Special Reports 09

Special Report 09 | April 2015 Modern Mitteleuropa: differences and similarities in the Visegrad Group Attila Marján – Lorina Buda

09 www.moderndiplomacy.eu

Attila Marján Hungarian economist, PhD in international relations.

Based in Brussels for fourteen years as diplomat and member of EU commissioners’ cabinets. Two times visiting fellow of Wilson Center in Washington DC. University professor and author of books on EU affairs and geopolitics. Head of department, National University of Public Administration, Budapest.

Lorina Buda Hungarian economist with a research profile of European integration. University teacher and PhD student at National University of Public Service. Worked for the Representation of the European Commission in Hungary. Author of papers in the field of Eu crisis management.

Modern Mitteleuropa differences and similarities in the Visegrad Group Attila Marján – Lorina Buda

T

here are diverse and contrasting interpretations and connotations of the concept of Mitteleuropa. It served as an idealistic model for a multicultural, multinational region with common features and geopolitical realities that is situated between the German and Russian power bloc. The Central-European Federation was the ultimate political vision of this line of thought. This somewhat nostalgic interpretation was invented and maintained by mainly the liberal intelligentsia of the late Habsburg era. There is although another Mitteleuropa vision of Prussian origin - that found its way to mainstream German geopolitical strategy during World War I. - as a panGermanist imperium spreading way into East-Europe.

This paper has no intention to engage in the academic debate on this subject. It chooses the Visegrad 4 countries as key nation states of this region of Mitteleuropa in its narrow geographical sense because of geopolitical realities.

In 1335 when the first summit in Visegrad took place, Casimir III of Poland, Charles I of Hungary, and John I of Bohemia had two objectives: to strengthen their economic and political cooperation and to form a regional alliance to counter the power of the duke of Austria and of the Holy Roman Emperor.

Some seven hundred years later in a completely different Europe regional cooperation still has a lot to offer but it has had several impediments to flourish in central Europe.

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

The modern times cooperation in the V4 group since its formation in 1991 in a Hungarian town called Visegrad has had its ups and downs: it almost fell apart in December 2003 in Copenhagen when EU accession terms were to be finalized: a killing competition took place among the four on who gets the most of the cohesion and agricultural funds.

The group of four central European EU member states, if counted as a single nation state, V4 (64,3 million inhabitants) would rank 22nd in the world and second in Europe, moreover it is the seventh largest economy in Europe and the 15th globally. Before the introduction of the double majority voting system they together have had equal number of weighted votes with Germany and France put together. From November 2014, the double majority has been replaced the old weighted voting system. According to the new rule the support of 55% of the Member States representing 65 % of the overall population of the European Union will be required.

The new system significantly modifies the power distribution by strengthening the influence of big Member States – with a population of 60 million; Spain and Poland will lose their big Member State status and medium-sized countries’ - between 2 and 11 million inhabitants - voting power will be reduced dramatically. In the new double majority system the ability of countries with large population to block decisions will be significantly reinforced, while small countries’ ability to prevent negative decisions will come to an end.

Germany and France will gain increased blocking capacities but V4 countries will not be able to form any blocking coalition any longer. Even the new Member States joined in 2004 and 2007 will not be able to block decisions under the new system [1] . Nevertheless one has to bear in mind that these countries stand for not more than 5 percent of the EU’s GDP (see graph )

Before a county-by-country analysis the most important features of the V4 group that demonstrate the similarities and dierences are worth quoting for a deeper understanding of this region: 1.20th century history and the mostly unsuccessful settling of its consequences is still a decisive feature of the present of these countries; 2.There is no genuine socio-economic, cultural and political cohesion among these countries. The V4 co-operation is more of an empty shell. This is partly a consequence of the troubled past of these region; 3.The V4 countries as semi-peripheric states are not drawn to each other, rather to the center of Europe, mainly Germany. What we see is a modern time version of Mittel-Europa of small export-dependent economies where Poland seems to be an exception; 4.The Graph 2 nevertheless means that these countries are practically the economic supply backwaters of the German economic sphere; 5.Still EU membership represents a historic chance of geopolitical stability and economic and societal modernisation for these countries; 6.This region needs (would have needed) a special political approach from the EU since its genuine integration is hindered by factors that cannot normally detected and handled (lack of strong civic net and traditions, no self-organising and self-protecing power of the society, weakness of civil society, inherited regional geopolitical tensions etc.) through the normal EU accession toolbox.

Graph 2 Exports of goods and services in % of GDP

Source: Eurostat

7.Anti EU sentiment or at least a significant disenchantment is present in the region as well. This is in some cases such as in Hungary reinforced by negative government propaganda.

Graph 3 Positive image of EU

Source: Eurobarometer (2014)

8.EU regional policy funds (representing these countries annual GNI’s 3 percent, a new source of modernisation after the nineties FDI vehicle) serve as key growth enhancing and modernisation tools, nevertheless their use sometimes contribute to controversial vehicles to strengthen regimes that antidemocratic and anti-liberal.

Graph 4 Net EU transfers in GNI ratio

Source: European Commission

9.Although there are very important features that are similar in these countries’ economies and societal webs, different political drives in the different V4 countries result in rather diverging realities. The most pertinent example is pro-European Poland and pro-East Hungary: the former is about to achieve its best geopolitical standing since centuries, while the latter has slipped into a pariah status from its number one place in the nineties.

Moreover Poland started to aim at higher geopolitical objectives such as creating a new Weimar arrangement in Europe[2].

The historically amicable Polish Hungarian relations froze in February 2015 when the Hungarian prime minister went to Warsaw to give an explanation why he had received Putin – in the middle of invading a European country - a few days before. The head of the Polish opposition, the former ideological ally of the Hungarian pime minister refused to receive the Hungarian premier which was unthinkable before.

