Sunday, May 31, 2009

Reminiscences of Ancient Syria? - turncoat economics

It is always flattering when economists regularly expressing their views publicly and supposedly with high authority support one's ideas, even if only unconsciously as they very probably never ever learnt of those. Therefore it is highly understandable if I was very proud of my smart ideas hearing that such an excellent economist as László Csaba (not to be confused with Csaba László, former minister of finance), professor at the Central European University and someone who is not only regularly sought by the media as expert but who also accepts this role and attends different TV and radio shows and gives interviews almost every week, echoed some of my thoughts. The opportunity was provided by the presentation of his new book(s?)"Crisis in Economics?" and in this task he was sided by another renowned expert, Péter Ákos Bod, former chairman of the Hungarian National Bank.

According to Csaba's opinion the crisis brought with it a wave of self-fulfilling pessimism and the real task would be to fight these jinxs as everyone knows that the crisis will have an end. Regarding the fate of economics as a science he didn't dare to make a judgement whether it is in crisis or not, but listed the problems and challenges economists are obliged to encounter. The presumption of absolute rationalism of actors, the capability of the markets for self-correction and the position of the economists as omniscient technicians of the societey, so willingly embraced by many, will certainly be doubted. He can even imagine that the present crisis will be a starting point for a paradigm shift as well. He denied that the road of the ECE countries towards convergence would be identical differing only in the starting points and maybe in their speed. In these assumptions and presumptions he was supported by Mr. Bod.

I won't say that such a set of ideas could not be consistent. But recalling Mr. Csaba's public performance from the last few monthes this book is a complete U-turn. (Just a short collection from the first few pages of a googled list, unfortunately in Hungarian.) He was convinced even in this February that the crisis is not an economic one, rather a financial, he prophesized that there won't be significant contraction. Moreover, he belonged (and still belongs) to the group of economists self-puffedly sitting in a studio and expressing their opinions peremptorily, never expressing reservations regarding its validity, never allowing that other views could have at least some minor relevance. As for the content of those views and proposals, Mr. Csaba never ever expressed something different from mainstream neoliberal ideas, he was always a champion of a smaller state sector, lower taxes and lower social spendings and among his arguments, clearly thought to be irresistible, always hinted to the example of states like Slovakia or Romania. (At least for me it is quite different from the idea of every ECE country having its own path towards convergence, even though in this case Mr. Csaba only wanted to fend off the opinion that the present crisis started outside Hungary and not inside.) To sum up: Mr. Csaba was not only always convinced of his own superiority as an expert, but he havn't got the slightes doubt regarding the mainstream model of economic policy and models and he proved to so overconfident that he dismised the idea of a world economic crisis even three and a half months ago, and attributed the situation in Hungary solely to the faults of its governments.

Everyone has the right to change his opinion. But it would be more credible if he would have been able to spell out some words expressing his sorry over his failure as economist in the recent past, describing clearly the points he reconsidered and not posing continously as the greatest ever Hungarian economists. It would have been made the book even more credible, as one can hardly believe that a serious work (not simply seeking easy publicity and money with a trendy topic) on such an important and complex topic could have been finished in three months (as Mr. Csaba held the opposite view that time) with all the necessary thorough editorial work as well.

I wouldn't waste any words of substance on Mr. Bod whose only considerable contribution to economics was his proverbial and long remered role played at negotiations with taxi drivers blocading the country in 1990, when he was more eager to satisfy his "biological necessities" than to bring the negotiations to a reassuring end, and who is a well-embededd member of the chorus of economists suddenly discovering themselves as non-neoliberals and meanwhile promoting the idea of a low tax, low redistribution, small-state economic model.

Update, 5. 8. 2009.: I have to admit, that I was not entirely fair with Mr. Csaba, but I was only following his public appearances and presumed that he is formulating the same opinion in his scientific texts as well. Now it turned out that he called for attention to the so called new populisms in the flat-tax economies (among them Slovakia), a phenomenon he characterized the politicians willingness to please the entrepreneurs with everything (low taxes, deregulation etc.) and making a fetish from the growth in a paper presented at a conference in March 2008. But as soon as he appeared in a radio or TV studio (and he made it fairly often, in almost every second week) he suddenly forgot about his scientific results and was like a robot, always repeting that Hungary has to cut taxes, spending as Slovakia and our regional competitors made earlier. So, the conclusion: he is not necessarily silly, he is simply mean and unprincipled, in his role as public commentator simply following political aims.

