Saturday, April 25, 2009

Practical jokes of life - Retributions in Moldavia

In an earlier post I tried to express my views on the situation in Moldavia. Although the process of retributions and the consolidtaion of the situation of the present government continued, the news consisted some very peculiar information, some of it seemed as a farce of the political forces in power. The government, two or three days after the riots, announced that they arrested someone accused to be one of the organizers and initiators of the events. The published name was quite capable to reinforce every kind of suspicion regarding the government's intentions. Who would think that arresting a man called Johnattan Jerusalaim Netanyahu could be anything else than a preparation for a fake trial? Jews have an age old tradition in the area being scapegoats for every problem and this approach didn't lack from the practice of communist parties in the Stalinist era. But the tranquility of those, who thought of it only as a usual manipulation of the well known communists have been disturbed soon. The authorities revealed that the above mentioned American-Romanian citizen is nothing else then a priest of the Moldavian orthodox church. I could not have helped to laugh for a while...

(In some christian churches giving and using names from the Old Testament is a custom in order to express adherence to the real traditions of christianity.)

Wednesday, April 22, 2009

Facing the limits - dead end for Latvia and the spending cuts approach, the new Hungarian finance minister abandons his ambitious plans

Although the psychosis of the crisis has been stilled a bit, the happy end is still far away and the everyday consequences of the steep contraction will be clear only afterwards. The usual hyteria - at least usual in Hungary in the recent weeks - is over, however it is not clear whether beacuse those actors how were very active in producing of this hysterical environment think that the new governemnt will realize the Reform Alliance program (tax and spending cuts at the same time)or it is just a natural relapse after weeks of intense and exhausting activity. (Exhausting even for simple citizens, it was not easy to hide away from the catastrophic visions put orward in the media almost every hour.)

Otherwise at least two events can be interpreted as a sign that the limits of the much advocated approach to the crisis management has been reached. The first one, certainly the more significant one, is that Latvia eclared: it is not capable to comply with the conditions set by the IMF last year in order to ensure the fiscal program, the precondition of the loan. One can suppose that this is just the usual wriggling between politicians and the Fund, but the data on the capabilities of Latvia to cut its budget, presented by the finace ministry, are truely schocking. The target is a 5% budget deficit for this year. According to the Latvian government if they cut the expenses by 20% they can reach 8,5%, if they make a 30% cut it will be at about 8% and with a 40% cut it will still be as high as 7,5%!!! I can't imagine any country that ould survive the elimniniation of 40% of its budget expneses, not to speak of to make almost the double to reach the target of 5%. Figuratively speaking: Latvia can shut down the state itself in order to comply with the IMF's terms. I don't think that it is a viable road, and if the Latvian's data is corract and the EU and the IMf is not ready to accept the realities we are facing serious trouble as Latvia can simply collapse, not abruptly, but gradually.

Somewhat similar is waht happend in Hungary, at least as it is also showing the limits of this bold, but amidst the present crisis not very ralistic aproach based on tax and sending cuts in order to achideve a balanced budget even as it is almost impossible. In the new Hungarian government one of the leading protagonists of the Reform Alliance ( a lobby group of the business interests, camouflaged as altruist group proposing a "scientific" solution for Hungary's every problem in one year) took over the post of the finance minister. Even a month ago the guy, Péter Oszkó was a frequent interviewee, always sharing with the public his conviction that the government should make brutal spending cuts in order to make huge tax cuts. As soon as he gave his first interview as minister his tone was softened and his program watered down completely. He will mange the earlier government program, the one he condemned not only as insufficient but principally wrong, and contrary to his earlier assumptions, that with a bold tax cut Hungary will have a 4-5% GDP growth in two years, now he is predicting the asme in a five years timespan. Moreovr, although a month ago he was quite confident that they have a very detiled program, that can be and only needs to be implemented in one or two months, now he answers for every question regarding the specific deatils of his "program", that they need more time to work out the details, that it is not so simple to prepare such important changes and that they based their program earlier on presumptions meanwhile became obsolete. Maybe he aslo began to feel his limits and will renounce on his omniscient pose.

Facts and figures - where to find the "reality"?

In an earlier - long, boring, not well argumented etc., as you wish - post I tried to outline the very peculiar concept of time and space prevalent in ECE in the public sphere, primarily among so-called analysts and economists. The recent events in Hungray, primarily the installment of the new government and the prime minister's presentation of his program revealed an interesting epistemological problem, quite connected to the crisis as well, that of the facts. What are considered to be facts nowadays here, who produces facts, why are facts accepted as "truth" and sometimes why are they rejected? I have no ready answers for the questions described above, I can only register the problem itself and to make some hypothesis, viable ones, I hope, regarding its foundations and origins.