The V4 countries main motivation for joining the EU was to improve living standard. After the accession due to the dynamic growth the GDP per capita increased, however the group heterogeneity did not reduce and the catch-up process is still a very long promise (especially because of the crisis).

Graph 5 Per capita GDP – illustrating the gap

Although out of the four Visegrad countries only Slovakia is member of the Eurozone, they are often seen as a homogeneous region. But despite an often shared history and similar economic features there exist significant differences among these countries.

There even used to be significant differences even before the collapse of the communism.

The regime change, the democratisation, the transition to the market economy took place in different ways, which has resulted in different paths of development. Often leaders became laggards. According to the World Bank data[3] Hungary had the highest GDP per capita, but this advantage disappeared after the initial power. In the early ‘90s Poland was the laggard, and now, ten years after the EU accession, Poland is the best performing state from the V4, and not just economically (graph 9) but politically[4] as well.

In 2014 only one country from the four is under excessive deficit procedure, but in 2013 all of them were under the procedure[5] . For Slovakia and the Czech Republic the procedure was opened in 2009 and had to reduce its deficit 1% of GDP over the period 2010-13. In case of Poland the procedure is ongoing. The procedure started in 2009[6] , but Poland missed the target by 2013, therefore in that year the Commission called Warsaw again to eliminate the excessive deficit by 2015 with the following nominal deficit targets: 4.8% of GDP in 2013, 3.9% of GDP in 2014 and 2.8% of GDP in 2015[7] .

Forecasts present that deficit will reduced to 2,5% of GDP by 2015, lower than the Council recommendation.

Source: European Commission

1. Table Convergence performance in 2014 Poland Debt Deficit Inflation Long-term interest rate Country in excessive deficit

49.2 +5.7 0.6 4.2 Yes

Czech Slovakia Hungary Republic 80.3 44.4 53.6 -1.9 -3.0 -2.9 -0.1 1 0.9 5.8 2.2 2.7 No No No

Graph 6 GDP/capita in PPS

Source: Eurostat

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

Source: World Bank

The Hungarian situation was a little bit different[8] , because this country was under the procedure since 2004, the year of its EU accession. Firstly the Ecofin Council called on Hungary to reduce its deficit by 2008. Because of the crisis the target could not met, so the Council set 2011 as a new target. However Hungary met the target in 2011, but it was only thanks to one-off revenues linked to the transfer of pension assets from private pension schemes to the state. Since this measure is not a structural one, Hungary remained under the procedure. After many negotiations in 2013, after 9 years, Hungary’s excessive debt has been corrected.

The V4 significantly dependent on FDI inflows; primarily industrial type, which implements technology transfer and expands export capacity. The V4 – contrary to any political wishful thinking that has been talked about in the region – is deeply integrated in the EU’s economy, and it has particularly important ties with Germany.

Foreign direct investment (FDI) inflows are one of the most important sources of productivity and product quality improvements.

Hungary was the first country in the region to attract large FDI inflows (partly due to its fast privatization process). (graph 7) In the middle of the ‘90s competition for FDI became sharper in the region. The competitiveness of the countries is contrasting. (table 2.)

During the last fifteen years many changes happened. By 2014 the most competitive country is Czech Republic followed by Poland. The macroeconomic situation is the best in Czech Republic, after Slovakia, Hungary and Poland[9] . According to higher education and training Poland and Czech Republic are performing better than the others. Competitiveness is often hampered by ill-conceived general and higher education policy, such as the one run in Hungary.

FDI inflows felt sharply after the onset of the crisis such as investments. The net investments are the best in Poland with the 8% of GDP and the worst in Slovakia with almost 0%, mainly due to the low quality of transport infrastructure[10] . In Hungary investments started to grow mainly due to the EU co-financed projects in 2013 after 5 years of stagnation.

2. Table Competitiveness ranking, 1999/2014 Czech Republic 41 37

Hungary 33 60

Poland 37 43

Slovakia 48 75

1999 2014 Source: WEF

Based on the report of the 2015 World Bank report[11] doing a business is the easiest in Poland and the hardest in Hungary[12] . The ease of doing business is really important in connection to the competitiveness. The most problematic factors are the tax regulation and corruption[13] in all four states. The worst situation in sense of paying taxes is in Czech Republic and the best is in Poland. The simplicity and predictability of the tax system is undermined by the special taxes[14] in Hungary. Although these taxes contributed fiscal consolidation and helped avoid higher tax burden on labour, in long term authorities should reduce these taxes and replace them more growth friendly fiscal instruments.

According to the Special Eurobarometer[16] corruption in a broader sense is perceived as widespread in these countries (82 % in Poland, 89% in Hungary and 90% in Slovakia). More than half of Europeans (56%) think the level of corruption in their country has increased over the past three years, (CZ: 76%, SK:53%, HU:52%, PL: 38%) V4 countries lag well behind the EU average in terms of innovation capacity. According to The Innovation Union Scoreboard[17] the V4 are performing below than the EU27 average. Czech Republic, Hungary and Slovakia are moderate innovators[18] and Poland is a modest one, which means that its performance well below[19] the average of EU27.

The economic eect of innovation is not really high either. From the 27 Member States Poland is 24th , which means innovation has little impact on economy. Hungary is first from the four countries with its 10th place, due to the fact that the contribution of medium and high-tech product exports to the trade balance is high – mainly in the car industry. Low tertiary education attainment levels can limit smart, sustainable growth, hamper productivity, innovation and competitiveness. Equivalent qualification levels can increase the technological progress and the intensity of global competition.