Sunday, May 17, 2009

A new migration period? - Fears and future of the East

The fear from a mass immigration from the East to the West was always prevalent since the EU accession of the countries in the region became a certainty. Its intensity never really diminished and it surfaces again and again, even though the recent years didn't proved it. For a certain extent quite the contrary happened, the migration was beneficial for both the destination and the country of origin, at least in the short term. But as the intention for migrating is not lower than it was some years ago one can consider it a structural phenomenon in the architecture of the EU, at least for the time being, and with lasting impacts on both the integration and the respective countries.

The main source of and reason for migration from the East to the West is very simple: the possibility to work and earn money, more than it would be possible at home. For a while the system is beneficial not for the countries receiving the wave of migrant and benefiting from the relatively cheap labour, but for the countries in the East, where the bulk of those who try to make a new fortune in the West invest their earnings and savings. Mainly in real estate, but a part of them even start new enterprises as well. But there should be one underlying assupmtion in order to preserve this behaviour: the huge differences have to became more moderate with time and that way enable he migrants to return home and live on their earnings there. (Well, again I know that the whole phenomenon is more complex...)

As far as the accession countries are concerned this last, important precondition was not realized yet. Although for a moment it seemed that soaring wages in some countries (Poland, Romania, the Baltics) can somehow attract the emigrées to return, it proved to be artificial. The raise of wages without the corresponding increase in productivity hurted the competitivity (it was caused by shortages in labour), while the flow of migrants was turned back (at least partially) by the effects of the crisis in the West, that led to the loss of low paid jobs, in a large proportion filled by migrants from the East.

Up to this point it is a rather an ordinary story with ups and downs and I'm not really keen on putting forward the issue of migration and migrants in that context. My aim is to emphasize the structural importance of the phenomenon in the
EU and its significance for its future. As the main reason behind the movement of labour was the huge differences between parts of the EU in a sense it was nothing else than a way to handle the tensions arising from the fact,that the market in Europe is much more integrated than the economic policy and the social systems. While the respective countries in the East were compelled to race for investemnts with relatively cheap labour and it meant low taxes as well, the inflow of money from the West was the only way to raise the standard of living significantly, not only for those in the working age, but for those in the pension systems, as the income for elderly peaple was ridiculous and terrifying at the same time in many cases. On the other hand the migration was in effect a way to deprive those countries from a considerable part of their workeforce, and even if it was not necessarily deliberate, it was an inherent consequence of the accession and the architecture of the EU.

The real problem is, that the countries in the east, even now struggling with the process of ageing, having no good prospects for their future composition of the population in terms of the ratio of active and inactive population are not in a position to make investments in sectors with higher additional value of labour, and there is a fair probability that they will be trapped in this process. They can't provide their population with even the minimal social security (there are countries with an avarage pension at around 100-150 euros per month!) and they could only rely on the migration and the resources sent home by those working in the West. On the other hand migration diminishes the reserves in workforce and soon leads to labour shortages resulting in the raise of wages, unsustainable in terms of competivity, and/or immigration into these countries, very probably leading to social tensions. Moreover, in order to keep the remaining workeforce throgh investment they should provide further tax cuts for companies investing in those countries, eiher for lowering the cost of labour or in the form of a low corporate tax rate. It is almost certainly a vicious circle.

On the other hand migration is not necesserily means of making those countries even poorer subconsciously. The migration can be a way - in this case also not necessarily deliberately - to compell member states to set up a kind of common, or at least harmonized social security system. For the time being migration was only prevalent among those in the working age. But it can evidently lead to the complete failure of the new member states what is a pressure on the whole community and on the other hand there can be a second wave of migrants, this time elderly ones, who are discontent with their situation and perspectives in the respective eastern social security systems and who has a right to settly in the EU anywhere. (Anyway, cynically speaking, as long as the politicians from the West and the Commission urge the Eastern countries to rein in social expenses it also implies that living on 100 euros per month is possible and decent, in compliance with the values of Europe as being an ever growing area of prosperity and therefore the 100 euos pension should be regarded as enough to settle in any other country.) If such a pressure would arise it would simply turn the process, this time the east not exporting the benefits of migration, but the negative effects, and not only in terms of budget expenses, but in terms of social tensions.

It is not a predestined story, of course. But it is certainly among the possible outcomes of an integration where there is no will to resolve the largest divides between new and older members. And as the integration of the capital markets benefited - maybe disproportionately - the older members, the integration of the labour market (more precisely the principle of the free movement of people) could benefit the new member states' population, although in a very peculiar way, clearly distoring the initial intentions behind it.

