www.moderndiplomacy.eu

Attila Marján Hungarian economist, PhD in international relations.Based in Brussels for fourteen years as diplomat andmember of EU commissioners’ cabinets. Two times vis-iting fellow of Wilson Center in Washington DC. Uni-versity professor and author of books on EU affairs andgeopolitics. Head of department, National Universityof Public Administration, Budapest.

Lorina BudaHungarian economist with a research profile of Euro-pean integration. University teacher and PhD studentat National University of Public Service. Worked for theRepresentation of the European Commission in Hun-gary. Author of papers in the field of Eu crisis manage-ment.

09Special Report 09 | April 2015

Modern Mitteleuropa: differences and similarities in the Visegrad Group

Attila Marján – Lorina Buda

www.moderndiplomacy.eu

here are diverse and contrasting in-terpretations and connotations ofthe concept of Mitteleuropa. It

served as an idealistic model for a multicul-tural, multinational region with common fea-tures and geopolitical realities that is situatedbetween the German and Russian powerbloc. The Central-European Federation wasthe ultimate political vision of this line ofthought. This somewhat nostalgic interpre-tation was invented and maintained bymainly the liberal intelligentsia of the lateHabsburg era. There is although another Mit-teleuropa vision of Prussian origin - thatfound its way to mainstream German geopo-litical strategy during World War I. - as a pan-Germanist imperium spreading way intoEast-Europe.

This paper has no intention to engage in theacademic debate on this subject. It choosesthe Visegrad 4 countries as key nation statesof this region of Mitteleuropa in its narrowgeographical sense because of geopoliticalrealities.

In 1335 when the first summit in Visegradtook place, Casimir III of Poland, Charles I ofHungary, and John I of Bohemia had two ob-jectives: to strengthen their economic andpolitical cooperation and to form a regionalalliance to counter the power of the duke ofAustria and of the Holy Roman Emperor.Some seven hundred years later in a com-pletely different Europe regional cooperationstill has a lot to offer but it has had severalimpediments to flourish in central Europe.

T

Modern Mitteleuropadifferences and similarities

in the Visegrad GroupAttila Marján – Lorina Buda

The modern times cooperation in the V4group since its formation in 1991 in a Hun-garian town called Visegrad has had its upsand downs: it almost fell apart in December2003 in Copenhagen when EU accessionterms were to be finalized: a killing competi-tion took place among the four on who getsthe most of the cohesion and agriculturalfunds. The group of four central European EU mem-ber states, if counted as a single nation state,V4 (64,3 million inhabitants) would rank22nd in the world and second in Europe,moreover it is the seventh largest economyin Europe and the 15th globally. Before theintroduction of the double majority votingsystem they together have had equal num-ber of weighted votes with Germany andFrance put together. From November 2014,the double majority has been replaced theold weighted voting system. According tothe new rule the support of 55% of the Mem-ber States representing 65 % of the overallpopulation of the European Union will be re-quired.

The new system significantly modifies thepower distribution by strengthening the in-fluence of big Member States – with a popu-lation of 60 million; Spain and Poland willlose their big Member State status andmedium-sized countries’ - between 2 and 11million inhabitants - voting power will be re-duced dramatically. In the new double ma-jority system the ability of countries withlarge population to block decisions will besignificantly reinforced, while small countries’ability to prevent negative decisions willcome to an end. Germany and France will gain increasedblocking capacities but V4 countries will notbe able to form any blocking coalition anylonger. Even the new Member States joinedin 2004 and 2007 will not be able to block de-cisions under the new system [1] . Neverthe-less one has to bear in mind that thesecountries stand for not more than 5 percentof the EU’s GDP (see graph )

Graph 1 Size of the V4 countries as per total EU GDP

Before a county-by-country analysis themost important features of the V4 group thatdemonstrate the similarities and differencesare worth quoting for a deeper understand-ing of this region:

1.20th century history and the mostly unsuc-cessful settling of its consequences is still adecisive feature of the present of these coun-tries;2.There is no genuine socio-economic, cul-tural and political cohesion among thesecountries. The V4 co-operation is more of anempty shell. This is partly a consequence ofthe troubled past of these region;3.The V4 countries as semi-peripheric statesare not drawn to each other, rather to thecenter of Europe, mainly Germany. What wesee is a modern time version of Mittel-Europaof small export-dependent economieswhere Poland seems to be an exception;4.The Graph 2 nevertheless means that thesecountries are practically the economic sup-ply backwaters of the German economicsphere;5.Still EU membership represents a historicchance of geopolitical stability and eco-nomic and societal modernisation for thesecountries;6.This region needs (would have needed) aspecial political approach from the EU sinceits genuine integration is hindered by factorsthat cannot normally detected and handled(lack of strong civic net and traditions, noself-organising and self-protecing power ofthe society, weakness of civil society, inher-ited regional geopolitical tensions etc.)through the normal EU accession toolbox.

7.Anti EU sentiment or at least a significantdisenchantment is present in the region aswell. This is in some cases such as in Hungaryreinforced by negative government propa-ganda.

Graph 2 Exports of goods and services in % of GDP

Graph 3 Positive image of EU

Source: Eurobarometer (2014)

Source: Eurostat

8.EU regional policy funds (representingthese countries annual GNI’s 3 percent, a newsource of modernisation after the ninetiesFDI vehicle) serve as key growth enhancingand modernisation tools, nevertheless theiruse sometimes contribute to controversialvehicles to strengthen regimes that antide-mocratic and anti-liberal.

9.Although there are very important featuresthat are similar in these countries’ economiesand societal webs, different political drives inthe different V4 countries result in rather di-verging realities. The most pertinent exam-ple is pro-European Poland and pro-EastHungary: the former is about to achieve itsbest geopolitical standing since centuries,while the latter has slipped into a pariah sta-tus from its number one place in the nineties.Moreover Poland started to aim at highergeopolitical objectives such as creating anew Weimar arrangement in Europe[2].

The historically amicable Polish Hungarianrelations froze in February 2015 when theHungarian prime minister went to Warsaw togive an explanation why he had receivedPutin – in the middle of invading a Europeancountry - a few days before. The head of thePolish opposition, the former ideological allyof the Hungarian pime minister refused to re-ceive the Hungarian premier which was un-thinkable before. The V4 countries main motivation for joiningthe EU was to improve living standard. Afterthe accession due to the dynamic growth theGDP per capita increased, however thegroup heterogeneity did not reduce and thecatch-up process is still a very long promise(especially because of the crisis).

Graph 4 Net EU transfers in GNI ratio

Source: European Commission

Although out of the four Visegrad countriesonly Slovakia is member of the Eurozone,they are often seen as a homogeneous re-gion. But despite an often shared history andsimilar economic features there exist signifi-cant differences among these countries.There even used to be significant differenceseven before the collapse of the communism.The regime change, the democratisation, thetransition to the market economy took placein different ways, which has resulted in differ-ent paths of development. Often leaders be-came laggards. According to the World Bankdata[3] Hungary had the highest GDP percapita, but this advantage disappeared afterthe initial power. In the early ‘90s Poland wasthe laggard, and now, ten years after the EUaccession, Poland is the best performingstate from the V4, and not just economically(graph 9) but politically[4] as well.

