Реферат: Transitional Success: USSR to EU
Реферат: Transitional Success: USSR to EU
policy issues during the political
transition from centrally planned socialist
free market democratic capitalism.
Table of Contents
II. Political Summary:
Restructuring for Transition
III. Transition to Market
Economy: 1990 - 1991
IV. Problems of Transitional
Monetary Policy and the Financial Sector: An Overview
V. Macro Economic Stability: 1993 -
VI. Monetary Policy: 1993
VII. Intergovernmental Financial
VIII. Budgetary Overview: 1993 -
IX. Tax Reform
X. Current Political Economic
XI. The EU and NATO
In 1989, after
nearly 40 years of Soviet control, Czechoslovakia once again became an independent
nation, the Czech and Slovak Federalist Republic. This transition from Soviet
socialism to democracy culminated throughout Central and Eastern Europe with
the literal collapse of the Berlin Wall in East Germany, the heroic Gdansk
Shipyard Strikes in Poland. The student and worker protests in Prague and
Budapest were no less important.
Czechoslovakian revolution took place peacefully and over a much longer period
of time than events in other former Soviet Union or Warsaw Pact nations. Hints
of major reform in Czechoslovakia began as early as 1968. Czechoslovakian
officials, under Soviet power, moved incrementally to begin the long road
towards decentralization and independent Czechoslovakian rule. Their
increasingly effective efforts became known as the Prague Spring, a time of
growth, change and development.
Success was, of
course, neither immediate nor easy to achieve. The Cold War reached a pinnacle
in the Eighties and the winds of change began to blow in Central and Eastern
Europe. The CEE nations endured many hardships. Soviet oppression, though
waning by this time, became largely unbearable. Change in Czechoslovakia came
from the ground up; dissidents quietly began to return to popular power. The
revolution gained momentum by 1989. ‘Revolutionists’ began to demand sweeping
economic and political reform. They were backed by well organized and very
timely strikes and protests. After a two hour general strike on November 27,
1989, proving the immediate and widespread power and cohesion of the revolution,
the Soviet controlled authorities finally agreed to negotiate.
negotiation process and threat of further massive general strikes, former
dissidents assumed officially sanctioned ‘concessional’ positions. Within
months, they gained near complete (and very real) control of the Federal
Assembly. On December 29, 1989, Mr. Havel, a very famous and popular Czech
dissident, became President of Czechoslovakia (renamed the Czech and Slovak
political victory represents only half of the nation’s success. Within the
first three years of self rule, harsh economic (and subsequent political)
realities forced the nation to divide once again. The nation as a whole was
unable to accommodate the vast discrepancies between the western Czech and
eastern Slovak regions. Massive economic reforms brought this to the popular
agenda as Slovakia suffered greatly while their Czech counterparts seemed to
benefit from reform.
in Prague wished to move swiftly to further reform efforts. Slovakia hindered
Czech success and in turn suffered greatly by this Czech-led reform. Slovakia
simply could not move as rapidly toward a market economy due to the economic
configuration left to them by years of Soviet planned economics.
Political Overview: Restructuring for Transition
Vladimir Meciar, a very strong nationalist was elected prime minister of the
Slovak Republic, while Vaclav Klaus, a moderate federalist, was elected in the
Czech Republic. Unfortunately, these two leaders were unable to agree on common
economic and political strategies to govern the CSFR. Klaus’s reform plans, now
legendary, were simply inappropriate for the fledgling Slovak regions.
Slovakians felt alienated from the government reform in Prague. Within a short
time it was very clear that the Czech regions could not completely support
their Slovak countrymen through the transition. The two leaders agreed to
divide the Czech and Slovak Federalist Republic (CSFR) into the Czech and
Slovak Republics on January 1, 1993.
and liabilities were split between the two nations in a two to one ratio. The
Czech Republic received the larger portions reflecting both size and
population. Again, the split was achieved peacefully, without massive debate.
The two countries agreed to form a customs union. They implemented identical
foreign policies with respect to third countries, and forbid tariffs or ‘bans’
between themselves. They also formed a temporary monetary union, which
collapsed within months as both countries unexpectedly experienced a massive
drain on foreign reserves during this time. To more fully understand the
current developments in the Czech Republic, one must examine the historical
economic decisions made before the break-up in 1993 as outlined below.
Transition to Market Economy Overview: 1990-1991
reformers went to work immediately following the collapse of Soviet rule. The
reform package included near complete liberalization of prices, a complete
reversal of former exchange and trade systems and an impressive preparation for
massive and rapid privatization. These efforts were supported by financial
policies including a “pegged” exchange rate, currency devaluations, and
restrictive fiscal, monetary and wage policies.
monetary policy is discussed in a separate section, it needs to be briefly
addressed here to understand the conditions in which the transition occurred.