Saturday, May 16, 2009

I'm so insecure, or am I not? - The next enunciation from Romania's Master of Economics

Traian Băsescu, Romanina's able president whose expertise in economic matters was so obvious regarding the teachers' salary affair (covered in two earlier posts) was today once again in a gracious mood and offered his views on the GDP data realeased yesterday. He chose as the most suitable spot for such an act the Congress of Student Unions.

The president told his audience that despite the sharp decline on a year on year basis he was not certain whether the economy is in recession or not, neither could he confirm that Romania would be in such a state offically (i. e. GDP contraction was registered in two consecutive quarter on a quarter on quarter basis), and it is even less possible because teher were clear signs of recovery in april. But on the other hand he couldn't say whether Romani will be in recession in december or not, he could even imagine solid grwoth for this year, but ... One can imagine, just one typical sentence from the discourse in my rough translation: "According to our estimations, on wich I can rely, although it is not certain, I can transmit it to you only as an information, we begin to get out from recession, but in no case would I say that Romania is on its way out from the crisis." Isn't it nice?

Otherwise one can point out that the only reason that Romania's state of economy is not declared officially being a recession is the peculiar waay their statistical office publishes data: they never estimate GDP growth on a quarter on quarter basis. It is not impossible that using this measurement the data on the forth quarter in 2008 would have been signalling contraction.* Moreover, one can wonder what kind of signs can the president cnsider as signs of a brigther future arriving soon? Some modest growth in economic sentiment? It is only sigalling a slowdown in the contraction and not the beginning of postive growth. And even a very modest growth in the production on a month on month basis would mean no positive estimation of the yearly GDP due to the high growth rates in last year. This was exactly the case in March regarding the construction sector... All in all we can again view politicians leaving honesty in order to get electoral support. But at least this time the president was not capable to use the very subtle nationalism of the competition rethoric. Although Romania at the moment is in front of the pack downwards the slope...

*Ok, I was to generous in my estimatation of Mr. Băsescu. The communicate from the National Statistical Office is quite clear: "În trimestrul IV 2008 s-a înregistrat o reducere a Produsului intern brut faţă de trimestrul III cu
3,4 procente.
" In the 4th quarter of 2008 the a 3,4% decline of the GDP was registered compared to the 3rd quarter of 2008. It was again a lie or just the usual idiocy from Mr. Băsescu;

Never say reform again? - Despised words and obvious bias

The release of the GDP data gave an opportunity to quickly assess the situation in ECE and Reuters did it with an article yesterday. Although the piece is not unbalanced, it has some peculiarties in it, showing incoherence in the picture and the argumentation. (Although it is rather a report then a text expressing opinion, the concluding remarks disguised as a citation from Katinka Barzych, clearly shows the preferences of the authors, more reform is needed in ECE.) Especially the part about the two types of ECE economies is lacking any real factual basis and can only be interpreted as a sign of an effort of those analysts who visibly failed as experts, to uphold their views and their personal legitimacy. After yesterday's data it is really questionable to make a significant difference between so called reform countries - Poland, Czech Republic and Slovakia - and "reform laggards" like Hungary or Bulgaria (!). Especially in the case of the latter, where not only a budget surplus was achieved - that means having had more restricted public finances as in any of the above mentioned reformers, but that was also praised as a booming and investment and business friendly country. Other telling fact is the lack of Romania from the classification, wich was again pointed out as a model for the reform laggard(s)... Maybe it would have been too much even for our experts to qualify Romania as having brighter outlook after the country registerd the largest contraction outside the Baltics?

Even more contradictory is the classification of the Baltics. For years those countries were considered to be among the most reform oriented, most business friendly ones with flat-tax systems and budget surpluses, low redistribution rates and social expenditures,* while Hungary as reform laggard - implicitly even in the above mentioned article - was criticized because of its "high" social spending. The fate of the Baltics, simply dosn't fit into the framework of reform countries having a good chance to emerge early from the crisis, and I'm convinced that it completely undermines the whole argumentation. Moreover the "experts" expressed their views that countries relying on strong export oriented industrial sectors will have an earlier recovery, due to growing demands in their export markets as the recession fades. But the reform laggard Hungary has one of the strongest export oriented industrial sector that in itself performed quite well even under the strains of the restrictive fiscal policy of the recent years, with huge growth rates in production and export as well. Why do these so-called economists think that Hungary's export oriented companies wouldn't be able to use the growing demand in order to expand their production, especially as the country's public finances are in a significantly better shape then two years ago? And why do they think that the Slovak industry relying heavily not on a differentiated range of products but on three car producing companies will experience a growth similar to the one seen in the last years? Can they ensure that the demand for cars will remain the same? Can they predict that consumers will have the same amount of money to spend and will look after the same goods at the same amount? I would call it voodoo economics rather than expertise... Or, even worth the complete incapability to pose the right questions.