In 2014 only one country from the four isunder excessive deficit procedure, but in2013 all of them were under the proce-dure[5] . For Slovakia and the Czech Republicthe procedure was opened in 2009 and hadto reduce its deficit 1% of GDP over the pe-riod 2010-13. In case of Poland the procedureis ongoing. The procedure started in 2009[6], but Poland missed the target by 2013,therefore in that year the Commission calledWarsaw again to eliminate the excessivedeficit by 2015 with the following nominaldeficit targets: 4.8% of GDP in 2013, 3.9% ofGDP in 2014 and 2.8% of GDP in 2015[7] .Forecasts present that deficit will reduced to2,5% of GDP by 2015, lower than the Councilrecommendation.

Graph 5 Per capita GDP – illustrating the gap

Source: European Commission

DebtDeficitInflationLong-term interest rateCountry in excessive deficit

49.2+5.70.64.2Yes

44.4-1.90.92.2No

53.6-3.0-0.12.7No

80.3-2.9

15.8No

Poland CzechRepublic

Slovakia Hungary

1. Table Convergence performance in 2014

The Hungarian situation was a little bit differ-ent[8] , because this country was under theprocedure since 2004, the year of its EU ac-cession. Firstly the Ecofin Council called onHungary to reduce its deficit by 2008. Be-cause of the crisis the target could not met,so the Council set 2011 as a new target. How-ever Hungary met the target in 2011, but itwas only thanks to one-off revenues linkedto the transfer of pension assets from privatepension schemes to the state. Since thismeasure is not a structural one, Hungary re-mained under the procedure. After many ne-gotiations in 2013, after 9 years, Hungary’sexcessive debt has been corrected.

The V4 significantly dependent on FDI in-flows; primarily industrial type, which imple-ments technology transfer and expandsexport capacity. The V4 – contrary to any po-litical wishful thinking that has been talkedabout in the region – is deeply integrated inthe EU’s economy, and it has particularly im-portant ties with Germany. Foreign direct investment (FDI) inflows areone of the most important sources of pro-ductivity and product quality improvements.Hungary was the first country in the regionto attract large FDI inflows (partly due to itsfast privatization process). (graph 7) In themiddle of the ‘90s competition for FDI be-came sharper in the region. The competitive-ness of the countries is contrasting. (table 2.)During the last fifteen years many changeshappened. By 2014 the most competitivecountry is Czech Republic followed byPoland. The macroeconomic situation is thebest in Czech Republic, after Slovakia, Hun-gary and Poland[9] . According to higher ed-ucation and training Poland and CzechRepublic are performing better than the oth-ers. Competitiveness is often hampered byill-conceived general and higher educationpolicy, such as the one run in Hungary.

FDI inflows felt sharply after the onset of thecrisis such as investments. The net invest-ments are the best in Poland with the 8% ofGDP and the worst in Slovakia with almost0%, mainly due to the low quality of trans-port infrastructure[10] . In Hungary invest-ments started to grow mainly due to the EUco-financed projects in 2013 after 5 years ofstagnation.

Graph 6 GDP/capita in PPS

Source: Eurostat

Graph 7 FDI flows intensity, % of GDP, 2002-2014

Source: World Bank

Based on the report of the 2015 World Bankreport[11] doing a business is the easiest inPoland and the hardest in Hungary[12] . Theease of doing business is really important inconnection to the competitiveness. The mostproblematic factors are the tax regulationand corruption[13] in all four states. Theworst situation in sense of paying taxes is inCzech Republic and the best is in Poland. Thesimplicity and predictability of the tax sys-tem is undermined by the special taxes[14]in Hungary. Although these taxes con-tributed fiscal consolidation and helpedavoid higher tax burden on labour, in longterm authorities should reduce these taxesand replace them more growth friendly fiscalinstruments. According to the Special Eurobarometer[16]corruption in a broader sense is perceived aswidespread in these countries (82 % inPoland, 89% in Hungary and 90% in Slova-kia). More than half of Europeans (56%) thinkthe level of corruption in their country has in-creased over the past three years, (CZ: 76%,SK:53%, HU:52%, PL: 38%)V4 countries lag well behind the EU averagein terms of innovation capacity. According toThe Innovation Union Scoreboard[17] the V4are performing below than the EU27 aver-age. Czech Republic, Hungary and Slovakiaare moderate innovators[18] and Poland is amodest one, which means that its perform-ance well below[19] the average of EU27.

The economic effect of innovation is not re-ally high either. From the 27 Member StatesPoland is 24th , which means innovation haslittle impact on economy. Hungary is firstfrom the four countries with its 10th place,due to the fact that the contribution ofmedium and high-tech product exports tothe trade balance is high – mainly in the carindustry. Low tertiary education attainmentlevels can limit smart, sustainable growth,hamper productivity, innovation and com-petitiveness. Equivalent qualification levelscan increase the technological progress andthe intensity of global competition.

In every countries from the V4 tertiary edu-cational attainment rate has increased sincethe EU accession, but in the case of Hungary,Czech Republic and Slovakia is still wellbelow the EU28 average. However Hungaryis already exceed its Europe2020 national tar-get, which is the lowest among the countries(30,3%), more measure are needed to ensurequality and labour market relevance. InCzech Republic tertiary education attain-ment has increased to 26.7% in 2013, but itstill has not reached the national target(32%) In the case of Slovakia the 40% national tar-get is at risk[20] , taking measures to increasethe quality of teaching in order to raise edu-cational outcomes would be necessary.

Czech Republic Hungary Poland Slovakia41 33 37 48 199937 60 43 75 2014

Source: WEF

2. Table Competitiveness ranking, 1999/2014

After the collapse of the Soviet Union andthe socialist block, markets of the Polisheconomy vanished. This meant high inflationand a huge GDP decrease. Directly after theregime change Poland started to implementreforms, which helped to reach the state cur-rent position. Different convergence pathscan be explained by the divergence (in senseof timing and nature of the reforms) of thestructural and institutional reforms. In 1999several structural reforms had been imple-mented (education, pension), this is why thecrisis reached Poland in a better positionthan its neighbours. As stated by Mark Allen, the IMF’s represen-tative for eastern and central Europe: „Polandwas able to manage the crisis mainly be-cause of the work the government did be-fore 2008. They didn’t allow the boom in thebanking system and the housing boom toget out of hand. They didn’t run large fiscaldeficits before the crisis. Their debt, eventhough, at close to 55 percent, is a little bithigh by emerging market standards, did notgive rise to concern[21]. „

Following important reforms which havedeeply transformed the structure of theeconomy, Poland has economically inte-grated to the eurozone, caught up steadilywith the EU15 in GDP-per-capita terms[22] .By 2013, the country had achieved levels ofincome and quality of life likely never expe-rienced before. Since the accession GDP in-creased by 48,6% and 20% from this growthwas reported during the period 2008-2013[23] . (graph 5.)Productivity steadily improved[24] since theaccession, and the labour cost per unit hasdecreased[25] . Growth is driven by exportgrowth, private consumption, and infrastruc-ture investments linked to the transfers of EUfunds and the 2012 European football cham-pionship. Poland is a fairly big economy witha large domestic market, which makes it lessdependent on exports.Overall, the fact that Poland – by far thebiggest of the V4 economies - did so wellspeaks not only to its strong economic fun-damentals, but also to good policy manage-ment and sound and well-chosen economicpolicies.

Poland

The results of the economic prosperity of thecountry were used by the Polish governmentto improve the international position of thecountry, which was supported by the coun-try image and international political actions(such as the Year of Chopin, the Polish Presi-dency of the EU, the Polish-Ukrainian jointorganized Football Championship). Warsawis trying to obtain the right position, accord-ing to its growing economic weight, both inthe international and European arena. Tuskgovernment not only was able to stabilizethe relationship with Berlin, but Poland be-came one of Germany’s major allies in the Eu-ropean crisis management.

