lack of case law, decrees…);
– Volatile and contradictory;
– Not enough enforced
On the main square in Sofia, one can buy
the most recent and expensive software
CDs for a few dollars.
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Preparation for lecture 3
• Browse the key economic indicators for
Russia, Estonia and Romania in
Centreurope.org
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Questions & Answers
• What is the main strong point and drawback of the
Romanian, Russian and Estonian economies?
• Is unemployment a crucial figure to analyze?
• Who performs the best for public and commercial
deficits and why?
• Why public and commercial deficits should be
avoided ?
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III. An economic overview
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An generalized improvement of the
economic performances
• After a deep collapse of their GDP,
Central European countries have
been achieving steady economic
GDP growths, followed by most
Eastern European countries
• With the example of up to 1000 %
inflation in one month in Bulgaria in
February 1997, hyper-inflation has
severely affected some CEE
countries, namely Poland, the
Baltic countries and Russia.
– This issue is today under control,
and figures are even close to
Western standards in Central
Europe.
Compared European GDP Growth (2000-2004)
12
10
8
Romania
Germany
6
Poland
France
4
Ireland
Russia
2
0
2000
2001
2002
2003
2004
-2
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Consumption as the most
important economic indicator
• Demography is essential to understand
consumption patterns, as old people do not
consume the same products and services as
young people.
• The rate of equipment helps us understand which
goods are not possessed by households and thus
may be purchased.
– In Central and Eastern Europe, people will turn to semidurable goods, as they are still under-equipped.
34
How GDP helps us understand
consumption patterns
• The long or medium term GDP Growth is as
important as the ratio GDP/head to understand
commercial opportunities.
– In countries where GDP Growth is steady, such as
Poland, people tend to buy durable goods (houses, cars:
the Polish automotive market is the 7th in Europe).
– In countries where GDP growth is relatively good, the
domestic consumption will support semi-durable goods
(ex. hi-fi), such as in Hungary.
– And when GDP Growth is uncertain, like in Russia,
people prefer non durable goods (food, luxury products,
etc.), even though their purchasing power would enable
them to buy durable goods.
35
The challenges of competitiveness
• Commercial deficits are found in most CEE countries.
– The values of the currencies tend to decline, which
impoverish these countries and put them under the
threat of speculators
– Local consumers and companies ask for foreign
goods and services, while the Eastern European
quality does not export well.
– The commercial deficits tend however to narrow,
thanks to the export successes of multinationals
Georges Soros: a
subsidiaries such as Skoda (Volkswagen Group),
real philanthropist ?
Philips, Matsushita, etc.
36
Unemployment and public deficits:
two persistent weaknesses
• Impossible during the Communist times,
unemployment has risen above average
European standards in all countries that have
started to restructure their local companies.
• Owing to weak fiscal revenues and uncontrolled
expenses, public debts have dangerously grown
– The consequence is high interest rates, which
prevent all economic development.
37
The European Monetary
Union (EMU)
•
•
The EMU belongs to the EMS. It has been
implemented in three steps, including the creation of a
European Central Bank, the convergence of European
countries economic policies and the launch of the
single currency, in early 2002.
12 countries out of 25 (the « ins ») belong to the EMU.
• The Entry process for the « outs » requires
achieving a certain degree of economic
convergence, called the Maastricht Treaty
convergence criteria:
- limits on the public deficit and debt have been set
respectively at 3% and 60% of the GDP;
- inflation and interest rates must be kept under control
(respectively not more than +1.5 % and +2 % of the average
of the three lowest scores in Europe.
- exchange rates must be stabilized.
38
Preparation for lecture 4
• Browse the main facts and figures for
Russia, Poland, Ukraine and Romania in
Centreurope.org
39
IV. Restructuring and current
situation of financial and
production systems
40
The impact of privatizations in
Central and Eastern Europe
• Privatisations of banks and
companies are well advanced
• But the industrial restructuring is
still unsufficient
• The companies suffer from
overemployment, obsolete
equipment, processes and
management models, and they
are not quality-driven.
