Business as usual as governments crumble in E.Europe
The Czech opposition toppled Prime Minister Mirek Topolanek’s minority cabinet on Tuesday in a no-confidence vote. Three days earlier, Hungary’s prime minister said he would resign to let someone else pull that country out of its economic mire. Although serious, the developments were far from surprising if complaints about the economic crisis by anti-government parties and disgruntled voters were anything to go by.
In fact, only a handful of governments have ever won re-election in central and eastern Europe since the fall of communism, and none twice. A mid-term collapse is much more common. Now opposition parties ever on the lookout for opportunity — Topolanek’s no confidence vote on Tuesday was his fifth — have the deteriorating economy on their side. But that might also be a poison pill, particularly in countries like Hungary or the Baltics, where whoever holds sway will have to enact deep spending cuts to level out their imbalanced economies — spending cuts that won’t be popular among the voting public.
And who says those ousted from power actually step aside? Take the energetic Latvians. The country of 2.3 million has run through 14 governments since it quit the Soviet Union in 1991 in a revolving-door style of politics in which the same parties continue to cycle in and out of power. Its new prime minister is Valdis Dombrovskis, a former finance minister, who formed a six-party coalition including the four parties of the government that collapsed in February due to the economic crisis. One of his first actions was to approach the International Monetary Fund and the EU to let his cabinet spend more than originally agreed when Riga took a 7.5 billion euro rescue package last year, a move that has been received coolly by the Fund.
In Hungary, the soon-to-be-former leader of the ruling Socialist-led coalition, Ferenc Gyurcsany, sparked riots in 2006 when he let slip in a leaked tape that his party lied “in the morning… in the evening… and at night” about how bad the economy was so he could get re-elected. Now the economy is much worse off. Budapest had to agree to a $25 billion IMF-led bailout last year, under which it will have to make unpopular spending cuts. The economy will shrink by as much as 5 percent or more this year, according to some analysts. Gyurcsany tried to push through reforms but had to pull back due to public resentment. So now it’s time for a change in government, right? Wrong. Although Gyurcsany won’t be in the driving seat, his Socialists are working on a government with their former ruling partners the Free Democrats. The Free Democrats have called for strict budget prudence, which is exactly what the IMF and economists have prescribed for years, while Gyurscsany will remain the head of his party, with the potential to maintain some power behind the scenes. But the question is how viable any state spending cuts will be with budget revenues plummeting along with growth.
Topolanek’s case is also nothing new. The Czechs haven’t had a strong majority government since 1996, which still didn’t stop them from attracting billions of dollars in foreign direct investment, joining NATO and the EU, enjoying growth of 5 percent for several years running, and keeping their budget relatively in check. And even after losing Tuesday’s no-confidence vote, Topolanek, like Gyurcsany, will seek a new mandate for his party as well. Analysts say there’s only one way out of the situation for “super-deficit” countries like Hungary and Latvia, and that is to cut back. The Social Democrats who toppled Topolanek will want to spend more on social sectors if they can take power, but how far will they be able to go when tax revenues are falling with growth?