Warsaw responded to the crisis less sensi-tively than the international standards.Poland was the only EU country where neg-ative economic growth[26] did not occurredas a result of the crisis. Poland added signifi-cant fiscal stimulus during the crisis. This wasone of the major reasons why Poland did notfall into recession during the crisis. The gov-ernment enacted a discretionary fiscal relax-ation of 4,5 percent of GDP and allowed theautomatic stabilizers to work[27] . As a result,the fiscal deficit rose from less than 2 percentof GDP in 2007 to more than 7 percent in2009 (graph 10). Policymakers had consider-able room for countercyclical monetary andfiscal policy, because Poland did not haveany severe macroeconomic imbalances onthe eve of the crisis.

Graph 8 Tertiary education attainment

Graph 9 Real GDP growth rate, 2006-2013

Graph 10 Fiscal deficit, (% of GDP) 2006-2013

Source: Eurostat

Source: Eurostat

Source: Eurostat

Although the Polish government debt has in-creased since the outbreak of the crisis, it isstill under the magic 60% of GDP[28] . Thegeneral government debt-to-GDP ratio fellfrom 55.7% in 2013 to 49.1% in 2014. It is setto amount to 50.1% in 2016. (graph 15)Poland was granted a precautionary loanunder the IMF’ Flexible Credit Line in 2010but hasn’t needed to draw on the funds[29] ,because the government insisted to solvethe problems by structural reforms and cutspending. Significant fiscal consolidationhelped to reduce the deficit and contain gov-ernment debt. Poland’s fiscal framework con-tains a public debt rule which is anchored inthe Constitution and limits gross debt to 60%of GDP.

Similarly, monetary policy was accommoda-tive at first, with aggressive cuts in the policyinterest rate.

Reflect to the excessive deficit procedureWarsaw has implemented some reforms toincrease state revenues[30] : ●increasing VAT rates from 22% to 23% andparallel decreasing the rates for basic foodproducts from 7% to 5%. Limiting the VATfraud: reducing the limit authorising tax pay-ers to the exemption from the obligation tokeep cash register, extension of the reversecharge mechanism and the joint and severalliability of the purchaser for tax liabilities ofthe supplier of steel products, fuel and non-processed gold●increasing social security contributions(through limiting the part transfer red to OFE(Open Pension Funds) in favour of the parttransferred to FUS (Social Insurance Fund) –2011 as well as owing to the increase of thepension insurance contribution in 2012●introducing a fee for exploiting certain nat-ural deposits of copper and silver

Poland Czech Republic Slovakia Hungary23 21 20 27 201522 19 19 20 2008

3. Table Standard VAT rates

Source: European Commission

The abolishing of the early retirementscheme and VAT hikes are the most impor-tant consolidation measures[31] , contribut-ing 1.3% of GDP and 0.5% of GDPrespectively by 2013. In addition, a tempo-rary expenditure rule limiting the growthrate of flexible expenditures will contributesubstantially[32]. The 2014 pension changesreverse part of the 1999 reform, which gaverise to transitional costs as pension contribu-tions were diverted to the mandatory secondpillar. The changes in the pension systemlowered gross general government debt byaround 9.3% of GDP[33] . The 1999 pension reform created a three-pil-lar system: notional define contribution(FUS), pay-as-you-go (OFE) and voluntary pri-vate fund. Poland decided to cut back on thetransfer to the second pillar due to reducethe fiscal deficit. Moreover the transferredTreasury bonds were cancelled and the cor-responding pension liabilities were regis-tered in individual subaccounts in the firstpillar. Therefore in 2014 the transfer to thesecond pillar was scaled-back, this one-offdrop in explains the 5.7 surplus on thebudget. (Table 1) (In contrast Hungary notonly cut the transfers, but eliminated the sec-ond pillar) Due to the individual pension bills, intro-duces in 1999, the amount of pensions to bepaid from the first pillar will decrease dra-matically (to 30-50% of the last payment),and this amount will be lower than the sec-ond pillar’s pension payments.

The Polish pension system reform is likely toreduce long-term debt (table 4), while inHungary the elimination of private pensionfunds in the system increases the level ofdebt. Pension costs make up a large part ofpublic expenditure especially in Hungary, in2060 it will reach 14.7 % of the GDP, which isthe highest among the four countries. (table4)Despite of the changes in 2014 first pillar willstill require further reforms to mitigate fiscalcontingencies. As result of the decreasing re-placement rate pensions will be lower andold-age poverty may appear as a seriousproblem. To prevent this minimum guaran-teed pension was designed, but developingefficient social assistance mechanisms forpoor pensioners stands out as an importantlong-term policy challenge[34] . Hungarian and Polish pension reform dam-aged social trust in the pension system andharmed the credibility of future structural re-forms more broadly. The increased role of thepublic pay-as-you-go system in a context ofrapid population ageing may further lowerfuture replacement rates.

Poland faces long term sustainability risk ofpublic finances mainly related to the pro-jected increase in healthcare spending.Therefore Warsaw is currently preparing anew National Health Programme and a newPublic Health law, to improve this sectorcost-effectiveness.

The other important challenge related to thetax collection or tax administration system:increasing the effectiveness of tax adminis-tration and tax compliance. Poland has thesecond highest (after the Slovak Republic)cost for tax administration per net revenuecollection[35] . The country’s growth in the last decade wasremarkable. (Graph 9) In order to be able tocontinue this tendency further steps will beneeded, such as improving the business cli-mate and innovation capacity of the Polishcompanies. Medium technology sectorsusing cheap and comparatively low-skilledlabour, which can undermine the futuregrowth.

The ratio of Gross Value Added is lower thanthe other V4 countries[36] . Firms with ahigher technological content tend to growfaster than low-technology sectors.

Some of the reforms not involve either sig-nificant budgetary or distributional costs;others are more complex and need betterpreparation. Fortunately necessary reformshave been implemented always. The chal-lenge is not only identifying the needfulmeasures, but to find the way of politicaleconomy to implement them.

4. Table Pension expenditures in % of GDP

% change(2010-2060) 2060 2010

-2.2 9.6 11.8 Poland1.1 11.1 9.1 Czech Republic5.2 13.2 8.0 Slovakia2.8 14.7 11.9 Hungary

Source: European Commission Adequacy and sustainability of pensions

Czech economy started to grow in 2010 with2,7 %, but after the growing tendency theeconomy dropped back. (graph 9) Thanks tothe decrease of the export and internal con-sumption (private and public). Real incomesfelt due to government measures, such asfreezing wages and cutting back allowancesand benefits. Like all the V4 countries, theCzech growth is depending on external con-ditions. The majority of its manufacturing ex-ports are directed to Germany and WesternEuropean countries. The Czech economy ex-ited the recession and started to recover dur-ing the second half of 2013, primarily drivenby domestic demand and growth in exportmarkets. Real GDP growth is expected to bestronger in 2015 and 2016 with the remain-ing main driver: domestic demand. A sharp fiscal adjustment led to an exit fromthe Excessive Deficit Procedure[37] (EDP)and kept debt levels contained, but exacer-bated the recession. The adjustment wasdriven mainly by a compression of capital ex-penditure, partly due to implementationbottlenecks, while an increase in VAT rateshelped boost revenue.