• The companies lack efficient
shareholders pushing towards
performance
41
(Eastern) European firms compared
with the firms of the other Triad powers
• Compared with Japanese management:
– European management is more individualistic and
centered around private needs, rather than on the
country needs
– Private companies clearly differ from public-owned
companies and trade unions defend individual interests
• Compared with American firms :
– European firms are more conservative and less
structured
– The decisions made by managers are less profitoriented, because their strategies focus on the longterm.
– State intervention and corporate democracy are widely
tolerated, whereas competition and its cruelty are not
well accepted.
– Pay incentives are limited. Mobility occurs inside the
company rather than outside.
42
The German model as the natural
reference for Eastern Europe
• The Rhenan model of corporate strategy has long been
a reference, owing to the strong position of Germany in
Eastern Europe.
• The particularities of this model are that:
– Companies must serve the society, the main goal of the
companies is not necessarily profit
– The consensus is sought at the micro level, with employers,
trade unions, creditors and employees working hands in hands,
and at the macro level, because frontal competition is avoided.
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A marked preference for the AngloSaxon model of corporate strategy
• In the Anglo-Saxon model of corporate strategy, the
State intervention is seen as negative and the
companies are controlled by shareholders who are
only interested in short-term profit and dividends.
• The Anglo-saxon model spreads rapidly all over
Eastern Europe:
– Central and Eastern European countries value this model,
because the USA is seen as the world reference for
business and trade.
– The multinationals adopt similar management practices
throughout the world
– The ERP (Enterprise Resource Planning) software, such as
SAP or Peoplesoft, tend to impose a global way of
management for the world, with minor adaptations for each
country
– The consultancy firms, such as the Big 5, focus on the best
practices, which mostly come from Anglo-Saxon countries44
Industrial relations
• There are several unions traditions in Europe. The
European Trade Union Confederation hosts members
from almost all European countries, but trade unions
have never managed to create efficient Paneuropean
organizations.
• In Central and Eastern Europe, Trade Union
memberships are quite high (over 30 %).
– But except in a few countries like Poland, Trade Unions have
virtually no power over the management of the companies.
– Their action is limited to improving the work conditions and to
the organization of social event
45
V. The shift of the Central and
Eastern European economies
towards less industry and more
services
46
• What made Republica acquire its leading
position in Eastern Europe?
• What are the reasons of the decline of
Republica ? Which reasons are specific to
this company and which are common to
post-communist companies?
• What future can we predict for Republica?
47
The decline of the agriculture and
the industry
The good potential of the agriculture sector has been
destroyed by the communist choices and a inefficient
privatization process.
Central European traditional industrial sectors (textile,
iron steel industry, mining, defence...) are not
anymore competitive in the new international division
of labour.
Central European Countries such as Poland or Slovakia
must focus on hi-added values industries because they
become too expensive compared to their Ukrainian or
Belarussian neighbors.
– But these countries have maintained a few industrial
competitive advantage (automotive industry, chemistry,
electronics, IT...).
48
Thriving services
• All services sectors perform
great: distribution, tourism,
financial services...
• The parallel economy is also
very much developped
GDP Growth in Central and
Eastern Europe is mainly
driven by foreign investment
and consumption of foreign
goods
49
A buoyant distribution sector
• The distribution is little
concentrated in Central and
Eastern Europe (Tesco is n°1 in
Slovakia with about 2 % market
share).
• There are two types of
hypermarkets:
– the French hypermarkets (Carrefour,
Leclerc, Auchan…) situated in the
outskirts and aiming at generating
traffic with good quality and branded
products,
– the German hypermarkets (Metro,
Lidl, Meinl…), situated in town
centers and aiming at generating
flow with cheap products.
Each unveiling of an
hypermarket is celebrated
by hours of queues of
avid consumers.