The similar effects of the crisis in ECE and the contraction far worse then expected in countries earlier expected to fare better than "reform laggards" can be a sign - besides showing those experts in their completely miserable condition - that the very model of growth implemented in these countries after the change of regime reached its limits, especially as the integration of the financial markets deprived the fiscal policy from its means to controll and influence the outside flow of capital.

Despite the possible objections and the important questions looming over ECE even if "experts" do not dare to ask after them, they sole advice is to continue reforms. Although the crisis and the events in the Baltics even before, revealed that the economic model so wholeheartedly advocated was not capabale to fulfil any of its promises - sustained and fast growth, growing incomes at the individual level, fast real convergence to Europe - they are sticking to these ideas. Peculiar. And not only peculiar. Sometimes it is complete blindness. Nigel Sharing expressed his opinion that: "“The Baltics have proven that they are flexible enough to carry out these reforms and wage cuts. The only danger is that public pressure could grow due to the rounds of budget cuts.” But it s a contradictio in adjecto. If the Baltics already prooved its flexibility then no danger of the abovementioned kind should exist. If such danger exists then the Baltics has not proven anything of its flexibility. Moreover, the political developments - recently the Estonian coalition practically collapsed, the rightist parties look after new possible combinatitons, excluding social democrats - shows that the pressure is growing. Why not, one should ask? It is not only the course of events to be expected in an economic crisis, but at the same time reveals another important part of the problem. The much advocated model ensured fast growth - at least seemingly and certainly only temporarily - but at the cost of social cohesion, with growing inequalities. Why shouldn't societies opt for a moderate growth - especally as the sustainabilty of the 6-7-8-9% rates in the medium term are highly questionable, at least after the recent crisis' experiences - instead of a faster one menaing only real convergence to Europe only for the highest 10% or 20% of the respective societies. Sometimes there is a reason behind the development that the phrase reform is more and more despised in some ECE countries...

Oh, and the Slovak press was once again true to its traditions. The SME summarized the Reuters article with the following title
"Reuters: Slovaks made refomrs, Hungarians didn't. We can see the result" Yes, we can see. Slovakia is falling from a higher cliff into a deeper canyon?

*A recent rankings of competitivity of individual economies, based on the data from 2008 (!) provided by the IMD Business School ranked the Baltics still higher than the other ECE countries, despite a huge loss of position compared to the previous year....

Friday, May 15, 2009

Doomsday or the truth revealed? - Q1 GDP data released...

It is almost official - Slovakia is always keen on overtaking Hungary either towards heaven or hell. The official (although preliminary) data on the economic growth in the countries of Hungary, Slovakia, Czech Republic and Romania is out. Every one of them was much better then the landlside experienced in the Baltics ranging from a 12,/% to a 18% year-on-year, but neither was very rosy. The Hungarian one 5,8% seasonally adjusted is slightly better then it was expected especially as the range of predictions/forcasts (or rather guesses, sometimes even bets) was between 5,5% and 10%(!). The other three publications were equally surpirsing, Slovakia with 5,4%,* Czech Republic 3,8% and Romania 6,4%. In these cases the data was far worse than it was expected, the contraction being twice or three times faster than predictions/forecasts (or rather guesses, sometimes even bets).

The conclusions? The situation is not rosy (ok, it is dire) but ECE is more homogenous than the "analyts' and "economists" were ready to admit. The predicted differences are less pronounced in terms of GDP contraction and if one compares the decline of the GDP with the year on year datas from the 4th quarter of 2008, then it is quite clear that Hungary, the economy of which fared worse in 2008, performed relatively better, not that it has any real significance among the present circumstances. The important issue is that those countries that were presumed to be more resilient either because being in the Eurozone and/or having a supposedly better tax system making them more competitive in the eyes of so-called analysts and economists underperfomed their forecasts. Those factors that were considered to influence the economic processes were seemingly not really importante in determining the economic contraction's pace. One can even dare to assume that they played no role in it. The broader framework of the world economy determines the fate of ECE not individual country's responses.