In every countries from the V4 tertiary educational attainment rate has increased since the EU accession, but in the case of Hungary, Czech Republic and Slovakia is still well below the EU28 average. However Hungary is already exceed its Europe2020 national target, which is the lowest among the countries (30,3%), more measure are needed to ensure quality and labour market relevance. In Czech Republic tertiary education attainment has increased to 26.7% in 2013, but it still has not reached the national target (32%) In the case of Slovakia the 40% national target is at risk[20] , taking measures to increase the quality of teaching in order to raise educational outcomes would be necessary.

Poland

After the collapse of the Soviet Union and the socialist block, markets of the Polish economy vanished. This meant high inflation and a huge GDP decrease. Directly after the regime change Poland started to implement reforms, which helped to reach the state current position. Different convergence paths can be explained by the divergence (in sense of timing and nature of the reforms) of the structural and institutional reforms. In 1999 several structural reforms had been implemented (education, pension), this is why the crisis reached Poland in a better position than its neighbours.

As stated by Mark Allen, the IMF’s representative for eastern and central Europe: „Poland was able to manage the crisis mainly because of the work the government did before 2008. They didn’t allow the boom in the banking system and the housing boom to get out of hand. They didn’t run large fiscal deficits before the crisis. Their debt, even though, at close to 55 percent, is a little bit high by emerging market standards, did not give rise to concern[21]. „

Following important reforms which have deeply transformed the structure of the economy, Poland has economically integrated to the eurozone, caught up steadily with the EU15 in GDP-per-capita terms[22] .

By 2013, the country had achieved levels of income and quality of life likely never experienced before. Since the accession GDP increased by 48,6% and 20% from this growth was reported during the period 20082013[23] . (graph 5.)

Productivity steadily improved[24] since the accession, and the labour cost per unit has decreased[25] . Growth is driven by export growth, private consumption, and infrastructure investments linked to the transfers of EU funds and the 2012 European football championship. Poland is a fairly big economy with a large domestic market, which makes it less dependent on exports.

Overall, the fact that Poland – by far the biggest of the V4 economies - did so well speaks not only to its strong economic fundamentals, but also to good policy management and sound and well-chosen economic policies.

Graph 8 Tertiary education attainment

The results of the economic prosperity of the country were used by the Polish government to improve the international position of the country, which was supported by the country image and international political actions (such as the Year of Chopin, the Polish Presidency of the EU, the Polish-Ukrainian joint organized Football Championship). Warsaw is trying to obtain the right position, according to its growing economic weight, both in the international and European arena. Tusk government not only was able to stabilize the relationship with Berlin, but Poland became one of Germany’s major allies in the European crisis management.

Warsaw responded to the crisis less sensitively than the international standards.

Poland was the only EU country where negative economic growth[26] did not occurred as a result of the crisis. Poland added significant fiscal stimulus during the crisis. This was one of the major reasons why Poland did not fall into recession during the crisis. The government enacted a discretionary fiscal relaxation of 4,5 percent of GDP and allowed the automatic stabilizers to work[27] . As a result, the fiscal deficit rose from less than 2 percent of GDP in 2007 to more than 7 percent in 2009 (graph 10). Policymakers had considerable room for countercyclical monetary and fiscal policy, because Poland did not have any severe macroeconomic imbalances on the eve of the crisis.

Source: Eurostat

Graph 9 Real GDP growth rate, 2006-2013

Source: Eurostat

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

Source: Eurostat

3. Table Standard VAT rates Poland 23 22

Czech Republic Slovakia 21 20 19 19

Hungary 27 20

2015 2008

Source: European Commission

Reflect to the excessive deficit procedure Warsaw has implemented some reforms to increase state revenues[30] : ●increasing VAT rates from 22% to 23% and parallel decreasing the rates for basic food products from 7% to 5%. Limiting the VAT fraud: reducing the limit authorising tax payers to the exemption from the obligation to keep cash register, extension of the reverse charge mechanism and the joint and several liability of the purchaser for tax liabilities of the supplier of steel products, fuel and nonprocessed gold ●increasing social security contributions (through limiting the part transfer red to OFE (Open Pension Funds) in favour of the part transferred to FUS (Social Insurance Fund) – 2011 as well as owing to the increase of the Similarly, monetary policy was accommoda- pension insurance contribution in 2012 tive at first, with aggressive cuts in the policy ●introducing a fee for exploiting certain natinterest rate. ural deposits of copper and silver Although the Polish government debt has increased since the outbreak of the crisis, it is still under the magic 60% of GDP[28] . The general government debt-to-GDP ratio fell from 55.7% in 2013 to 49.1% in 2014. It is set to amount to 50.1% in 2016. (graph 15) Poland was granted a precautionary loan under the IMF’ Flexible Credit Line in 2010 but hasn’t needed to draw on the funds[29] , because the government insisted to solve the problems by structural reforms and cut spending. Significant fiscal consolidation helped to reduce the deficit and contain government debt. Poland’s fiscal framework contains a public debt rule which is anchored in the Constitution and limits gross debt to 60% of GDP.

The abolishing of the early retirement scheme and VAT hikes are the most important consolidation measures[31] , contributing 1.3% of GDP and 0.5% of GDP respectively by 2013. In addition, a temporary expenditure rule limiting the growth rate of flexible expenditures will contribute substantially[32]. The 2014 pension changes reverse part of the 1999 reform, which gave rise to transitional costs as pension contributions were diverted to the mandatory second pillar. The changes in the pension system lowered gross general government debt by around 9.3% of GDP[33] .

The 1999 pension reform created a three-pillar system: notional define contribution (FUS), pay-as-you-go (OFE) and voluntary private fund. Poland decided to cut back on the transfer to the second pillar due to reduce the fiscal deficit. Moreover the transferred Treasury bonds were cancelled and the corresponding pension liabilities were registered in individual subaccounts in the first pillar. Therefore in 2014 the transfer to the second pillar was scaled-back, this one-off drop in explains the 5.7 surplus on the budget. (Table 1) (In contrast Hungary not only cut the transfers, but eliminated the second pillar) Due to the individual pension bills, introduces in 1999, the amount of pensions to be paid from the first pillar will decrease dramatically (to 30-50% of the last payment), and this amount will be lower than the second pillar’s pension payments.