50
The transportation and logistics
market
• The Central and Eastern European Freight Transport
Sector is leaded by the road haulage.
• Major Industrial Sectors: Automotive, fast moving
consumer goods (FMCG) / Retail, Healthcare /
Pharmaceutical, High Tech Electronics Almost all
main transport players in market come from Western
Europe and the US.
• The local know-how, plants and equipments have not
yet catched up with European standards
• Road Networks, Customs Issues, Security Issues
need to be improved.
• Transportation and logistic costs are almost as high
as in Western Europe.
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Opportunities for US firms in
offering logistic services
• The distribution sector is very much
atomized.
• Logistics and transportation is a priority for
the EU.
• Thanks to a strategic location and a
buoyant economy, the logistics and
transportation sector of most Central and
Eastern European countries is growing
rapidly
• Local companies urgently need assistance
from the West with a comprehensive
updating of equipments/technologies and
restructuring their organization.
52
VI. Nature and extent of
Foreign Direct Investments
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Why invest in Central and
Eastern Europe ?
• Foreign direct investments in all sectors and from all countries are
welcomed and little restricted.
• Central and Eastern European countries benefits from a cheap
and qualified workforce and an advantage of territorial location
– Investment incentives are offered for Manufacturing investors.
– It is a mistake to think that delocalizing in a low labor cost country
increase competitiveness. The wages are a consequence of the
competitiveness, not a cause.
– For example, assembling cars in Poland should be very competitive with
a skilled labor force and an average salary of USD 500, but in practice,
local companies suffer from low motivation, bad organization,
bureaucracy, insufficient national infrastructures, etc.
– The main reason for FDI is good access to domestic and foreign
markets, which are growing and unsaturated
54
Unsaturated markets
• Local consumers ask for western products.
– They are fascinated by the consumption society and relatively
under-equipped.
– Each unveiling of an hypermarket is celebrated by hours of
queues of avid consumers.
• Local companies urgently need comprehensive
updating of equipments/technologies and restructuring
their organization.
– The local supply is unable to provide these services.
– Local public authorities lack of everything
Services of public utility (environment, education, culture…)
constitute a huge market, often financed by the EU.
55
Where and how to invest ?
•
A few Central European countries attract the
majority of FDI
–
–
Hungary, Poland and the Czech Republic
have received the biggest shares, but now
good opportunities can also be found in
Eastern Europe
In Eastern Europe, some large companies are
scheduled for privatisation, but the best deals
have long been done
56
Greenfield investments
• The most profitable way of investment is the Greenfield
investment (starting up from scratch)
• Greenfield investments are the least risky, because the
foreign investor is not constrained by the communist
heritage and low productivity of the local firms
• Greenfield investments require arranging administrative
problems.
– When Auchan wanted to invest in Prague, they bought from
the Town hall fields that eventually did not belong to the Town.
Auchan offered bribery in order to solve the problem, which
cause a national scandal and the abandonment of the project
and the dismissal of dozens of people.
• A new labor force is needed, which is not always
available, especially in low-populated areas
57
The direct international
cooperation
•
•
•
Well developed in Europe, the direct international
cooperation offers an alternative between simple
export and delocalisations.
In most cases, franchises and licensing
agreements offer a win-win situation
International joint ventures, which are an
association between a local company and one or
several foreign investors offer less opportunities
–
–
A JV should be recommended for each unknown market,
but in practice, the results are rarely positive due to
cultural of financial disagreements.
In some countries such as Russia, it is the only authorized
way to invest in some sectors, because local governments
want to access foreign technology without losing the
control of their wealth.
58
... Foreign direct investment as an
easier access to foreign markets
• FDI provide easier and more efficient access to the
markets and avoid customs barriers.
– When Asian or American companies want to access the
European market, they can create a subsidiary, which can
constitute a bridge for other markets : Prague or Warsaw for the
CIS, etc.
– One of the reasons for FDI rather than for export is to deal with
marketing, distribution, after sale service, etc. which are easier
on the spot (ex. The French optical group Essilor has a strong
implantation worldwide).