Moreover it is another question mark regarding the expertise of the analysts, who have a great influence on the image on the individual countries - conferring and/or conveying the opinion and judgment of the "markets" about those economies, and that way sometimes even deciding whether those will be financed or not - sticked to ideas clearly not really having roots in the present reality, namely that every country is an individual case and the main reason behind the depth of the crisis is the respective economic policy.

Otherwise the competiton is not finished. Slovakia is on the heels of Hungary and Romania is already leading the pack. Beware Hungarians...!!!

*Update: according to figures at the website of the Slovak Statistical Office the seasonally adjusted data for Slovakia was in fact 6% decline, that means even higher than the respective Hungarian one.

Thursday, May 14, 2009

Uspide down - Tax cuts, free market and distorting subsidies

Recently I was pondering the idea that the practice of tux cuts (more precisely cuts in the contribution to social security payable after the salaries) represent - at least in the context of the European Union - a kind of - reversed - state subsidy for companies and that way not only being distortive in the free market but implicitly contrary to the basic ideas of the Union. Of course one should presume as a starting point that the tax-free economy never existed and therefore we could and have to compare the effects of such moves to the existing conditions in Europe and not to the highly idealistic concept of the tax free economy as the less distorted and less regulated , as a consequence the real free market economy. But this premise is the easier to accept because it would be not only ahistorical to make this comparison with a theoretical concept never ever realized, but it even would violate such ideas as the theory of comparative advantages, not really foreign from the theory of free market.
If one takes the EU not as a conceptual phenomenon but as a historical entity integrating earlier separated markets than in every given moment the integration is nothing else than a single market in which different - national - regulations can be considered as inherent elements of its architecture and therefore being a factor in determining comparative advantages. This approach - and the acceptance of the idea and ideal of the EU itself, the concept that it is a market where every single actor competes with everyone else - allows us to consider taxes and other contributions as factors of individual choices regarding decisions of production (what, where, with what kind of factors of production etc.) . If we can rely on the idea that every actor is rational, than the differences of the taxation systems will be part of those choices and therefore the distribution of companies and production throughout Europe will be the optimal one considering every factor. (Well one weakness of the argumentation that it is not quite clear from which date can the EU be treated as such market, or is it possible at all at the moment. But let's assume that since the Maastricht Treaty it is in fact a really dominantly common market where every actor has a horizon beyond the national economy and the differences in national regulations constitute elements of this common and single architecture causing comparative advantages.)
The key is whether we accept the idea of an existing common market, because in this case every change - achieved not at the European but on a lower level - affecting the architecture of the market distorts it, because it modifies the equilibrium. Every tax cut distorts the market, disfavor companies whose earlier decision was quite rational and in line with the common market's characteristics, while favors companies whose earlier decisions were poorer. (Once again one can assume that the different tax systems in themselves signal the non-existence of a single market, but at least equally feasible is the perception that the lack of customs and harmonized regulation frames a market and not taxes.)
But the phenomenon is even more interesting in the special case of Hungary, where the main idea at the moment is to lower labor costs in order to make hiring new workforce more attractive for SME-s. The peculiarity of the idea lies in the fact that these companies - while contributing to the GDP with a forth of it or so -, uses at about 20% of the allocated capital and employs almost 70% of the workforce. Anyway it is rather the lack of capital that restricts their expansion and not the lack of workforce. (One can imagine the productivity figures with these factors.) It is quite possible that the new employees will have a zero or negative marginal product, what means that the tax cuts will effectively subsidize production otherwise bringing not profit but losses. That's the textbook example of distortive subsidy, I would say...
Well, I know that thing are not so simple as I presented above. Moreover my definition of a single market is not incontestable. But otherwise I would hypothesize that even in other concepts of the single market tax rates and systems would converge to each other in a similar situation - because of the competition for investment etc. - and not to zero, as it is the case in today's Europe. Or is it not a strange process?

(I know that once again there is nothing revolutionary in this post, but it was a self-pleasing activity to provide the argument and I'm a sinner in this regard.)