As a result of the measures and also to one-off factors, the overall fiscal deficit narrowedfrom 4.2 percent of GDP in 2012 to 1.5 per-cent in 2013. (graph 10)In 2014 the new Czech government has de-cided to adopt a fiscal policy that aims atkeeping the public deficit below 3% GDPand a reform agenda focussed on promotingexternal competitiveness, investment, ex-ports, infrastructures and quality of publicservices, which were recommended by theEuropean Commission also[38] .

With respect to pensions, the governmentaims to propose to withdraw the second pil-lar, as well as introducing measures to ensurethe long-term stability of the public pensionsystem and an adequate level of pensions.The pension system is currently relativelysuccessful in preventing old-age poverty.Contrary to the Polish and Hungarian exam-ple, Prague not dismantled but created a sec-ond pillar to its pension system in 2013.Although it is a pity that due to the low par-ticipation and minimalized political supportit is going to be demolished in 2016.

Czech Republic

Healthcare spending, cost effectiveness andgovernance in the healthcare sector are wait-ing for optimisation. Czech healthcarebudget being below the EU average. The lackof transparency and data of the public pro-curements are also a problem. Increasinghealth care and pension expenditures due topopulation aging will be a risk in the near fu-ture for the fiscal sustainability[39] . Overall the Czech economy was not hit hardby the crisis. Unemployment has been fallingin recent months and it is the lowest amongthe four countries.(graph 12)

Even so it was improved, there are still prob-lems with the Czech labour market. Due tothe limited use of flexible working time andlack of childcare services employment rate ofwomen remains significantly lower thanmen. Furthermore there are obstacles tohigher female labour-market participationand public employment services do notguarantee transitions from unemploymentto employement. In this field taking moremeasure are definitely needed in the future.

Tax evasion is a big problem for this countryalso, mostly in the field of VAT and excise du-ties. Improve the efficiency of tax collection,reduce compliance costs and fight tax avoid-ance is a challenge for the government. Totackle VAT evasion extension of the reverse-charge mechanism to more goods and serv-ices and a broader definition of theʻunreliable taxpayerʼ status were introduce.In 2016 electronic reporting of sales for VATand income tax purposes and a central reg-istry of bank accounts will introduce to re-duce the VAT fraud[40] . Tax revenue in the Czech Republic still reliesheavily on taxation of labour income due tothe high labour taxation. In 2015 some meas-ures entered into force to reduce these com-mon public charges for working pensionersor families with two or more children. Property taxes are really low comparing tothe other member states, and not linked tothe real value of property. Pollution and re-source taxes are very low (0.02 % of GDP),which does not provide sufficient incentivesfor environmentally-friendly behaviour, es-pecially in waste management.

Source: Eurostat

Source: European Commission Adequacy and sustainability of pensions

Graph 11 Employment rate of older workers (age 55-64), 2013

Graph 12 Unemployment rate, 2003-2013

Slovakia, the former Central Europe tiger, washit hard by the crisis in 2009. It was not be-cause of its financial system, but its exportorientated economy. Tight trade linkageswith Germany and other euro area countriesmean that growth shocks in those countriesare transmitted to Slovakia also via slowertrade growth. The recovery depended on theimprovement of euro area confidence, and itwas driven by the export[41] and domesticdemand[42] . Slovakia is the only eurozone member fromthe V4. The Slovak koruna joined the Ex-change Rate Mechanism (ERM II) on 28 No-vember 2005. On 1 January 2009 Slovakiajoined eurozone with hope it will providesome protection against negative impact ofglobal downturn[43]. . Slovakia faced the fi-nancial crisis with lower vulnerabilities thanother countries. Euro membership alsomeant early participation in all collective cri-sis-related measures and hence much morefinancial and capital market stability.

General government deficit increased afterthe outbreak of the crisis and reached 8% ofGDP in 2009, which has resulted an excessivedebt procedure in the country. Due to thisprocedure many macroeconomic develop-ments happened. Strong fiscal consolidation contributed toconfidence financial markets in Slovakia.However, it has also undercut domestic driv-ers of growth, in particular as public invest-ment spending has fallen and tax rates haverisen. As a consequence of budget consoli-dation, low income growth, stagnating em-ployment, deteriorating terms-of-trade andthe increase in servicing costs of loans as apercentage of income, domestic demand feltback. Responding to the crisis many changes hap-pened. Slovakia also reformed its pensionsystem, but not the way as Hungary andPoland. The general pension fund reform im-proved the long term sustainability of thepension finance.

Slovakia

The reform included automatic increase inthe statutory retirement age depending onlife expectancy, change in the indexation ofpension benefits, strengthening solidarity inawarding new pensions and changes to themaximum assessment base for the paymentof social insurance contributions. Moreoverthe reform introduced the fourth type ofpension fund, so-called index -linked, whoseperformance will replicate developments inone or more stock market indices. The pro-posed change enables savers to divide theirsavings into two pension funds, one of whichmust be a bond pension fund[44] .

Slovakia implemented tax reforms in 2013that replaced the flat income tax with a pro-gressive one[45] , which should promotegreater equity; and phasing out lower taxa-tion of the self-employed should reduce taxavoidance. Furthermore the corporate in-come tax rate has been raised from 19% to23%.

Due to the fight against tax fraud VAT effec-tive rate increased with 2%. VAT controlstatement, compulsory down-payment onVAT were introduces, and inspection on VATaudit[46] were emphasized. According tothe national target of VAT collection effec-tiveness has to reach 72% by 2020, this was53% in 2012[47] .

The implicit tax rate on labour is the lowestamong the four countries, and lower thanthe EU28 average; but real estate and envi-ronment taxes are a problem is Slovakia aswell as the other countries[48] . Unemployment has remained high, and stillthe highest among the four countries. (graph12.) High unemployment rate can under-mine the growth. A significant part of unem-ployment is located in more remote ruralregions with a low population density. De-spite of this fact mobility of unemployedpeople are low due to the high living andhousing cost and weak travelling infrastruc-ture. Unemployment had reached 20 per cent oflabour force in the early 2000s. However,strong growth and convergence brought areduction in the unemployment rate to a lowof 10 % in 2008. Following this, the fall in ex-ports in 2008/9 was associated with a new in-crease in unemployment to nearly 15 percent. Nowadays it reached 12,4%, but it stillabove the EU average (9,9%). The jobless re-covery and the high unemployment rate il-lustrate imbalances in the economy. Themost problematic groups are women, Romaand young people. 60% of the unemploye-ments are low skilled and long-term unem-ployed. Due to its structural natureunemployment rate will remain around12%[49] .

In order to increase employment rate Slova-kia should increase the quality and attain-ment of education, because low skilledworkers and women have particularly lowemployment rates. The high ratio (6,4%) ofearly school leavers, especially for Roma peo-ple, calling for targeted measures also.

Prior to the financial crisis, Slovakia suc-ceeded in reducing public debt levels. Gov-ernment debt has risen sharply since the2009 global crisis and is now running intoconstitutional debt ceilings. (graph 15) Slo-vakia adopted a complex fiscal legislative re-form in December 2011[50] . FiscalResponsibility Constitutional Act introducesdebt brakes, new institutional framework(Council for Budget Responsibility and twocommittees – for macroeconomic forecastsand for tax forecasts), and transparency rules.The purpose of the Act is to, first, entrenchcertain fundamental fiscal rules in the legalsystem, and second to create competencesand obligations for public authorities thatwould otherwise being prevented by otherconstitutional provisions or constitutionallyproblematic or insufficient.