59
Foreign direct investment as a way to
avoid Western legislation
• Some investments are offered for free to client with low
financial means: the provider gets paid by asking fees on
revenues.
– It sometimes happens for investments that permit to avoid
Western environmental legislations. For example, the serious
pollution of the Danube River in Romania in 2000 by a subsidiary
of an Australian gold mining company was caused by the use of
cyanure, which is totally prohibited in developed countries.
60
HRM strategies
• Two HRM strategies coexist in Central and Eastern
Europe:
– A culture-free model based on the global best
practices
• Corporate cultures must be stronger than
national cultures.
– A cross-cultural management model based on
contingent strategies
• Different environments, cultures and attitudes
towards work lead to different practices :
corporate communication, pay systems, HRM…
61
A qualified workforce…
• The workforce is
– Qualified, especially in technical fields
– relatively cheap, especially in Eastern
Europe
– respectful for hierarchy and rules and
able to stand hard working conditions
• So how can we explain such low salaries?
In spite of a high qualification
in technical fields such as
computer science, Bulgaria’s
wages are about 10 times less
than in Western Europe
62
… but a low labor productivity
– The main characteristic in Central and Eastern Europe is the
dependency from a central structure of authority.
• In practice, the management is hierarchical. This system is not
competitive and human resources little productive compared to
European standards.
– Commitment (especially towards foreign investors), sense of
initiative, mutual trust between workers, customer satisfaction,
ability to communicate and ethics at work are low
• « pretend to pay us and we will pretend to work »
• « the one who does not steal, steals his family » (Czech
proverbs)
• But workers tend to behave in a more productive way
in Eastern Europe than in Central Europe.
63
How to recruit/sack people?
• Young graduates are targeted by companies
• Outsourcing recruitment is not as common as in Western
Europe
• Assessment centers, psychological tests and even cv’s
are not as widespread as in western Europe
• Sacking employees is easy, as labour laws and trade
unions have little influence ; But it is risky especially for
seniors.
64
How to motivate? How much to
pay?
– Money is generally the best incentive to motivate
people
– Young graduates receive higher salaries than their
older colleagues with a long experience
– Bonuses are not much widespread nor much effective
– Cellular phones, company car and other nonmonetary allowances have more impact than salary
increases
– Honors and titles are appreciated
65
What is the importance of training?
– Central and Eastern European human resources are
eager to learn
– Training is not perceived by employers as a strategic
investment, especially for « soft » skills
– Money spent on vocational training is very low
66
VIII. The evolution of social
structures: winners and losers
67
Democracy is relatively well spreaded in
Central and Eastern Europe
• Parliamentary regimes dominate in
Central and Eastern Europe, but
some countries do not have a
parliamentary but a presidential
regime, such as Serbia and
Montenegro.
• Some States are not unitary but
federal. In Eastern Europe
(Czechoslovakia, USSR,
Yugoslavia) they have exploded
and those who remain (Russia,
Serbia and Montenegro, Bosnia
and Herzegovina...) are politically
unstable.
68
The Welfare state model is in crisis
• In Central and Eastern Europe, the social role of the
State is decreasing.
• Most institutions (The Police, Universities, Hospitals…)
in Central and Eastern Europe are in crisis
• Central and Eastern Europe faces a serious
demographic problem.
•
While generations are renewed with an average of 2,1
children by woman, the average is 1,3 for Eastern Europe
countries with a world record for the Czech Republic and
Latvia.
• This has direct effects on the domestic demand and on the
national competitiveness
• Central and Eastern European states suffer from
bureaucracy and corruption
• Income inequalities and regional discrepancies are
widening
69
Unequalities for the local
population
• Central European countries’ GDP / head is about half of
the average of the EU’s one, and Eastern European
countries’ GDP/head about a fifth.