Two minor details, not really taken seriously by the public, can shed some light on the problem and its context. The prime minister designate, Gordon Bajnai was supposed to work hard on his evaluation of the economic situation and the crisis since he was proposed to be the candidate for this post at the beginning of April, but promised to present his ideas and proposals only at April 18. At the same day he held an international press conference, where he showed a presentation. (Bajnai is very convincing at presenatations, this dominant form of selling one's ideas today, once I saw him in Brussels as he was putting forward Hungar's claim for the European Science and Technology Agency's seat, and two gentlemen in front of me, I would say they were German, concluded that he was very good and clear, although for someone from the academics - where I'm supposed to belong, even if I feel sometimes that it is a self delusion and I'm only clinging to my false ideas and I'm not ready to accept my failure - the whole thing was a series of banalities, but I'm sure that it is an inevitable characteristic of the genre.) This presentation was marketing some old ideas on the factors of the crisis, outside and inherent ones, specificlly Hungarian and international and the proposed solutions - not completely without contradictions in itself - were also well known. But the communication team made a mistake, as they mada downloadable a form of the presentation that consisted some technical data regarding the author of it and the date of the last modification. The material was prepared by the intrnationl company McKinsey and last modified at April 3.

One can conclude that the supposed hard work was only a deception and Bajnai, while seemingly negotiating with politicians, parties etc. knew from the beginning that he won't modify his views. He won't acept that facts and argumentations based on this fats provided for him by others can be relvant, important or "true". (Anything this last concept covers.) He made a choice earlier and was not ready and openminded to accept others point of view or at least to ponder it. Even more interesting is the fact, that his own, unwavering ideas were not based on the data and results of their evaluation provided by the state administration (a series of institutions from the Ministry of Financ to the Statistial Office) but on concepts of an international company. One could say that he accepted the opinion of the so called markets and analysts without any reservation, even though those guys are using only a limited set of data, some figures considered to be very important and they try to deduce from those every other information on the respective economy.

Quite revealing in this sense is the data on the sovereign debt in the presentation itself. Many so-called analysts, among them the new finance minister of Hungary, are convinced that the country is on its path towards sovereign default, baceuse the debt ratio to GDP has soared in last year and there is no way to hamper the process without harsh spending cuts. (I discussed this issue in an earlier post on the S&P evaluation of the problem.) The presentation was in line with this assumption, although two fellows from the National Agnecy for Sovereign Debt published a well argumented article, in wich the porved that this assumption is false. (They reasoning was similar to what I oulined in the above mentioned earlir post.) What is really striking that the prime minister rejects the opinion of the state authorities, that have more data and probably more epxertise on the issue than so-called analysts and accepts the views of the latter. Why don't disolve this costly state institution if some self-appointed guys know it better? It would be also beneficial in financial terms.

In the light of this events it is easier to understand why are the majority of the so-called analysts are convinced that the costs of the state administration can be reduced significantly. They so it as completely useless, the existence of which is only a tradition and age old custom, something that can be substituted by market institutions. Well, maybe there is some hope. As you can see from the next post, even the most hawkish guys from the so-calld markets could soon realize that it is always easier to sell ideas on cuts and solutions without responsibility, and the limits could be immediately obviuos from another perpsective. But it is still a long way to go until facts won't be only facts if they are provided and pondered by the so-called market institutions with the most narrow perspective and having only mediocre expertise.

Sunday, April 12, 2009

Slovakia still the frontrunner - irony and self-critic

As the data on the economic production and trends in the first few months in ECE is gradually revealed it is quite clear that the whole region is facing an economic downturn, regardless of earlier preformance and forecasts on possible growth. Last week the Slovak Statistical Office published its results on the industrial production in February, 28,2% year on year decline. It is very serious, especially as the industry makes up at about a third of Slovakia's GDP, but not suprisingly, given the effects of the crisis on the car making industry, of wich Slovakia's current ecenomics is based on.