To help plunging car industry governmentalso introduced car-scrapping bonus toboost car sales, mirroring similar subsidies inFrance and Germany. The first wave waslaunched in early March and the second inApril. Government allocated 55 million euroto subsidy purchase of 44,200 new cars[51] .

Export (mainly manufacturing) industrieshave received special attention in Slovakiatoo. Various measures were used to attractforeign direct investors. Automobile industryhas grown almost from nothing in Slovakiaduring the past eleven years, which has be-come the most important exporting indus-try. It gives the GDP’s ¼, and the export’s 1/3.Unit labour costs declined[52] in all majorexport industries between 1998 and 2007.This is in line with the dominating impor-tance of price competiveness for Slovak ex-ports. This export-led growth strategy has also hadits vulnerabilities. The Slovak economy hasbecome strongly dependent on foreign de-mand (graph 14), especially from Germanyand the euro area.

Graph 13 The ratio of trade of machinery and transport

Source: Eurostat

equipment to total export in million EUR

Business cycles in the industries concernedare often more pronounced than in other in-dustries, especially services. As an exampleduring the 2008-2009 downturn the drop indemand was especially strong for automo-biles, iron and steel, and building materials.Furthermore, the export industries have ex-panded are mainly capital intensive, mean-ing that growth of production translatedonly marginally into a reduction of unem-ployment. The focus on large companies increases themismatch on the Slovak labour market,which is characterized by large regional im-balances.

The rapid success of the export-led growthstrategy was also achieved by a concentra-tion on mobile industries which, though theycould move in quickly, could also leave easily,meaning that a relatively minor worsening ofbusiness conditions or cost competitivenesscan result in significant capacity outflows.

However reforms in taxation, pension andhealthcare systems can ensure sound publicfinances, low investments can undermineSlovakia competitiveness and growthprospect, like the high unemployment rate.In these two fields significant changes areneeded.

Graph 14 Share of EU in V4 countries foreign trade, 2013

Source: Eurostat

Hungary’s early “golden boy” status has van-ished. After the regime change the govern-ments were unable to set in motion theeconomy, inflation went double-digit, publicdebt and deficit proved to be difficult tokeep under control, but from the mid-nineties a rather short period of stabilizationand rapid modernisation kicked in.

During the last two decades Hungary as wellas the other V4 countries have become a verymuch integrated part of the EU economywhich is demonstrated in the graph 14.The global financial and economic crisis hitHungary very hard. Hungary was the first EUcountry that asked for financial support fromthe IMF in 2008. In response to the crisis,Hungary took steps at two key areas: fiscalstability and financial stability. The govern-ment took radical steps to diminish costs,and bring the spending to a sustainable rate.All together spending has to be cut by ap-proximately 5 billion Euros in 2009-2010. The package contained the elevation of gen-eral VAT-rates from 20 to 25 percent (cur-rently it is at 27 percent), with some

exceptions: dairy products, wheat, flour, orstarch-made products and district-heatingcosts pertain under a preferential, 18 percenttax rate. Excise duty for cigarettes, fuel andalcohol has grown. The income-tax classeshave been changed, so the net income of themost employees rose. But after the electionthe government set up a new economicmodel which is called unorthodox economicpolicy. Hungary’s economy emerged from the 2012recession and entered to a weak growth pathin 2013. This growth is mainly driven by gov-ernment investment and consumption, andalso exports. Private demand remainedweak, and credit to the retail and corporatesectors continued to contract.

Hungary’s medium-term growth prospectsremain modest, as private consumption isstill hampered by the ongoing repair ofhouseholds’ balance sheets; low employ-ment among low skilled workers and short-coming in labour and product market; whilethe weak business environment continues toweigh on private investment.

Hungary

Monetary easing has helped to return togrowth. The Hungarian National Bank hascuts its policy rate since 2012 to support de-mand and credit growth[54] . The centralbank also introduced the Funding for GrowthScheme in 2013 with the aim of easing ac-cess to finance for SMEs and improving theircredit conditions through the provision ofsubsidized lending interest rate. Despitestrong take up it is still not clear whether itproduce more growth in the economy ornot. External vulnerabilities have been the keyrisk of the Hungarian economy. External debtremains high and large open net positioncan create more volatility in the future.Growth potential is held back by low em-ployment among low-skilled and weak in-vestment, making further structural reformsessential.

Hungary has demonstrated a strong com-mitment to keeping the fiscal deficit withinthe EU limit. (graph 10). No surprise, since ithas spent nine years under the excessivedeficit procedure. A number of special taxesintroduced over the recent years havehelped bring the fiscal deficit below 3%[55] . After the introduction of flat-rate personal in-come tax in 2011, incomes[56] of the generalgovernment budget decreased. Thereforesector-specific taxes were introduced andtheir role still increasing despite the countryspecific recommendations[57] . Environmenttaxes were increased such a way that ques-tioning the green economy goals[58] . Theimplicit tax rate on labour is the highestamong the four countries and above thanthe EU28 average[59] . Reducing it on low-wage earners would be necessary.

Ensure a stable, more balanced and stream-lined tax system for companies, including byphasing out distortive sector specific taxeswould be necessary in a long run. VAT fraud is a problem in Hungary as well asthe other three countries. Therefore a newsurveillance system has been establishedfrom January 2015, which will permit thereal-time monitoring of the transport of VAT-liable goods and establishment of on-linelinks to cash registers in the retail sector hasbeen completed by the end of 2014.

Regulating the fiscal framework after 2010has lead to mixed results. Long-term sustain-ability is questionable due to incomes afterthe phasing out of special taxes. Legal ac-tions have to be taken to improve the trans-parency of public finances.

Graph 15 General government gross debt, %of GDP, 2004-2014

Source: Eurostat

The basic feature Hungarian economic policysince 2010 (sometimes misleadingly labelledby the government as „unorthodox”) is keep-ing the VAT rate at a very high level (27%) andmore importantly applying one-off sectoral„crisis” taxes imposed on whatever sectorthat can be taxed. The application of thesetaxes (accounting for 2200 billion Hungarianforints (EUR 7,4 billion) together with the na-tionalisation (i.e.: confiscation) of the secondpillar pension fund assets made it possible tocurb the government deficit. These taxesconstitute a major burden on some sectorsand seemingly spare the population at leastit is more difficult to track their imposition onthe society later by the companies affectedthrough higher fees and other charges. Hereis a list of the nine special tax introducedsince 2010:-special tax on financial institutions;-special sectoral tax (phased out in 2013);-utility services tax;-telecom tax;-financial transaction tax;-insurance tax;-health tax;-accident tax;-publicity tax.

Government debt has remained steadily at ahigh level, which is forecast to be correctedonly at a very slow pace. Despite one-off cap-ital transfers[60] that decreased public debtby around 7% of GDP, and a substantial im-provement in the structural balance, govern-ment debt has been broadly stable around80% of GDP since 2009. This reflects the ef-fect of a weakened exchange rate, a lowgrowth performance and high financingcosts. (graph 11.)