– The average revenue or GDP / head is not significant
in Central and Eastern Europe, where revenues
inequalities are high. Those countries are marked by
a combination of few very rich people and many poor
people, without a real medium class
• The poor European regions are helped by the European
Union, but there are still huge differences, even between
rich countries
– See human development index
70
Multiple regionalisms
• Regions have always played in Europe but their
importance tends to increase with the globalization.
– Their development is financially supported by the European
Union because of the principle of subsidiarity (each decision
should be taken at the most local spot) and because regional
identities are « allies » of the European Union against strong
national identities..
71
Multiple regionalisms
• Borders in central and Eastern Europe have more
been designed according to the side chosen by the
countries during the World Wars rather than by the
human realities of the period (see map)
– For example, Hungary, who was the ally of the Germans, saw
at the dislocation of the Austro-Hungarian Empire its size
reduced by three and its population by two.
– As a consequence neighboring countries such as Romania
and Slovakia respectively host 1,5 million and 500 000
Hungarians, that is to about 10 % of their total population.
– The regionalisms are also encountered in Romania, Poland
or Ukraine with a strong east/west opposition.
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Job market and educative systems
in Central and Eastern Europe
• The educative system is a key issue for the productivity of
human resources
– Baltic countries specialize in the the Hi-tec industry because
more than one third of their University graduates are specialized
in this field.
– But in most Central and Eastern European countries, the
educative system is in crisis
• In Eastern Europe, the fluidity of the job market is high thanks
to an unconstraining labor law, but there is a high level of
unemployment
– People are highly attached to their town or region
– Some people are officially unemployed in order to receive the
dole
– The brain drain is strong in countries such as Bulgaria or Serbia
and Montenegro, where a doctor or a University professor earns
about 100 USD per month.
73
Other factors of competitiveness
• The tax level, costs of the workforce and of other
factors and attitudes towards work, are highly
varying across the region.
• Some Central and Eastern European countries
rank high in the competitiveness rankings (IMD,
WEF)
74
VIII. The enlargement challenge
75
The European identity
• There is a common ground for the European identity,
which is opposed to the two other poles of the Triad
(USA and South-East Asia)
– The heritage of the Greco-Roman Empire. The Greeks
gave the name Europe to the continent, its first civilization
and its rational spirit (the logos)
– The Renaissance. This period has mainly affected the
southern catholic part of Europe, where still today the look
may be more important than the essence.
– The social romanticism. The ideal of social justice,
defended by V. Hugo and other romantic figures, continues
to dominate the philosophy of a large part of Europe
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Different aspirations for Europe
• Germany and the Netherlands propose a form of
federalism while Brits and Scandinavians reject the idea
of a Super State and will only accept an unconstrained
union.
• The EU is the only supra-national structure of the world,
which means that the European law is superior than
national laws. The main body is the European
Commission.
• The European Union is criticized because of its lack of
transparency, its bureaucracy and its high costs, namely
budgets for translations and funding, with little control of
the use of the money.
77
COUNCIL OF
MINISTERS
EUROPEAN
COMMISSION
COMMITTEE
OF THE
REGIONS
EUROPEAN
PARLIAMENT
ECONOMIC
AND SOCIAL
COMMITTEE
COURT OF
JUSTICE
OMBUDSMAN
COURT OF
AUDITORS
Towards a stronger Europe
• A group with 25 +
countries offers a
stronger opposition
to the other world
powers
– The USA will
endeavour make
the enlargement
fail
• The EU must adjust
itself to the
enlargement
– Is it able to ?
– How far can we
go ?
79
A difficult task to achieve
• A few international disputes are not
solved yet
• The first relationships between
ancient and new EU members are
marked by conflicts
• Reciprocical expectations and
knowledge from ancient and new
members strongly diverge
Will they get along
together ?
80
More information…
D. Chelly &
F. Lafargue,
Guide culturel
et d’@ffaires
pour l’Europe
de l’Est,
L’Harmattan,
2003
www.centreurope.org
East-west business portal
81