THAT POLITICAL instability can come hard on the heels of economic breakdown is more and more apparent in central and eastern Europe. News that the Hungarian prime minister Ferenc Gyurcsany is stepping down was confirmed yesterday after he blamed himself for mishandling his country’s economic crisis. Today the Czech government faces a vote of no confidence in parliament on its economic and political record, which could see it ousted in the middle of the country’s presidency of the European Union.
Although other governments in the region are also vulnerable, it is a mistake to generalise too much, since some have handled these issues more effectively than others. That understanding was seen in the EU summit decision last week not to adopt Mr Gyurcsany’s proposal for a €180 billion regional bailout. This was resisted by other such governments and instead the EU decided to double to €50 billion its emergency funding reserve fund for balance of payments support for non-euro zone states, in what was described as a gesture of European solidarity. A parallel decision was made to provide €75 billion in new loans to the International Monetary Fund. And many of the €5 billion energy and IT related special projects will also go to the central and eastern European region. These were sensible decisions with potentially more universal application.
Mr Gyurcsany’s government was forced to call on the IMF for help last October after its bonds failed to sell on international markets. Since then he has had even more difficulty balancing a large state debt with high social benefit payments. Whoever succeeds him will be expected to take tough action or face a highly divisive election campaign.
These problems are specific to Hungary. Although Slovakia and Poland are also facing deep economic problems in this crisis they have resisted blanket comparisons and sought a more modulated EU response at the summit. It should be remembered that Latvia’s government also fell, but not Estonia’s. Romania and Bulgaria, too, have their problems, but so far their governments are not threatened. Elsewhere in Europe Iceland’s government fell, and Belgium’s was long delayed. Rightly or wrongly Greece and Ireland among the older EU member states are perceived to be vulnerable too.
If the Czech government falls today it will nevertheless inevitably put the spotlight on political instability in that region. Its conduct of the EU presidency would be thrown into great uncertainty as well.