The Hungarian Constitution contains thatthe gross government debt should not ex-ceed 50% of GDP. Until it comes down thatlevel the debt GDP ratio has to decline everyyear, after 2016 nominal public debt can in-crease only by half of expected real GDPgrowth, which supposes a counter-cyclicalfiscal policy[61]. Budgetary risks and thesmall reduction path can undermine long-term debt reduction which highlights theimportance of fiscal sustainability andgrowth friendly economic policy. The Hungarian export deflators have broadlystagnated since 2000, so far the other V3countries were able to increase their defla-tors by around 30% to 70%. All V4 countriesare primarily involved in producing machin-ery and transport equipment products forexports, with Poland having a somewhat lessconcentrated structure compared to theother V3 countries. The Hungarian exportperformance suggests that the deteriorationis primarily related to tightening supply con-straints.

This is partly linked to the inability to attractnew FDI inflows but also to the weak spillover linkages between multinationals anddomestic companies. Although recentlythere have been some large investment proj-ects in the automobile industry, a markedimprovement in the export sector is not ex-pected. The relapse of Hungary's competitiveness inthe export sector is primarily related to themachinery and transport equipment subsec-tor. (graph 13) Nevertheless, the country con-tinues to have the highest level of exportunit values, thanks to the still competitiveproduct quality in regional comparison[62] . Although unemployment rate is around 10%(graph 11), increasing employment rate toreach its Europe2020 national target labourmarket policy measures are inevitable. Labour force participation also remains lowfor women and for old cohort. Maternal em-ployments rate is the lowest within theOECD[63] .

The poor overall health status of the Hungar-ian population implies that many workersare affected by debilitating health condi-tions, in particular at advancing age, this onereason why older workers market participa-tion is low. The public works programme hasincreased employment, but has a poorrecord in reintegrating the non-employed toregular work. Like in Slovakia unemploymentrate has a strong regional profile, which callsfor measures to mobilize the workers andcreate more jobs in the peripheral regions.

Therefore revision of the public worksscheme, creation of a Roma labour marketintegration policy scheme and reductionpoverty, support the transition between dif-ferent stages of education and towards thelabour market are should be done in the nearfuture. Long-term improvements in labourmarket outcomes will also depend on com-plimentary structural reforms, improvementsin health care and public education.

The EU as a whole and even more so, the Eu-rozone was heavily hit by the sovereign debtcrisis, which resulted in way above the marknational debt to GDP ratios. In the light ofthis V4 countries’ performance in controllingthe national debt was a relative success, al-though in absolute terms all of them experi-enced a rising debt. The analysis of growthtrends clearly show that the dramatic declinein 2009 was followed by consolidation in2010. Economic success and political decisions areinterlinked to a great extent in the region.This stems from the fact that politics in gen-eral and the direction in which the politicalclass wants to direct the country is more im-portant in this region in terms of end resultsboth in political and economic terms. A newgovernment in the V4 countries can havedramatic impact on the geopolitical, EU-po-litical and economic policy path the countrytakes. Long-term political stability is still innascent form, or in a more pessimistic tone:is a rarity in the region.

V4 countries harnessing the benefits of EUmembership differs a lot. Some of the newmembers were more successful than othersin using EU-accession as an economic andmodernisation leverage by halving the num-ber of people living in poverty and raisingthe per capita GDP by almost fifty percent.There is obviously a clear difference in thegroup when euro-status is considered.

When it comes to EMU issues, the four coun-tries are in different position and have differ-ing views. The way V4 countries approachthe Euro accession and crisis management isalso a mix of economic and political features.These states differ a lot: Slovakia, a relativelatecomer in economic reforms is part of thecurrency union. Poland, Hungary and theCzech Republic are not Euro-members. Buteven this sub-group is divided: Poland in-tends to join whenever requirements are ful-filled while the Hungarian and the Czechgovernments are cool on accession. The future of the V4 co-operation is dim:clearly the divisive forces are way strongerthan the rather opportunistic cohesive ones(such as the drive to gain as much EU fundsas possible). The case of Hungary is particu-lar, it has maneouvered itself onto a path thatleads the country away not only from themainstream European political consensusbut also from the other Visegrad countries. As far as desirable policy actions from theEU’s side vis-à-vis the V4 countries are con-cerned, a mix of pragmatist and positivisticengagement is recommended. This would entail taking a strong stance in re-lation to the respect of the basic values of Eu-ropeaness but also an open andunderstanding attitude. Besides the Euro-pean institutions, Germany will also have toplay a decisive role, not for its own good thistime but for the good of this region this time- hopefully.

Conclusion

[1]Attila Marján: EU-rule changes force a Visegad re-think. Europe’s World. 2014. Spring[2]More on this:An emerging new European political geometry. In: Modern Diplomacy. 2014. June.[3]GDP/capita in current US $

http://databank.worldbank.org/data/views/reports/tableview.aspx?isshared=true#[4]Donald Tusk is the president of The European Council[5]Council of the European Union (2013): http://www.consilium.europa.eu/uedocs/cms_data/docs/press-

data/en/ecofin/143282.pdf [6]Council of the European Union (2013) http://www.consilium.europa.eu/uedocs/cms_data/docs/press-

data/en/ecofin/140017.pdf [7]European Commission (2014):

http://ec.europa.eu/economy_finance/economic_governance/sgp/pdf/30_edps/126-07_council/2014-11-18_pl_-_ear_en.pdf

[8]Council of the European Union (2013) http://www.consilium.europa.eu/uedocs/cms_data/docs/press-data/en/ecofin/137561.pdf

[9]WEF(2014): Global Competitivness Report.[10]European Commission (2015) Country Report Slovak Republic p7. graph 1.2[11]Doing Business 2015[12]From 189 country, Poland:32, Slovakia:37, Czech Republic:44, Hungary:54. [13]WEF(2014): Global Competitvness Report 2014-2015[14]Incomes of the central budget https://www.ksh.hu/docs/hun/xstadat/xstadat_evkozi/e_qse006i.html [15]In 1999. 58 countries, in 2014. 144 countries were examined.[16]Special Eurobarometer on Corruption (397)

http://ec.europa.eu/public_opinion/archives/ebs/ebs_397_en.pdf [17]The Innovation Union Scoreboard 2013 gives a comparative assessment of the innovation performance

of the EU27 [18]Their performance is between the 50-90% of the EU27 average[19]More than 50%[20]Target from the Country reports[21]IMF(2012): Poland continouses as bright spot in region

http://www.imf.org/external/pubs/ft/survey/so/2012/car020312a.htm [22]GDP per capita http://appsso.eurostat.ec.europa.eu/nui/show.do?dataset=nama_aux_gph&lang=en [23]GDP growth

http://epp.eurostat.ec.europa.eu/tgm/table.do?tab=table&init=1&plugin=1&language=en&pcode=tec00115 [24]Productivity

http://epp.eurostat.ec.europa.eu/tgm/refreshTableAction.do;jsessionid=9ea7d07d30e8adf98854aaa14d088119d3d3b7c2244b.e34OaN8PchaTby0Lc3aNchuMchuNe0?tab=table&plugin=1&pcode=tsdec310&lan-guage=en

[25]Labour costhttp://epp.eurostat.ec.europa.eu/tgm/table.do?tab=table&init=1&language=en&pcode=tec00130&plugin=1[26]GDP growth

http://epp.eurostat.ec.europa.eu/tgm/table.do?tab=table&plugin=1&language=en&pcode=tec00115[27] http://ec.europa.eu/economy_finance/eu/forecasts/2014_autumn/pl_en.pdf [28]Government debt

http://epp.eurostat.ec.europa.eu/tgm/table.do?tab=table&plugin=1&language=en&pcode=tsdde410 [29] http://www.imf.org/external/pubs/ft/scr/2012/cr1212.pdf [30]http://ec.europa.eu/economy_finance/economic_governance/sgp/pdf/30_edps/126-07_council/2014-