The real surprise is the reaction of some of the Slovak newpapers, especially that of the SME's. The newspaper suddenly portrayed the situation very realistically, moreover we should find traces of self irony in the article. It is enough to emphasize the title, almost jokingly plyaing with the phrase "look at someone's back" in case soemone is hopelessly trailing the other. For months Slvakia was a frontrunner with its enomrous growth and Hungary was prophecized to be doomed, but the situation suudenly cahnged and at the moment it is not clear who is leading the pack in terms of velocity of the contraction. In this case Slovakia's "superiority" - that very popular idea - regarding the speed of decline is stressed and portrayed as faster than either the Czech Republic's or Hungary's speed of industrial contraction - turning around the whole concept.

Here I'm obliged to make some self-critic, the SME, that I was criticizing because the articles in the newapaper were sometimes reflecting the strong belief in Slovakia's superiority, moreover lecturing on the right economic policy, reacted very soon and changed its stance and did it with an obious sense of humor as well. Otherwise it is still the same perception of ECE, the eternal competition. But at least it is more digestible, and far easier to tolerate this way.

Wednesday, April 8, 2009

A rather traditional crisis - Riots in Chişinău

Days of tension after elections were held in Moldavia on Sunday led to violence and riots in the capital of the tiny country. Mass protesters against an allaged electoral fraud lost their patience and stormed the building of the Parliament and the Presidency. They planted Romanian and EU flags* and greated their victory as the fall of Moldavia's communist president, Valdimir Voronin. After hours of negotiation between the opposition parties and the government the problems were not earnestly resolved (and the government even withdraw the small concession provided for the oppoistion today), but the masses dissolved and during the hours of the night the authorities began the arrests. Repressions continued today as well, for example university and high school students were interned in he respective buildings and not allowed to leave. At the moment the government seems to win, and even have the opportunity to strike on their opponents portraying them as means of foreign powers in undermining he countries independence, putschists and so on.

Although the picture of tens of thousands of youngsters protesting against a communist president, demanding repetiton of an election won by communists and hailing freedom and Europe is quite easy to be interpreted as if the lines between good and bad would be clear, Moldavia's crisis has many more underlying factors. Moreover, it is not so clear whom to treat as supporting a just case or an unjust one.

The tiny country, a strip of land de facto between the rivers Prut and Dniester is the scene of an unreslved conflict on the boundary between the spheres of influence of the West and Russia. After the dissolution of the Soviet Union the former soviet republic of Moldavia became independent (parctically for the first time in its history) but the eastern part of the country soon declared its secession, and set up the so-called Republic along the Dnestier. An armed conflct followed, and as the breakaway province was supported by the 14th soviet army, led by the able commander, Alexander Lebed, they prevailed. Alathough nobody recognizes this state its existence is a fact for more than 15 years. For a while the situation was more or less clear, Moldavia was led by political forces aiming to recapture the lost territories, while the latter was considered as a not-so-covered bridgehead of Russia. As the communist party won the elections in 2001 for a while everyone expected a rapproachment between Moscow and Moldavia, but it turned out that even Vladimir Voronin is not ready to pay the requested price for he reintegration of the country. With the extension of the EU Moldavia and its internal conflict gaind more significance for the West as well and the problem of Transnistria is to be resolved today - at least theoretically - through a multilateral iniciative. But in practice it meant no real adance and Moldavia is today still the place of a frozen conlict, while Russia's leaders, after the bitter experiences of the coloured revoultions are less willing to cooperate and would rather choose the preservation of the status quo.

But, unluckily for observers and the participants itself, the conflict between East and West (or for neo-conservatives between democracy and authoritarianism) is not the only dividng line and conflict of interests regarding Moldavia. The country had a rather vexed modern history, as it was annexed to Russia in 1812 from the principality of Moldova. (A part of it, a thin strip of land on the left bank of the Prut belonged to the merging new country of Romania between 1858 and 1878.) The Russian rule lasted for more than a century, but meanwhile the newly forming and strengthening Romanian nationalism announced its claim for "Basarabia", as a Romanian territory. The collpase of the empire of the Tzars and the following republican attempt led to the annexation of Bessarabia to Romania in 1918. But the Soviet Union forced Romania to abandon its sovereignty over present day Moldavia in 1940 and even though Romanian troops, as allies of Nazi Germany reannexed the territory to a extreme rightist Romania, the imbalance of forces between a great power and a loser of WWII naturally led to a renewed soviet rule. Romania's aspirations reborn after the dissolution of the Soviet Union and for a while the merger of the two country's seemd a realistic option.