Monetary policy in the initial stages of transition ensured that inflation remained
in control throughout currency devaluations and price liberalizations. The CSFR
devalued its currency by 20 percent in 1991 after several smaller devaluations
before hand. Taken as a whole, these devaluations reduced the value of the
currency by half within six months. Generally, monetary policy remained tight
throughout the entire period.
goals of the CSFR economic reformers were to drastically reduce government
spending. The former centrally-planned, output-driven economic policies were no
longer effective for the new capitalist democracy. Restructuring government
expenditures was a key component of reform. The main changes, aside from
massive privatization discussed below, forced reduced subsidies wherever possible.
Every sector of society, with the exception of health, welfare and education,
saw an abrupt end to government subsidies. In 1991 alone, for example,
officials reduced government spending by 12 percent to reach 47 percent of GDP.
This trend continued throughout the transition. Massive government spending, a
hallmark of socialism, ended virtually overnight.
government spending remained high would remain so throughout the reform
process. Health and welfare for poor, elderly, unemployed and children is a
very difficult situation in any government, especially one in transition.
Reformers focused primarily on industry and energy in the initial stages,
leaving the areas of greater uncertainty to be dealt with in a more stable
As an almost
immediate measure, subsidies to foodstuffs and energy were reduced by nearly 50
percent. Retail prices for most household items increased by nearly 25 percent
literally overnight. By the end of 1991, the Czech government controlled only
6 percent of prices in the country as compared with 85 percent in early 1990.
Only basic necessities, oil, and agricultural products remained under state
control. To offset some of these shocks, wages increased, though only slightly
and not nearly enough to meet the increased cost of living. Politically
powerful trade unions prevented the passage of even more drastic reform
measures. Plans in 1991 to increase the price of electricity, heating oil and
coal by nearly 400 percent and rent by 300 percent were delayed until 1992 and
After an initial
currency devaluation of nearly 50 percent, the government adopted an adjusted
exchange rate connected to a “basket” of convertible hard currencies. Internal
convertibility of hard currencies was established in 1991. These two measures
combined to foster trade and investment. Initially, the CSFR set a 20 percent
surcharge on imports coupled with a 5 percent tariff. These obstacles soon
ended as major provisions were passed to more actively encourage trade and
investment. Initial steps toward private property rights and the dissemination
of publicly owned lands further enhanced the investment environment.
by far the most critical and complicated development the CSFR had to address.
Speed was critical. The ‘default mechanism’ ensured that current managers and
persons of powers would assume control and create their own joint venture
agreements with foreign entities.
State firms that
were nearly completely vertically integrated needed to be desegregated by form
and function. And the process had to be done well, for flailing industries
would simply increase state expenditures. Failures did not decrease
expenditures in compliance with the transitional reform strategy. The CSFR
privatization plan was threefold. Small-scale privatization was the easiest.
Retail stores, restaurants and small service or industrial workshops were sold
to the highest bidders in weekly public auctions. Where no CSFR buyers were
found, a second round of auctions allowed foreigners to bid.
restitution was more difficult. The government needed to equitably redistribute
land that had been taken nearly 40 years earlier. This is a difficult and
involved issue. CSFR citizens are allowed to claim land taken from them, though
the burden of proof is on them. Where no proof exists, special arrangements can
be made for state assistance. In areas of conflict, the issue will be brought
to the courts. A large part of the country was not in private hands before
Soviet rule. Some of this land can be used as an offering to parties where
disputes over ownership exist. Also, lands that have been improved (shops,
developments, houses, etc.) are sold at specially determined rates to the
former property owners. Prices and possible alternative compensation for those
owners who do not wish to purchase these ‘improvements’ are again settled by a
special court arrangement.
privatization progressed swiftly. Some state-owned firms were sold outright to
private interests while others remained under indirect state control until
buyers were found, legal or economic concerns settled, or parliamentary debate
tradition of labor unions and their political strength proved crucial to social
security reforms throughout CEE. The CSFR was no exception. Labor unions were
instrumental in keeping CSFR unemployment at very low levels and social safety
net benefits quite high. Essentially the state guaranteed incomes at a minimal
level to meet the ‘cost of living’ for the unemployed or the under-employed.
Pensioners and parents of children received benefits adequately covering bare
essentials. Further benefits for health care were distributed at the local
level as the health system still remained under state control.
Problems of Transitional Monetary Policy and the
introduction of reforms, monetary policy played a key role in the economic
stability of the Czech Republic throughout the transition. Inflation remained
surprisingly low (though relatively high in 1989 and 1990), exchange rates were
relatively stable (after initial fluctuations), and external reserves stayed
strong throughout the period (spurred by unusual and unexpected outside
interest in the Czech Republic as the first reformer to prove its success).
What is perhaps
most impressive are the obstacles Czech officials overcame in developing an
effective monetary policy. First, the entire CMEA trading block was virtually
dismantled. Reform and transition would be difficult even with stable trading
partners. In the CMEA, all of the countries were experimenting with and
adjusting prices, exchange rates and policies. It was very difficult to set
monetary conditions correctly, in real or absolute terms.
just a few short years, the CSFR itself broke apart for economic and political
reasons. This was largely unexpected and proved difficult in the policy making
arena. As the break-up drew near, officials had a difficult time determining
which policies should be enacted based upon which of many scenarios might occur
in the CSFR.
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