11-18_pl_-_ear_en.pdf [31]The law rose taxes by one percentage point to 23% on most consumer goods, including food, electrical

appliances, and cosmetics. Adam Reichardt: Poland and the global economic crisis: Observations and reflec-tions in the public sector. http://www.cipfa.org/-/media/files/policy%20and%20guidance/the%20jour-nal%20of%20finance%20and%20management%20in%20public%20services/vol%2010%20number%201/adam_reichard.pdf

[32]http://www.oecd.org/gov/budgeting/47860307.pdf [33]OECD (2014): http://www.oecd.org/eco/surveys/Overview_Poland_2014.pdf 18.p.[34]IMF (2014): http://www.imf.org/external/pubs/ft/scr/2014/cr14174.pdf [35]European Commission (2014) Taxation. http://ec.europa.eu/europe2020/pdf/themes/02_taxation_02.pdf [36]GVA: Ratio og GVA produced in high- and medium-high-technology industries to medium- and low tech-

nology sectors. ECFIN (2014): Country Focus: Securing Poland’s economic succes: A good time for reforms.http://ec.europa.eu/economy_finance/publications/country_focus/2014/pdf/cf_vol11_issue9_en.pdf [37]Council of the European Union (2014): Council closes excessive deficit procedures for Belgium, Czech Re-

public, Denmark, Austria, Netherlands and Slovakia.http://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/en/ecofin/143282.pdf

[38]European Commission (2015): Country report Czech Republic 2015.http://ec.europa.eu/europe2020/pdf/csr2015/cr2015_czech_en.pdf

[39]European Comission (2015): Country Report for Czech Republic[40]European Comission (2015): Country Report for Czech Republic[41]Export growth is still very dependent on the situation in automotive and consumer electronics sectors,

and competition from neighbouring countries has become fiercer [42]Domestic demand depends on income growth generated by the foreign-owned export sector, but it is

not well developed.[43]EC (2014a) Slovakia and the euro:

http://ec.europa.eu/economy_finance/euro/countries/slovakia_en.htm [44]Stability Programme for the Slovak Republic 2014-2017.

http://ec.europa.eu/europe2020/pdf/csr2014/sp2014_slovakia_en.pdf [45]new tax rates: 19% and 25% [46]80% of all tax audit were VAT audit[47] http://ec.europa.eu/europe2020/pdf/csr2014/nrp2014_slovakia_en.pdf [48]European Cimmission (2015) Country Report Slovakia[49]European Commission (2015): Country Report Slovakia[50]L’udovít Ódor: Fiscal framework in Slovakia. http://www.oecd.org/gov/budgeting/49778688.pdf [51]http://www.visegrad.info/economic-crisis-in-ceecs/factsheet/economic-crisis.html[52]Nominal unit labour cost

http://ec.europa.eu/eurostat/tgm/table.do?tab=table&init=1&language=en&pcode=tipslm20&plugin=1 [53]Share of trade with EU28.

http://ec.europa.eu/eurostat/tgm/table.do?tab=table&init=1&language=en&pcode=tet00036&plugin=1 Exports of goods and services in % of GDP http://ec.europa.eu/eurostat/tgm/table.do?tab=table&init=1&lan-guage=en&pcode=tet00003&plugin=1 [54]Base rate history http://www.mnb.hu/Jegybanki_alapkamat_alakulasa [55]Only in 2013 the income from these special taxes was around 538 billion HUF. (OECD 2014b, 25.p.)[56]Incomes from personal taxes decreased almost 400 billion HUF (1,3billion €)[57]European Commission (2015): http://ec.europa.eu/europe2020/pdf/csr2015/cr2015_hungary_en.pdf [58]eg.: solar power panels got a tax[59]European Comission (2015): Country Report Hungary[60]Gathering the private pension fund. [61]http://net.jogtar.hu/jr/gen/hjegy_doc.cgi?docid=A1100425.ATV Article 36. Constitution of Hungary[62]graph 3.12, p23. EC 2014c[63]IMF (2014): http://www.imf.org/external/pubs/ft/scr/2014/cr14156.pdf

Notes

Constitution of Hungary: Article 36. http://net.jogtar.hu/jr/gen/hjegy_doc.cgi?docid=A1100425.ATV Last ac-cessed: 20-02-2015Council of the European Union (2014): Council closes excessive deficit procedures for Belgium, Czech Repub-lic, Denmark, Austria, Netherlands and Slovakia.http://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/en/ecofin/143282.pdf Last accessed: 20-02-2015Council of the European Union (2013): Council closes excessive deficit procedures for Italy, Latvia, Lithuania,Hungary and Romania.http://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/en/ecofin/137561.pdfCouncil of the European Union (2014): Council closes excessive deficit procedures for Belgium, Czech Repub-lic, Denmark, Netherlands, Austria and Slovakiahttp://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/en/ecofin/143282.pdf Council of the European Union (2013) Excessive deficit procedure for Poland: Insufficient action taken, Councilissues new recommendationhttp://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/en/ecofin/140017.pdfECB (2014): Convergence Report. http://www.ecb.europa.eu/pub/pdf/conrep/cr201406en.pdfECFIN (2014): Country Focus: Securing Poland’s economic success: A good time for reforms.http://ec.europa.eu/economy_finance/publications/country_focus/2014/pdf/cf_vol11_issue9_en.pdfEurobarometer(2014): Public opinion in the European Union 82.http://ec.europa.eu/public_opinion/archives/eb/eb82/eb82_first_en.pdfEuropean Commission (2013): Special Eurobarometer on Corruption (397) http://ec.europa.eu/public_opin-ion/archives/ebs/ebs_397_en.pdf Last accessed: 20-02-2015European Commission (2013): The Innovation Union Scoreboard 2013. http://ec.europa.eu/enterprise/poli-cies/innovation/files/ius-2013_en.pdf Last accessed: 20-02-2015European Commission (2014a): Slovakia and the euro: http://ec.europa.eu/economy_finance/euro/coun-tries/slovakia_en.htm Last accessed: 20-02-2015European Commission( 2014b): Economic forecast for Poland http://ec.europa.eu/economy_finance/eu/fore-casts/2014_autumn/pl_en.pdf Last accessed: 20-02-2015European Commission (2014c) Macroeconomic imbalances in Hungary 2014.http://ec.europa.eu/economy_finance/publications/occasional_paper/2014/pdf/ocp180_en.pdf Last ac-cessed: 20-02-2015European Commission (2014): Europe 2020 target: Tertiary education attainment. http://ec.europa.eu/eu-rope2020/pdf/themes/28_tertiary_education_02.pdf European Commission (2014): Report on action taken by Poland in response to the Council recommendationof 10 December 2013 in order to bring an end to the situation of excessive deficit. http://ec.europa.eu/econ-omy_finance/economic_governance/sgp/pdf/30_edps/126-07_council/2014-11-18_pl_-_ear_en.pdfEuropean Commission (2014) Taxation. http://ec.europa.eu/europe2020/pdf/themes/02_taxation_02.pdfEuropean Commission (2014): Adequacy and sustainability of pensionshttp://ec.europa.eu/europe2020/pdf/themes/04_pensions_02.pdf European Commission (2014): National Reform Programme of the Slovak Republic 2014http://ec.europa.eu/europe2020/pdf/csr2014/nrp2014_slovakia_en.pdfEuropean Commission (2014): Stability Programme for the Slovak Republic 2014-2017.http://ec.europa.eu/europe2020/pdf/csr2014/sp2014_slovakia_en.pdfEuropean Commission (2015): VAT Rates applied in the Member States of the European Union. http://ec.eu-ropa.eu/taxation_customs/resources/documents/taxation/vat/how_vat_works/rates/vat_rates_en.pdf European Commission (2015): Country report Czech Republic 2015.http://ec.europa.eu/europe2020/pdf/csr2015/cr2015_czech_en.pdfEuropean Commission (2015): Country report Hungary 2015.http://ec.europa.eu/europe2020/pdf/csr2015/cr2015_hungary_en.pdf European Commission (2015): Country report for Poland 2015.http://ec.europa.eu/europe2020/pdf/csr2015/cr2015_poland_en.pdf European Commission (2015): Country report Slovak Republic 2015http://ec.europa.eu/europe2020/pdf/csr2015/cr2015_slovakia_en.pdf