Anyway, the majority of Moldavia's population have Romanian as mother tounge and in Romnaia they are mainly considered as Romanians "dincolo the Prut" (over the Prut). The canon of the Romanian national history treats these territories and its inahbitants - even well before the emergence of the modern idea of the Romanian nation - as part of the nation. Romania was and still is very active in identity politics, provides students with scholarships, theoretically makes it esier for Moldavians to acquire Romanian citizenship and there are even political forces (today on the fringes of the political spectrum, but only a decade ago with more substantial popular support) demanding the annexation of Moldavia to Romania. (As I was in Bucharest last weekend I saw stickers depicting Moldavia as part of Romania.) And Moldavia is clearly a very special area for Romania's foreign policy, they are interested in the success of pro-Western (usually it also means pro-Romanian) political forces.

But Moldavia is a society divided nationally, along "class" lines, linguistically or according to the differene between rural and urban spheres. Only a minority of the population claims to be "Romanian" the majority opts for another term "Moldavian", even if their mother tounge is Romanian. Besides we can find significant minorities - the Gagauz has their autonomy as well, and Ukrainians -, and the Russian is a real second language of the country. (For example Russian TV and radio stations, magazines, newspapers has a broad audince in Moldavia, sometimes larger than Romanian ones.) To make the problem more complex, Romania has no good relationship either with Russia (the present head of state was propelled to power by a popular movement preemptively making impossible any electoral fraud at the presidential elections in 2004 and many Russian leadres saw it as part of the coloured revolutions, while Basescu, the Romanian president is among the most active supporters of Georgia and its anti-Russian president), or with Ukraine. (The International Court in Hauge recently settled a territorial dispute of the two countries regarding the rights of exploitation in the Black Sea area; Ukraine constructed a channel for shipping in the Danube's estuary, border zone between these countries, that Romania took as violation of its territorial integrity; the Ukrainian governemtn pursues recently nationalistic policies regarding minority schools and it hit the Romanina minority in Northern Bukovina, once belonged to Romania as well.) The resulting divergence of interest just aggravates the conflict, as Romania is not able to ally itself with Ukraine against Moscow's influence because of the differences, Romania is always suspected to pursue its own particular interests even if it poses as member of the EU etc.

The most important internal division inside Moldavia is certainly the difference between the countryside and the urban areas. The communists scored their third electoral victory ina row, this time polling at almost 50% of the votes. Although many claim that it was the result of a fraud, international organizations initially declared the process as fair and democratic and strong evidence suggests that communist perheps only needed some minor "engineering" of the elctoral will in order to achieve the vital 61 seats in the parliament.** (61 votes from 101 is needed to elect the new president.) The party is very popular in rural Moldavia, and although the mood of Moldavian's is characterized by a very strong disappointment, disillusionment and the lack of confidence in the system and in their future in terms of standard of living, paradoxically their majority place their trust in the communists. On the other hand the majority of the urban population and the younger generations want profound change, first of all a credible perspective of European integration. It is not really surprising in the light of the fact that hundreds of thousands of Moldavians are working in the EU and sending their earnings home. The relationship with Romania grew in importance after 2007, when the country joined the EU and it led to the severing of connections with Moldavia, especially due to a new visa regime, obliging Moldavians, earlier unproblematically entering the territory of the neighboring state, to apply for visa. many legal or illegal workers, students attending universities in Romania were caught by the new system. As Romania is the EU and a kin-state for many Moldavians (especially for the younger generations, target of two decades of Romanian identity politics, maybe this is the first generation in half a century that was raised as Romanian in Moldavia) it makes it even more desirable. Meanwhile rural Moldavia remained indifferent towards the Romanian idea of nation and supports the communist party either as the most socially embedded organization, or as the party providing them with a minimal security in their everyday life or as representant their Moldaviansim, even if it is not so refined a concept as the Romanian nationalism, especailly as it is defined by not being the Romanian national idea.

It is important to stress, that Moldavia was not part of Romania during the decades of the realization of the project of the nation. After 1918 it remained a very problematic province, with peasants suspectedly very receptive of bolshevism, social unrest, revolts, an ethnically mixed population and without a web of strong civic and national institutions. The Romanian rule lasted only for two decades. Accordingly it is not astonishing - and certainly not a result of Soviet "de-romanization" policies, as many Romanians claim - that many Moldavians are not keen on embracing Romania. And the communists can use this feeling very cunningly.