The Polish pension system reform is likely to reduce long-term debt (table 4), while in Hungary the elimination of private pension funds in the system increases the level of debt. Pension costs make up a large part of public expenditure especially in Hungary, in 2060 it will reach 14.7 % of the GDP, which is the highest among the four countries. (table 4) Despite of the changes in 2014 first pillar will still require further reforms to mitigate fiscal contingencies. As result of the decreasing replacement rate pensions will be lower and old-age poverty may appear as a serious problem. To prevent this minimum guaranteed pension was designed, but developing efficient social assistance mechanisms for poor pensioners stands out as an important long-term policy challenge[34] .

Hungarian and Polish pension reform damaged social trust in the pension system and harmed the credibility of future structural reforms more broadly. The increased role of the public pay-as-you-go system in a context of rapid population ageing may further lower future replacement rates.

Poland faces long term sustainability risk of public finances mainly related to the projected increase in healthcare spending.

Therefore Warsaw is currently preparing a new National Health Programme and a new Public Health law, to improve this sector cost-effectiveness.

4. Table Pension expenditures in % of GDP % change (2010-2060) -2.2 1.1 5.2 2.8

2060 9.6 11.1 13.2 14.7

2010 11.8 9.1 8.0 11.9

Poland Czech Republic Slovakia Hungary

Source: European Commission Adequacy and sustainability of pensions

The other important challenge related to the tax collection or tax administration system: increasing the eectiveness of tax administration and tax compliance. Poland has the second highest (after the Slovak Republic) cost for tax administration per net revenue collection[35] .

The country’s growth in the last decade was remarkable. (Graph 9) In order to be able to continue this tendency further steps will be needed, such as improving the business climate and innovation capacity of the Polish companies. Medium technology sectors using cheap and comparatively low-skilled labour, which can undermine the future growth.

The ratio of Gross Value Added is lower than the other V4 countries[36] . Firms with a higher technological content tend to grow faster than low-technology sectors.

Some of the reforms not involve either significant budgetary or distributional costs; others are more complex and need better preparation. Fortunately necessary reforms have been implemented always. The challenge is not only identifying the needful measures, but to find the way of political economy to implement them.

Czech Republic

Czech economy started to grow in 2010 with 2,7 %, but after the growing tendency the economy dropped back. (graph 9) Thanks to the decrease of the export and internal consumption (private and public). Real incomes felt due to government measures, such as freezing wages and cutting back allowances and benefits. Like all the V4 countries, the Czech growth is depending on external conditions. The majority of its manufacturing exports are directed to Germany and Western European countries. The Czech economy exited the recession and started to recover during the second half of 2013, primarily driven by domestic demand and growth in export markets. Real GDP growth is expected to be stronger in 2015 and 2016 with the remaining main driver: domestic demand.

A sharp fiscal adjustment led to an exit from the Excessive Deficit Procedure[37] (EDP) and kept debt levels contained, but exacerbated the recession. The adjustment was driven mainly by a compression of capital expenditure, partly due to implementation bottlenecks, while an increase in VAT rates helped boost revenue.

As a result of the measures and also to oneo factors, the overall fiscal deficit narrowed from 4.2 percent of GDP in 2012 to 1.5 percent in 2013. (graph 10) In 2014 the new Czech government has decided to adopt a fiscal policy that aims at keeping the public deficit below 3% GDP and a reform agenda focussed on promoting external competitiveness, investment, exports, infrastructures and quality of public services, which were recommended by the European Commission also[38] .

With respect to pensions, the government aims to propose to withdraw the second pillar, as well as introducing measures to ensure the long-term stability of the public pension system and an adequate level of pensions.

The pension system is currently relatively successful in preventing old-age poverty.

Contrary to the Polish and Hungarian example, Prague not dismantled but created a second pillar to its pension system in 2013.

Although it is a pity that due to the low participation and minimalized political support it is going to be demolished in 2016.

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

Source: European Commission Adequacy and sustainability of pensions

Graph 12 Unemployment rate, 2003-2013

Source: Eurostat

Healthcare spending, cost effectiveness and governance in the healthcare sector are waiting for optimisation. Czech healthcare budget being below the EU average. The lack of transparency and data of the public procurements are also a problem. Increasing health care and pension expenditures due to population aging will be a risk in the near future for the fiscal sustainability[39] .

Overall the Czech economy was not hit hard by the crisis. Unemployment has been falling in recent months and it is the lowest among the four countries.(graph 12)

Even so it was improved, there are still problems with the Czech labour market. Due to the limited use of flexible working time and lack of childcare services employment rate of women remains significantly lower than men. Furthermore there are obstacles to higher female labour-market participation and public employment services do not guarantee transitions from unemployment to employement. In this field taking more measure are definitely needed in the future.

Tax evasion is a big problem for this country also, mostly in the field of VAT and excise duties. Improve the efficiency of tax collection, reduce compliance costs and fight tax avoidance is a challenge for the government. To tackle VAT evasion extension of the reversecharge mechanism to more goods and services and a broader definition of the ʻunreliable taxpayerʼ status were introduce.

In 2016 electronic reporting of sales for VAT and income tax purposes and a central registry of bank accounts will introduce to reduce the VAT fraud[40] .

Tax revenue in the Czech Republic still relies heavily on taxation of labour income due to the high labour taxation. In 2015 some measures entered into force to reduce these common public charges for working pensioners or families with two or more children.

Property taxes are really low comparing to the other member states, and not linked to the real value of property. Pollution and resource taxes are very low (0.02 % of GDP), which does not provide sufficient incentives for environmentally-friendly behaviour, especially in waste management.