Wednesday, May 6, 2009

"I was not lying, I'm only idiot" - scene two of the teachers' salary saga

The story of the law raising teachers' salaries in Romania rolls on. The president, Traian Băsescu, after admitting a mistake yesterday was possibly warned by his spin doctors that it is dangerous to assume responsibility. As a consequence, at the evening he began to manouver in order to put responsibilty on anyone else. According to his new explanation it would have been strange not to promulgate the above mentioned law - even though the government insisted that it is practically impossible to realize, or only with a serious imbalance of the state houshold - while the National Statistical Office and the IMF predicted economic growth for Romania for 2009.

Apart from the usual deception in political communication one can once again highlight the fact how the idea of exceptionalism and singularity prevailed and prevails even over common sense in ECE. Although many "anaylsts'" forecasts ultimately turned out to be quite far from reality, to accept the idea that a country in wich growth depends on consumption based on the money sent home by guest workers in countries heavily affected by the crisis (Great Britain, Spain, Italy!) and on a housing bubble - a classical one, an appartment in a block of flats in Bucharest, built in the '50s was more expensive then a newly built flat in one of the most prestigious areas of Budapest - would not be influenced by the world ecenomy's events was simply idiocy, even if it was shared by so called experts as well. And it was clearly not independent from the fact, that it was tempting to use as a political leverage the fact that the countries seemingly hit by the crisis was "arch-enemies" of Romania and in this sense falling behind the own country, reinforcing the feeling that everything goes right in this state.

Tuesday, May 5, 2009

"Read my lips, I'm lying" - electoral promises and harsh realities in Romania

Romania, until recently a beloved model country for "economists" and "experts" and "analysts" in Hungary, is getting nearer to social turmoil. Not that it is expected in the nearest future and as I was there recently there was no visible change compared to timexs of "normality", when the rapid growth generated by the supposedly very simple tax system - at least according to the above mentioned categories of human beings - made it one of the "threats" for Hungary's never existing frontrunner position.

But the crisis didn't let Romania unaffected and as the consuomtion is declining, the housing bubble is ended, the guest workers in the EU countries were laid off and try to live on unemployment "benefits" while the government, in order to control the budget deficit made cuts once again reducing consumption earlier fuelling the economy Romaina arrived into the next stage of the deathly spiral: more budget cuts are needed. The real problem - at least for the politicians at the moment governing the country - is that these cuts will affect some categories whose votes were almost literally bought at the last elections, first of all teachers, whom these parties not only promised 50% raise of their salries, but they even passed a law, against the will and objection of the incumbent minority government of the liberals and the Hungarian minority party. Now the country's president admited tht it was a "mistake", but he defended his earlier position and action with the argument that in last October, when the respective law were voted, he could not have foretell that the crisis will affect Romania and the state budget will be in so dire state as it is.

I wouldn't say that it is a refined position, especially the knew-nothing part, but maybe it will be somewhat effective in political and electoral terms. (Romania's parties are not only preparing themselves for the upcoming elections to the European parliament, the more important prize is the seat of the country's president,m up for grab this autumn.) Otherwise, if someone considers this statement, there is something more substantial behind it tha the usual "politicians are always lying, but they are rarely compelled to admit it" phenomenon. Romanian politicians were able to veil the sour reality relying on the refined nationalism of the "every ECE country is an individual case" approach for this aim. As Hungary was forced to apply for an IMF loan they could have pointed out the huge difference between that country - for a while treated as the sick man of ECE almost universally, that way reinforcing the attempts of the local politicians - and theirs, for a long period described as one of the new "miracles" in the region. As the Hungaians were portrayed as solely responsible for their own fate, denying any similarity - not to speak of structural sameness - to the situation of other ECE countries it was easy to fend off counterarguments warning of the dangers of such a move.

But the necesity to admit this political lie and the reaction of the teachers - a strike in order to impede pupils to write their baccalaureate - reveals something else as well. Many people in these countries - always unobjected by those influencing the public discourse - percieved the process of European integration and europeanization as a well deserved reward for their transition from a "communism" to "freedom" and identified it with a fast catch up in material terms as well. It was reinforced by the mass migration and travel, as a result of wich more and more people knew the difference of the standard of living in "Europe" and in their countries, perceived as "Europeans". The perception of being European was accompanied with the idea that being European means material well being as well. The visible and sensible tension between this consciousness and the lack of its material elements (or at least the feeling that those are insecure), this duality of officially being recognized as "Europeans" and having very limited possibility to live as "European" is another common phenomenon shared by many in ECE, that makes it easier to be manipulated by financial promises, but easily backlashing on politicians as it makes it harder to make budget austerity accepted by the population.