Yesterday's conflict was one of generations, different social spaces and even national feelings or ideas. It is certainly not a coincidence, that the protesters planted EU and Romanian flags (probably almost identical for many of them), while the communists denounced the actions as a coup d'etat initited by Romania. (The president today described it as the absolute humiliation of Moldavia's beloved independence.) But at the same time they use a well known rethoric inherited from the period before 1989, patronizing the society, denouncing hooligans and vanadalism, depicting themselves as generous rulers, because they didn't act violently even though it would have been justified and lawful etc. Today Moldavia's communist are still stronger (especially as they can pose as defendrs of almost every social or ethnic group threatened by Romanian nationalism) and they seemingly begin a wave of retribution (the Office of the State Attorney in Chişinău announced the beginning of a trial because of an alleged coup d'etat tomorrow) in order to intimidate the opposition. The new generations were influenced by the new national feeling. It is far from being non-exclusivist (its foremost premise is that Moldavia is a Romanian country, not only linguistically, but historically as well), leaves not much space for non-Romanians in Moldavia and denounces the supporters of communists as Russophiles and lacking the necessary moral basis. It is not quite ready to accept that Moldavians can identify themselves as such instead of Romanians and Europeans and therefore they - democrats, Romanians, westernizers - can be in fact a minority. But as the communists applied a refined but authoritarian method of governing the country, it was one of those not so rare moments when nationalism showed its democratic face as well.

* Meanwhile another explanation for this act emerged: deliberate provocation of the communists. Even some photos surfaced showing two youngsteres planting an EU flag while viewed by a policman from very close. I can't decide the issue sitting here, but as the mass for example sang the Romanian national anthem (a song about the awakening of nationally opressed Romanians) it is clear that one of the driving forces if the demonstations was Romanian nationalism juxtaposed with the communists rule.
**Yesterday, at Thursday it seemed that the final result would only bring 60 seats for the communist party.

Friday, April 3, 2009

A week later - today's world as seen from Bratislava

Things are changing with an aunexpected pace in Slovakia as weel. Only a week after the serious lecturing delivered at the adress of Hungary the SME begin to relize that the problems looming over Slovakia are in fact larger than expected. Today they published an article with the title "The budget in state of an heart attack". The tone of the piece is substantially different from earlier one and it prophesizes that without major modifications (that means cuts on expenses) the deficit can reach a level the dubble of the forecasted. The resons: the collapse of VAT incomes, the loss of revenue from corporate taxes, the relatively high sums paid out for "stimulus pacakges". The danger: with a higher deficit Slovakia won't be recieve financing and investment from abroad, as the example of Hungary shows. The conbclusion: Slovakia need to adjust its udget to the circumstances and cease with the practice to give for everybody who raies his hands.

But the SME was not deviating too far from its earlier opinion. Although one could think that it is a profound change, there are signs contrary. The perceptible intention is to attack Fico, who is fra from being beloved by the liberal newspaper and as we can see the usual "Hungary-complex" remained, only to be reversed, this time put forward as a threatening example of collapse. But as things are going forward we can expect further changes as well.

Thursday, April 2, 2009

Under the surface: normality?

Well, as I was writing long and boring posts in the recent weeks, considering problems not in line with my capacity to resolve and dealing with serious problems of human society (once again far from offering any viable solution) this post will be "something completely different". Even not really related to the crisis, or if it would be the case, only showing the flip side of the coin, business as usual. But "in the context of the worst economic collapse after the Great Depression, amidst the meltdown of hard won achievments of two decades of unfinsihed transition" such stories certainly can reveal that my seriousness in approaching the events, readily embracing its dimensions as age defining is not the only possible way, and perhaps not the most rewarding.

The SME published yesterday an article, reporting the foremost problem of Slovak dairy industry: the inflow of cheep and supposedly poor quality Polish "bryndza"! (Bryndza is a product from ewe cheese, cheese from cow's milk and butter, the former ingredients grated and mixed with the latter to make a homogenous, very spicy, somewhat bitter and acidic material, to a certain extent similar to cottage cheese made from cow's milk. It is very popular in Slovakia, another variant in Romania and it has many consumers in Hungary as well.) The Slovak producers are complaining that the Poles use only 30% ewe milk instead of the 50% usual in case of Slovak "bryndza". The Polish product is sold under the name "Tatranska bryndza" (bryndza from the Tatry Mountain) and as the Tatry (a part of wich lies in southern Poland)is a symbolic landscape for Slovaks, it is a not too subtle but certainly effective way to mislead consumers, who should be proud of the millennial production of this product.

Otherwise the story is quite typical, someone is cutting under others prices on the market, the consumers can buy cheaper product (and in the crisis it can easily be an important factor in their decisions regarding the type of "bryndza" they buy) and producers try to counteract not only on the market, but with such stories in the minds of their consumers. Business as usual?