Slovakia

Slovakia, the former Central Europe tiger, was hit hard by the crisis in 2009. It was not because of its financial system, but its export orientated economy. Tight trade linkages with Germany and other euro area countries mean that growth shocks in those countries are transmitted to Slovakia also via slower trade growth. The recovery depended on the improvement of euro area confidence, and it was driven by the export[41] and domestic demand[42] .

Slovakia is the only eurozone member from the V4. The Slovak koruna joined the Exchange Rate Mechanism (ERM II) on 28 November 2005. On 1 January 2009 Slovakia joined eurozone with hope it will provide some protection against negative impact of global downturn[43]. . Slovakia faced the financial crisis with lower vulnerabilities than other countries. Euro membership also meant early participation in all collective crisis-related measures and hence much more financial and capital market stability.

General government deficit increased after the outbreak of the crisis and reached 8% of GDP in 2009, which has resulted an excessive debt procedure in the country. Due to this procedure many macroeconomic developments happened.

Strong fiscal consolidation contributed to confidence financial markets in Slovakia.

However, it has also undercut domestic drivers of growth, in particular as public investment spending has fallen and tax rates have risen. As a consequence of budget consolidation, low income growth, stagnating employment, deteriorating terms-of-trade and the increase in servicing costs of loans as a percentage of income, domestic demand felt back.

Responding to the crisis many changes happened. Slovakia also reformed its pension system, but not the way as Hungary and Poland. The general pension fund reform improved the long term sustainability of the pension finance.

The reform included automatic increase in the statutory retirement age depending on life expectancy, change in the indexation of pension benefits, strengthening solidarity in awarding new pensions and changes to the maximum assessment base for the payment of social insurance contributions. Moreover the reform introduced the fourth type of pension fund, so-called index -linked, whose performance will replicate developments in one or more stock market indices. The proposed change enables savers to divide their savings into two pension funds, one of which must be a bond pension fund[44] .

Slovakia implemented tax reforms in 2013 that replaced the flat income tax with a progressive one[45] , which should promote greater equity; and phasing out lower taxation of the self-employed should reduce tax avoidance. Furthermore the corporate income tax rate has been raised from 19% to 23%.

Due to the fight against tax fraud VAT eective rate increased with 2%. VAT control statement, compulsory down-payment on VAT were introduces, and inspection on VAT audit[46] were emphasized. According to the national target of VAT collection eectiveness has to reach 72% by 2020, this was 53% in 2012[47] .

The implicit tax rate on labour is the lowest among the four countries, and lower than the EU28 average; but real estate and environment taxes are a problem is Slovakia as well as the other countries[48] .

Unemployment has remained high, and still the highest among the four countries. (graph 12.) High unemployment rate can undermine the growth. A significant part of unemployment is located in more remote rural regions with a low population density. Despite of this fact mobility of unemployed people are low due to the high living and housing cost and weak travelling infrastructure.

Unemployment had reached 20 per cent of labour force in the early 2000s. However, strong growth and convergence brought a reduction in the unemployment rate to a low of 10 % in 2008. Following this, the fall in exports in 2008/9 was associated with a new increase in unemployment to nearly 15 per cent. Nowadays it reached 12,4%, but it still above the EU average (9,9%). The jobless recovery and the high unemployment rate illustrate imbalances in the economy. The most problematic groups are women, Roma and young people. 60% of the unemployements are low skilled and long-term unemployed. Due to its structural nature unemployment rate will remain around 12%[49] .

Graph 13 The ratio of trade of machinery and transport equipment to total export in million EUR

In order to increase employment rate Slovakia should increase the quality and attainment of education, because low skilled workers and women have particularly low employment rates. The high ratio (6,4%) of early school leavers, especially for Roma people, calling for targeted measures also.

Prior to the financial crisis, Slovakia succeeded in reducing public debt levels. Government debt has risen sharply since the 2009 global crisis and is now running into constitutional debt ceilings. (graph 15) Slovakia adopted a complex fiscal legislative reform in December 2011[50] . Fiscal Responsibility Constitutional Act introduces debt brakes, new institutional framework (Council for Budget Responsibility and two committees – for macroeconomic forecasts and for tax forecasts), and transparency rules.

The purpose of the Act is to, first, entrench certain fundamental fiscal rules in the legal system, and second to create competences and obligations for public authorities that would otherwise being prevented by other constitutional provisions or constitutionally problematic or insufficient.

To help plunging car industry government also introduced car-scrapping bonus to boost car sales, mirroring similar subsidies in France and Germany. The first wave was launched in early March and the second in April. Government allocated 55 million euro to subsidy purchase of 44,200 new cars[51] .

Source: Eurostat

Export (mainly manufacturing) industries have received special attention in Slovakia too. Various measures were used to attract foreign direct investors. Automobile industry has grown almost from nothing in Slovakia during the past eleven years, which has become the most important exporting industry. It gives the GDP’s ¼, and the export’s 1/3.

Unit labour costs declined[52] in all major export industries between 1998 and 2007.

This is in line with the dominating importance of price competiveness for Slovak exports.

This export-led growth strategy has also had its vulnerabilities. The Slovak economy has become strongly dependent on foreign demand (graph 14), especially from Germany and the euro area.

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

Source: Eurostat

Business cycles in the industries concerned are often more pronounced than in other industries, especially services. As an example during the 2008-2009 downturn the drop in demand was especially strong for automobiles, iron and steel, and building materials.

Furthermore, the export industries have expanded are mainly capital intensive, meaning that growth of production translated only marginally into a reduction of unemployment.

The focus on large companies increases the mismatch on the Slovak labour market, which is characterized by large regional imbalances.