Eurostat: Nominal unit labour costhttp://ec.europa.eu/eurostat/tgm/table.do?tab=table&init=1&language=en&pcode=tipslm20&plugin=1 Lastaccessed: 20-02-2015Eurostat: Share of trade with EU28.http://ec.europa.eu/eurostat/tgm/table.do?tab=table&init=1&language=en&pcode=tet00036&plugin=1 Lastaccessed: 20-02-2015Eurostat: Government debthttp://epp.eurostat.ec.europa.eu/tgm/table.do?tab=table&plugin=1&language=en&pcode=tsdde410 Lastaccessed: 20-02-2015Eurostat: Exports of goods and services in % of GDPhttp://ec.europa.eu/eurostat/tgm/table.do?tab=table&init=1&language=en&pcode=tet00003&plugin=1 Lastaccessed: 20-02-2015Eurostat: GDP per capita http://appsso.eurostat.ec.europa.eu/nui/show.do?dataset=nama_aux_gph&lang=enLast accessed: 20-02-2015Eurostat: GDP growth http://epp.eurostat.ec.europa.eu/tgm/table.do?tab=table&init=1&plugin=1&lan-guage=en&pcode=tec00115 Last accessed: 20-02-2015Eurostat: Productivityhttp://epp.eurostat.ec.europa.eu/tgm/refreshTableAction.do;jsessionid=9ea7d07d30e8adf98854aaa14d088119d3d3b7c2244b.e34OaN8PchaTby0Lc3aNchuMchuNe0?tab=table&plugin=1&pcode=tsdec310&lan-guage=en Last accessed: 20-02-2015Eurostat: Labour costhttp://epp.eurostat.ec.europa.eu/tgm/table.do?tab=table&init=1&language=en&pcode=tec00130&plugin=1Last accessed: 20-02-2015Eurostat: GDP growthhttp://epp.eurostat.ec.europa.eu/tgm/table.do?tab=table&plugin=1&language=en&pcode=tec00115 Last ac-cessed: 20-02-2015Eurostat: Share of trade with the EU 28 http://ec.europa.eu/eurostat/tgm/table.do?tab=table&init=1&lan-guage=en&pcode=tet00036&plugin=1 Last accessed: 20-02-2015Eurostat: Long term interest rate:http://ec.europa.eu/eurostat/tgm/table.do?tab=table&init=1&language=en&pcode=tec00097&plugin=1Eurostat: International trade of machinery and transport equipmenthttp://ec.europa.eu/eurostat/eurostat/tgm/table.do?tab=table&init=1&plugin=1&language=en&pcode=tet00009 Eurostat: Tertiary education attainment http://ec.europa.eu/eurostat/tgm/table.do?tab=table&init=1&lan-guage=en&pcode=tsdsc480&plugin=1Hungarian Central Statistical Office: Incomes of the central budget https://www.ksh.hu/docs/hun/xstadat/xs-tadat_evkozi/e_qse006i.html Last accessed: 20-02-2015Hungarian National Bank: Base rate history http://www.mnb.hu/Jegybanki_alapkamat_alakulasa Last ac-cessed: 20-02-2015IMF (2012): Poland continues as bright spot in regionhttp://www.imf.org/external/pubs/ft/survey/so/2012/car020312a.htm Last accessed: 20-02-2015IMF (2012): Republic of Poland—Review Under the Flexible Credit Line Arrangement http://www.imf.org/ex-ternal/pubs/ft/scr/2012/cr1212.pdf Last accessed: 20-02-2015IMF (2014):IMF Country Report: Poland. http://www.imf.org/external/pubs/ft/scr/2014/cr14174.pdf

References

IMF (2014): Databasehttp://www.imf.org/external/pubs/ft/weo/2014/02/weodata/weorept.aspx?pr.x=45&pr.y=13&sy=2001&ey=2015&scsm=1&ssd=1&sort=country&ds=.&br=1&c=964%2C935%2C936%2C944&s=PPPSH%2CGGXWDG_NGDP&grp=0&a= Last accessed: 20-02-2015Marján, Attila (2014): The new EU voting system ―The old west-east north south division. ModernDiplomacy. http://www.moderndiplomacy.eu/index.php?option=com_k2&view=item&id=454:the-new-eu-voting-system-the-old-west-east-north-south-division&Itemid=569 Last accessed: 20-02-2015Marján, Attila: EU-rule changes force a Visegad re-think. Europe’s World. 2014. SpringOECD (2011): Restoring public financeshttp://www.oecd.org/gov/budgeting/47860307.pdf Last ac-cessed: 20-02-2015OECD (2014a): Economic Surveys, Polandhttp://www.oecd.org/eco/surveys/Overview_Poland_2014.pdf Last accessed: 20-02-2015OECD (2014b): Economic Survey of Hungary. http://www.oecd.org/eco/surveys/economic-survey-hun-gary.htm Last accessed: 20-02-2015Ódor ,L’udovít: Fiscal framework in Slovakia. http://www.oecd.org/gov/budgeting/49778688.pdf Lastaccessed: 20-02-2015Reichardt ,Adam: Poland and the global economic crisis: Observations and reflections in the publicsector. http://www.cipfa.org/-/media/files/policy%20and%20guidance/the%20journal%20of%20fi-nance%20and%20management%20in%20public%20services/vol%2010%20number%201/adam_re-ichard.pdf Last accessed: 20-02-2015Visegrad.info (2009): Economic crisis. http://www.visegrad.info/economic-crisis-in-ceecs/factsheet/economic-crisis.html Last accessed: 20-02-2015WEF (2014): Global Competitiveness Report 2014-2015 http://www3.weforum.org/docs/WEF_Global-CompetitivenessReport_2014-15.pdf Last accessed: 20-02-2015WEF (1999): Global Competitiveness Reporthttp://www.cid.harvard.edu/archive/res/gcr_2000_overview.pdf Last accessed: 20-02-2015World Bank: GDP/capita in current US $ http://databank.worldbank.org/data/views/reports/table-view.aspx?isshared=true# Last accessed: 20-02-2015World Bank (2014): Doing Business 2015 http://www.doingbusiness.org/reports/global-reports/doing-business-2015 Last accessed: 20-02-2015World Bank (2015): Exports of goods and services % of GDP.http://databank.worldbank.org/data/views/reports/tableview.aspx?isshared=true# Last accessed: 20-02-2015

www.moderndiplomacy.eu