BW: this year to be most important in Baltics since 1989

2010 will be the most important year since the regime change of 1989 for post-communist Central Europe and the Baltics, writes Business Week.

Economic crisis and a series of elections in Easter Europe may lead to rising nationalism and test the European Union's solidarity.

For the Visegrad Four, as well as the Baltic states, 2010 will be a year of many elections, and these will provide a platform for the nationalists to excel, especially on both banks of the Danube. Unemployment will grow, and in the midst of the continuing economic crisis this will play to the populists. And Estonia will prepare for the adoption of the euro.

A wave of nationalism and populism is in store thanks to the economic crisis and a series of elections. It is only a question of how strong that wave will be. The impact of the economic crisis will test the much-proclaimed solidarity of the European Union and show whether having the European common currency is really an advantage.

Following the elections of 2005 and 2006, when nationalists and populists won or at least entered government in many countries, experts warned that after joining the EU and NATO the post-communist countries had lost their motivation to reform, to build democratic institutions, and to fight nepotism and corruption. In these analysts' judgment, voters have sunk into disillusionment, suffering from a hangover from freedom and the free market, and now see no goal or objective in front of them. But the economies still grew annually by as much as 6 percent and unemployment reached record lows. However, instead of seizing the opportunity to implement structural reforms, most countries preferred political squabbles and instability. State budgets, even in such a situation, increased their already high indebtedness.

It's true that last year Polish Prime Minister Donald Tusk attempted pension reform. But he met strong resistance and withdrew at the first symptoms of the credit crisis. Only the Estonians managed to set aside the equivalent of 10% of GDP in a special fund—a nice cushion now. But not even they will avoid drastic budget cuts.

We're going to see 2006 all over again, but this time in a much worse economic situation. Yes, the crisis will begin to dissipate, but its impact on normal people will peak in 2010.

Next year will see populism rampant in Central Europe. Simple promises for solving complicated economic problems will be heard everywhere, especially in Hungary and Latvia, the countries worst hit.

The populists may even help preserve the center-right coalition in Lithuania, where parliamentarians have been leaving the main governing party. The Poles will be electing a president, and this will block the liberal government of Donald Tusk, the favorite for the presidency, from undertaking any resolute steps such as public finance reform. Polish politics won't avoid the populist wave, and the same goes for the Czech Republic, where political rhetoric will concentrate on the fight around iconic policies such as obligatory medical fees. Unemployment, already above 20 percent in Latvia, will keep rising everywhere. People will make clear to politicians how they are suffering from the recession—whether at the voting booth or at protest rallies.

The pressure "from the street" will be fertile ground not only for populism but also for nationalism. In some cases, suspicion of foreigners or domestic "foreign" elements, especially the Roma, is on the rise. It's worth paying attention, for instance, to the growing opposition to immigration in the Czech Republic. New evidence for this is found in a global survey by the American Pew Research Center.

Nationalism will drive election campaigns mainly in Slovakia and Hungary. In Hungary, the openly xenophobic Movement for a Better Hungary (Jobbik) will enter parliament, mostly likely as the third-strongest party, inciting a reaction not only in Slovakia but also in Romania, with its large Hungarian minority. In Slovakia, Prime Minister Robert Fico will try to lure away the nationalist voters of Jan Slota's Slovak National Party.

Since the Hungarian elections will take place a month or two before those in Slovakia, it can't be excluded that the Slovak nationalists will do well in reaction to Jobbik's success.

The third theme for the Central Europeans will be their relationship to the EU. It won't be about enlargement and various agreements but feelings, character, and long-term prospects. The economic and political crisis will test how Central Europeans understand the notion of European solidarity and how Brussels and the old members understand it. Opinion polls have signaled that especially in the countries hit hard by the recession, ardor toward the EU has cooled. And the case of Greece, which the eurozone tolerates with its huge debts and "creative" budgets, evokes real doubts from the new members about whether Brussels views them as equal partners.

Czech Republic: Too long a wait
Voters are still awaiting a final solution to the political stalemate, just as they are also anxiously expecting that the economy will begin to recover. And they're wondering if the spring parliamentary elections will really bring a solution, or, as is far from impossible, they will again end in a dead heat between left- and center-right forces, like the last ones in 2006. It is also expected that if the Social Democrats form the next government, the Czech Communists, the only unreformed party of its type in Central Europe, will take part in some way—another sign of the overall regional trend of growing extremism. The economy next year will likely be "a positive zero," in terms of growth, which will deepen the country's indebtedness.

Poland: No more excuses, time for action?
The Poles' worst bogeyman, unemployment, will get worse even though the economy will be the region's best performer and businesses feel renewed confidence. The government's scheme to patch holes in the budget with profits from privatization won't live up to expectations, but exports, revived domestic consumption, and stadiums and other construction projects for the 2012 European football championships will tow the economy.
In politics, everything will be subordinate to the fall battle for the presidency. Tusk currently has no equal competitors, but, with a direct election coming up, his government will hesitate to take any reform-minded (that is, unpopular) steps. The unions will use that to apply greater pressure. Once Tusk wins the election, he'll have no further excuse to postpone reform (until now a conservative president has vetoed some of his laws).

Slovakia: Promises and Hungary
More likely than a parliamentary majority for Fico's social-democratic Smer party will be another coalition government after the elections, with one possible partner being Vladimir Meciar. Fico and his ministers act confident when they speak of the budget, but independent experts warn of the many black holes that might lurk there. And as elections approach they are more likely to spend than skimp.
The markedly divided political right is focused more on internal duels, so it's hard to predict which parties will enter the next parliament: the Christian Democrats have a chance, as does the new liberal party, Freedom and Solidarity. Domestic nationalists will be keenly watching to see if one of the two parties representing the Hungarian minority will seat deputies in the new parliament: if not, a further rise in Slovak-Hungarian tensions is likely.

Hungary: Waiting for the right-wing revolution
Hungarians are hoping that elections, probably in April, will finally break the interminable political stalemate of past years. The center-left parties that support Prime Minister Gordon Bajnai's government don't have much support. Right-wing Fidesz is breaking popularity records, but its economic policies are shrouded in fog. Fidesz might even win enough seats to be able to introduce constitutional changes and thus change the rules of the political game in play since 1989.
The vote-winning ability of Jobbik, and whether the extremist party will join a Fidesz-led coalition, are the big questions. Playing into the extremists' hands are the high level of political dissatisfaction, as polls show; among EU citizens Hungarians voice the lowest level of support for union membership.

Governments across the region are absorbed in crisis management and have little excess capacity to care for the generation of those who were too young to remember the old regimes and are now entering their active working lives. Or at least are trying; graduating students especially will find out how scarce jobs are. At the same time these political neophytes are being exposed to politicians' easy promises and enticements. In a pattern like that we've seen with young Greeks over the past few years, many of these young people may slide into disillusionment over a cloudy future.