The rapid success of the export-led growth strategy was also achieved by a concentration on mobile industries which, though they could move in quickly, could also leave easily, meaning that a relatively minor worsening of business conditions or cost competitiveness can result in significant capacity outflows.

However reforms in taxation, pension and healthcare systems can ensure sound public finances, low investments can undermine Slovakia competitiveness and growth prospect, like the high unemployment rate.

In these two fields significant changes are needed.

Hungary

Hungary’s early “golden boy” status has vanished. After the regime change the governments were unable to set in motion the economy, inflation went double-digit, public debt and deficit proved to be difficult to keep under control, but from the midnineties a rather short period of stabilization and rapid modernisation kicked in.

During the last two decades Hungary as well as the other V4 countries have become a very much integrated part of the EU economy which is demonstrated in the graph 14.

The global financial and economic crisis hit Hungary very hard. Hungary was the first EU country that asked for financial support from the IMF in 2008. In response to the crisis, Hungary took steps at two key areas: fiscal stability and financial stability. The government took radical steps to diminish costs, and bring the spending to a sustainable rate.

All together spending has to be cut by approximately 5 billion Euros in 2009-2010.

The package contained the elevation of general VAT-rates from 20 to 25 percent (currently it is at 27 percent), with some

exceptions: dairy products, wheat, flour, or starch-made products and district-heating costs pertain under a preferential, 18 percent tax rate. Excise duty for cigarettes, fuel and alcohol has grown. The income-tax classes have been changed, so the net income of the most employees rose. But after the election the government set up a new economic model which is called unorthodox economic policy.

Hungary’s economy emerged from the 2012 recession and entered to a weak growth path in 2013. This growth is mainly driven by government investment and consumption, and also exports. Private demand remained weak, and credit to the retail and corporate sectors continued to contract.

Hungary’s medium-term growth prospects remain modest, as private consumption is still hampered by the ongoing repair of households’ balance sheets; low employment among low skilled workers and shortcoming in labour and product market; while the weak business environment continues to weigh on private investment.

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

Source: Eurostat

Monetary easing has helped to return to growth. The Hungarian National Bank has cuts its policy rate since 2012 to support demand and credit growth[54] . The central bank also introduced the Funding for Growth Scheme in 2013 with the aim of easing access to finance for SMEs and improving their credit conditions through the provision of subsidized lending interest rate. Despite strong take up it is still not clear whether it produce more growth in the economy or not.

External vulnerabilities have been the key risk of the Hungarian economy. External debt remains high and large open net position can create more volatility in the future.

Growth potential is held back by low employment among low-skilled and weak investment, making further structural reforms essential.

Hungary has demonstrated a strong commitment to keeping the fiscal deficit within the EU limit. (graph 10). No surprise, since it has spent nine years under the excessive deficit procedure. A number of special taxes introduced over the recent years have helped bring the fiscal deficit below 3%[55] .

After the introduction of flat-rate personal income tax in 2011, incomes[56] of the general government budget decreased. Therefore sector-specific taxes were introduced and their role still increasing despite the country specific recommendations[57] . Environment taxes were increased such a way that questioning the green economy goals[58] . The implicit tax rate on labour is the highest among the four countries and above than the EU28 average[59] . Reducing it on lowwage earners would be necessary.

Ensure a stable, more balanced and streamlined tax system for companies, including by phasing out distortive sector specific taxes would be necessary in a long run.

VAT fraud is a problem in Hungary as well as the other three countries. Therefore a new surveillance system has been established from January 2015, which will permit the real-time monitoring of the transport of VATliable goods and establishment of on-line links to cash registers in the retail sector has been completed by the end of 2014.

Regulating the fiscal framework after 2010 has lead to mixed results. Long-term sustainability is questionable due to incomes after the phasing out of special taxes. Legal actions have to be taken to improve the transparency of public finances.

The basic feature Hungarian economic policy since 2010 (sometimes misleadingly labelled by the government as „unorthodox”) is keeping the VAT rate at a very high level (27%) and more importantly applying one-off sectoral „crisis” taxes imposed on whatever sector that can be taxed. The application of these taxes (accounting for 2200 billion Hungarian forints (EUR 7,4 billion) together with the nationalisation (i.e.: confiscation) of the second pillar pension fund assets made it possible to curb the government deficit. These taxes constitute a major burden on some sectors and seemingly spare the population at least it is more difficult to track their imposition on the society later by the companies affected through higher fees and other charges. Here is a list of the nine special tax introduced since 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 a high level, which is forecast to be corrected only at a very slow pace. Despite one-off capital transfers[60] that decreased public debt by around 7% of GDP, and a substantial improvement in the structural balance, government debt has been broadly stable around 80% of GDP since 2009. This reflects the effect of a weakened exchange rate, a low growth performance and high financing costs. (graph 11.)

The Hungarian Constitution contains that the gross government debt should not exceed 50% of GDP. Until it comes down that level the debt GDP ratio has to decline every year, after 2016 nominal public debt can increase only by half of expected real GDP growth, which supposes a counter-cyclical fiscal policy[61]. Budgetary risks and the small reduction path can undermine longterm debt reduction which highlights the importance of fiscal sustainability and growth friendly economic policy.

The Hungarian export deflators have broadly stagnated since 2000, so far the other V3 countries were able to increase their deflators by around 30% to 70%. All V4 countries are primarily involved in producing machinery and transport equipment products for exports, with Poland having a somewhat less concentrated structure compared to the other V3 countries. The Hungarian export performance suggests that the deterioration is primarily related to tightening supply constraints.

This is partly linked to the inability to attract new FDI inflows but also to the weak spill over linkages between multinationals and domestic companies. Although recently there have been some large investment projects in the automobile industry, a marked improvement in the export sector is not expected.

The relapse of Hungary's competitiveness in the export sector is primarily related to the machinery and transport equipment subsector. (graph 13) Nevertheless, the country continues to have the highest level of export unit values, thanks to the still competitive product quality in regional comparison[62] .

