Central to Europe.

• Author: McNamara, Kevin J.

As Europe emerges from the depths of quarantine and recession, its geopolitical landscape will reveal a significant change, the result of trends that emerged before 2020. Since these trends disturb a status quo that sustains illusory feelings of confidence and superiority among elites in Western Europe, it can only slowly, and barely, be acknowledged.

Before the pandemic, many saw the East-West divide of the European Union (EU) as a "Rich Man-Poor Man" rift between a prosperous, modern, worldly Western Europe, on one hand, and a poor, backward, isolated Central and Eastern Europe (CEE), on the other. Western leaders easily took a skeptical and condescending tone toward the EU'S eastern members, in large part due to the lingering perception of these states as the misfortunate orphans of Nazi and Soviet rule. To say nothing of the low opinion of Central and Eastern Europe in popular culture; in Paris and Berlin, Central Europe is viewed as a regional backwater--Europe's version of West Virginia.

Indeed, right up until the peoples of Central and Eastern Europe liberated themselves from the USSR and the Warsaw Pact, they were routinely ignored, misunderstood, or ritually described as "backward." One of the most popular English-language books about Europe, The Europeans, by Luigi Barzini, focuses on Belgium, France, Great Britain, Italy, Luxembourg, the Netherlands, and the former West Germany--and, weirdly, even the United States--but not a single country in Central or Eastern Europe. And neither the European Union nor its predecessor, the European Economic Community, ever called themselves West European, even though until 2004 all of their members were located in Western Europe. In Brussels, "Europe" usually means Western Europe.

Yet some CEE countries are, in terms of national progress, becoming the equals of, and even superior to, France and Germany--two EU founders and its two largest, wealthiest members. Recent statistical measures of economic growth, employment, income, prosperity, strong currencies, life expectancy, tax and debt burdens, global engagement, Chinese economic penetration, innovation, entrepreneurship, manufacturing, immigration, crime, and terrorism all show that four ex-Soviet satellites on the EU'S eastern frontier--the Visegrad Group or V4--demonstrate better performance than France or Germany in almost every benchmark metric.

And why is this important? Because the better-performing CEE countries are undermining the reputations, governance models, and leadership of Berlin and Paris, and evident, systemic failings by the EU'S Western European capitals can only sustain the populist, or "illiberal," politics of Central Europe and Eastern Europe. West European elites are understandably not anxious to confront their widespread, persistent policy failures, so they remain little-known. But the long-established reputations of Paris and Berlin are being undermined by reams of data. Western Europe still sports larger economies, higher incomes, and longer life expectancies, but these represent a fading legacy of decades of prosperity and peace that was denied to the EU'S eastern members. The indicators in which some CEE states still lag, like corruption or pollution, are similarly an inheritance of ex-communist rule. Pre-pandemic economic and social progress looked very good for Czechia, Hungary, Poland, and Slovakia, and troubling for Germany and France. If these trends resume--and there is no reason to think they won't--the East will soon outshine the West.

The economies and finances of the V4, for example, are far healthier across many sectors than France and Germany. Pre-pandemic data indicated that the four Central European countries were rapidly gaining on the economic prosperity and financial stability of Europe's two largest powers. Prior to the coronavirus pandemic, the Visegrad Four long enjoyed significantly higher levels of economic growth and employment than Paris or Berlin. The gross domestic product (GDP) of the V4 grew an average of 4.3 percent in 2018, compared to 1.6 for France and Germany. In both Hungary and Poland, the growth of GDP was 5.1 percent, more than three times the average rate for France and Germany. The worst growth rate among the V4--Czechia's 3.0 percent--was still double Germany's growth rate. Given Germany's stellar reputation as Europe's economic powerhouse, this is significant. Yet inflation remained mild across all four Visegrad countries, ranging from 1.7 percent in Poland to 2.9 percent in Hungary.

Slower growth was forecast for France and Germany in 2020, even before the coronavirus pandemic, with the International Monetary Fund predicting 1.1 percent growth for Germany and 1.3 percent for France. Somewhat slower growth was also forecast for the V4 countries--from 3.3 percent for Hungary to 2.6 percent for Czechia--but again, the worst-performing V4 country was still going to enjoy a rate of growth expected to be double that of France and even better than Germany's. And some analysts saw this trend continuing for at least another decade. A recent HSBC Global Research report, The World in 2030, anticipated the V4 countries would continue vigorous GDP growth rates of 3.4-3.6 percent to the year 2030, when it forecast a 0.9 percent growth rate for Germany and a 1.1 percent rate for France.

The economies of the V4 are more vigorous in many other respects. Commercial real estate investment in the V4, for example, was still skyrocketing in the first quarter of 2020, when more than [euro]3.78 billion was invested in the four countries, plus Romania. This was an increase of 79 percent over Ql 2019 for these countries. By contrast, Germany's growth in real estate investment was 35 percent, France's was 21 percent, and the average for Western Europe was 51 percent. And speaking of real estate, Warsaw will soon host the tallest building in the entire European Union, Varso Tower, in a project led by a Slovak developer, HB Reavis.

Given this, it is unsurprising that the V4 nations also enjoyed higher levels of employment than Germany and France, both on average and in most one-to-one comparisons. Average unemployment in the Visegrad countries in 2018 was 4.1 percent, while it averaged 6.3 percent in France and Germany. The latter's poor showing was due almost entirely to France, whose steep 9.1 percent rate would be associated in the United States with a serious recession. Yet Czechia enjoyed a lower rate (2.3 percent) than even Germany (3.4 percent). Hungary's rate of 3.7 percent was only slightly higher than Germany's, and every V4 country had much less unemployment than France.

Skeptics of high GDP growth in the V4 countries, of course, can point to their EU subsidies. Indeed, Slovakia received [euro]11.3 billion in EU funds in the most recent seven-year budget cycle (2007--15) and is set to receive [euro]13.8 billion in the current (2014-20) cycle. Czechia received [euro]23.3 billion in the previous cycle and is budgeted for [euro]21.6 billion in the new cycle...