Although unemployment rate is around 10% (graph 11), increasing employment rate to reach its Europe2020 national target labour market policy measures are inevitable.

Labour force participation also remains low for women and for old cohort. Maternal employments rate is the lowest within the OECD[63] .

The poor overall health status of the Hungarian population implies that many workers are aected by debilitating health conditions, in particular at advancing age, this one reason why older workers market participation is low. The public works programme has increased employment, but has a poor record in reintegrating the non-employed to regular work. Like in Slovakia unemployment rate has a strong regional profile, which calls for measures to mobilize the workers and create more jobs in the peripheral regions.

Therefore revision of the public works scheme, creation of a Roma labour market integration policy scheme and reduction poverty, support the transition between different stages of education and towards the labour market are should be done in the near future. Long-term improvements in labour market outcomes will also depend on complimentary structural reforms, improvements in health care and public education.

Conclusion

The EU as a whole and even more so, the Eurozone was heavily hit by the sovereign debt crisis, which resulted in way above the mark national debt to GDP ratios. In the light of this V4 countries’ performance in controlling the national debt was a relative success, although in absolute terms all of them experienced a rising debt. The analysis of growth trends clearly show that the dramatic decline in 2009 was followed by consolidation in 2010.

Economic success and political decisions are interlinked to a great extent in the region.

This stems from the fact that politics in general and the direction in which the political class wants to direct the country is more important in this region in terms of end results both in political and economic terms. A new government in the V4 countries can have dramatic impact on the geopolitical, EU-political and economic policy path the country takes. Long-term political stability is still in nascent form, or in a more pessimistic tone: is a rarity in the region.

V4 countries harnessing the benefits of EU membership differs a lot. Some of the new members were more successful than others in using EU-accession as an economic and modernisation leverage by halving the number of people living in poverty and raising the per capita GDP by almost fifty percent.

There is obviously a clear difference in the group when euro-status is considered.

When it comes to EMU issues, the four countries are in different position and have differing views. The way V4 countries approach the Euro accession and crisis management is also a mix of economic and political features.

These states differ a lot: Slovakia, a relative latecomer in economic reforms is part of the currency union. Poland, Hungary and the Czech Republic are not Euro-members. But even this sub-group is divided: Poland intends to join whenever requirements are fulfilled while the Hungarian and the Czech governments are cool on accession.

The future of the V4 co-operation is dim: clearly the divisive forces are way stronger than the rather opportunistic cohesive ones (such as the drive to gain as much EU funds as possible). The case of Hungary is particular, it has maneouvered itself onto a path that leads the country away not only from the mainstream European political consensus but also from the other Visegrad countries.

As far as desirable policy actions from the EU’s side vis-à-vis the V4 countries are concerned, a mix of pragmatist and positivistic engagement is recommended.

This would entail taking a strong stance in relation to the respect of the basic values of Europeaness but also an open and understanding attitude. Besides the European institutions, Germany will also have to play a decisive role, not for its own good this time but for the good of this region this time - hopefully.

[1]Attila Marjån: 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/pressdata/en/ecofin/143282.pdf [6]Council of the European Union (2013) http://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/en/ecofin/140017.pdf [7]European Commission (2014): http://ec.europa.eu/economy_finance/economic_governance/sgp/pdf/30_edps/126-07_council/2014-1118_pl_-_ear_en.pdf [8]Council of the European Union (2013) http://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/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=9ea7d07d30e8adf98854aaa14d0881 19d3d3b7c2244b.e34OaN8PchaTby0Lc3aNchuMchuNe0?tab=table&plugin=1&pcode=tsdec310&language=en [25]Labour cost http://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/201411-18_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 reflections in the public sector. http://www.cipfa.org/-/media/files/policy%20and%20guidance/the%20journal%20of%20finance%20and%20management%20in%20public%20services/vol%2010%20number%201/ad am_reichard.pdf

Notes [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 technology 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 Republic, 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&language=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

Constitution of Hungary: Article 36. http://net.jogtar.hu/jr/gen/hjegy_doc.cgi?docid=A1100425.ATV Last accessed: 20-02-2015 Council of the European Union (2014): Council closes excessive deficit procedures for Belgium, Czech Republic, Denmark, Austria, Netherlands and Slovakia. http://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/en/ecofin/143282.pdf Last accessed: 2002-2015 Council 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.pdf Council of the European Union (2014): Council closes excessive deficit procedures for Belgium, Czech Republic, Denmark, Netherlands, Austria and Slovakia http://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/en/ecofin/143282.pdf Council of the European Union (2013) Excessive deficit procedure for Poland: InsuďŹƒcient action taken, Council issues new recommendation http://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/en/ecofin/140017.pdf ECB (2014): Convergence Report. http://www.ecb.europa.eu/pub/pdf/conrep/cr201406en.pdf ECFIN (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.pdf Eurobarometer(2014): Public opinion in the European Union 82. http://ec.europa.eu/public_opinion/archives/eb/eb82/eb82_first_en.pdf European Commission (2013): Special Eurobarometer on Corruption (397) http://ec.europa.eu/public_opinion/archives/ebs/ebs_397_en.pdf Last accessed: 20-02-2015 European Commission (2013): The Innovation Union Scoreboard 2013. http://ec.europa.eu/enterprise/policies/innovation/files/ius-2013_en.pdf Last accessed: 20-02-2015 European Commission (2014a): Slovakia and the euro: http://ec.europa.eu/economy_finance/euro/countries/slovakia_en.htm Last accessed: 20-02-2015 European Commission( 2014b): Economic forecast for Poland http://ec.europa.eu/economy_finance/eu/forecasts/2014_autumn/pl_en.pdf Last accessed: 20-02-2015 European Commission (2014c) Macroeconomic imbalances in Hungary 2014. http://ec.europa.eu/economy_finance/publications/occasional_paper/2014/pdf/ocp180_en.pdf Last accessed: 20-02-2015 European Commission (2014): Europe 2020 target: Tertiary education attainment. http://ec.europa.eu/europe2020/pdf/themes/28_tertiary_education_02.pdf European Commission (2014): Report on action taken by Poland in response to the Council recommendation of 10 December 2013 in order to bring an end to the situation of excessive deficit. http://ec.europa.eu/economy_finance/economic_governance/sgp/pdf/30_edps/126-07_council/2014-11-18_pl_-_ear_en.pdf European Commission (2014) Taxation. http://ec.europa.eu/europe2020/pdf/themes/02_taxation_02.pdf European Commission (2014): Adequacy and sustainability of pensions http://ec.europa.eu/europe2020/pdf/themes/04_pensions_02.pdf European Commission (2014): National Reform Programme of the Slovak Republic 2014 http://ec.europa.eu/europe2020/pdf/csr2014/nrp2014_slovakia_en.pdf European Commission (2014): Stability Programme for the Slovak Republic 2014-2017. http://ec.europa.eu/europe2020/pdf/csr2014/sp2014_slovakia_en.pdf European Commission (2015): VAT Rates applied in the Member States of the European Union. http://ec.europa.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.pdf European 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 2015 http://ec.europa.eu/europe2020/pdf/csr2015/cr2015_slovakia_en.pdf

References Eurostat: Nominal unit labour cost http://ec.europa.eu/eurostat/tgm/table.do?tab=table&init=1&language=en&pcode=tipslm20&plugin=1 Last accessed: 20-02-2015 Eurostat: Share of trade with EU28. http://ec.europa.eu/eurostat/tgm/table.do?tab=table&init=1&language=en&pcode=tet00036&plugin=1 Last accessed: 20-02-2015 Eurostat: Government debt http://epp.eurostat.ec.europa.eu/tgm/table.do?tab=table&plugin=1&language=en&pcode=tsdde410 Last accessed: 20-02-2015 Eurostat: Exports of goods and services in % of GDP http://ec.europa.eu/eurostat/tgm/table.do?tab=table&init=1&language=en&pcode=tet00003&plugin=1 Last accessed: 20-02-2015 Eurostat: GDP per capita http://appsso.eurostat.ec.europa.eu/nui/show.do?dataset=nama_aux_gph&lang=en Last accessed: 20-02-2015 Eurostat: GDP growth http://epp.eurostat.ec.europa.eu/tgm/table.do?tab=table&init=1&plugin=1&language=en&pcode=tec00115 Last accessed: 20-02-2015 Eurostat: Productivity http://epp.eurostat.ec.europa.eu/tgm/refreshTableAction.do;jsessionid=9ea7d07d30e8adf98854aaa14d0881 19d3d3b7c2244b.e34OaN8PchaTby0Lc3aNchuMchuNe0?tab=table&plugin=1&pcode=tsdec310&language=en Last accessed: 20-02-2015 Eurostat: Labour cost http://epp.eurostat.ec.europa.eu/tgm/table.do?tab=table&init=1&language=en&pcode=tec00130&plugin=1 Last accessed: 20-02-2015 Eurostat: GDP growth http://epp.eurostat.ec.europa.eu/tgm/table.do?tab=table&plugin=1&language=en&pcode=tec00115 Last accessed: 20-02-2015 Eurostat: Share of trade with the EU 28 http://ec.europa.eu/eurostat/tgm/table.do?tab=table&init=1&language=en&pcode=tet00036&plugin=1 Last accessed: 20-02-2015 Eurostat: Long term interest rate: http://ec.europa.eu/eurostat/tgm/table.do?tab=table&init=1&language=en&pcode=tec00097&plugin=1 Eurostat: International trade of machinery and transport equipment http://ec.europa.eu/eurostat/eurostat/tgm/table.do?tab=table&init=1&plugin=1&language=en&pcode=tet0 0009 Eurostat: Tertiary education attainment http://ec.europa.eu/eurostat/tgm/table.do?tab=table&init=1&language=en&pcode=tsdsc480&plugin=1 Hungarian Central Statistical OďŹƒce: Incomes of the central budget https://www.ksh.hu/docs/hun/xstadat/xstadat_evkozi/e_qse006i.html Last accessed: 20-02-2015 Hungarian National Bank: Base rate history http://www.mnb.hu/Jegybanki_alapkamat_alakulasa Last accessed: 20-02-2015 IMF (2012): Poland continues as bright spot in region http://www.imf.org/external/pubs/ft/survey/so/2012/car020312a.htm Last accessed: 20-02-2015 IMF (2012): Republic of Poland—Review Under the Flexible Credit Line Arrangement http://www.imf.org/external/pubs/ft/scr/2012/cr1212.pdf Last accessed: 20-02-2015 IMF (2014):IMF Country Report: Poland. http://www.imf.org/external/pubs/ft/scr/2014/cr14174.pdf

IMF (2014): Database http://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%2CG GXWDG_NGDP&grp=0&a= Last accessed: 20-02-2015 Marján, Attila (2014): The new EU voting system ―The old west-east north south division. Modern Diplomacy. http://www.moderndiplomacy.eu/index.php?option=com_k2&view=item&id=454:thenew-eu-voting-system-the-old-west-east-north-south-division&Itemid=569 Last accessed: 20-022015 Marján, Attila: EU-rule changes force a Visegad re-think. Europe’s World. 2014. Spring OECD (2011): Restoring public financeshttp://www.oecd.org/gov/budgeting/47860307.pdf Last accessed: 20-02-2015 OECD (2014a): Economic Surveys, Poland http://www.oecd.org/eco/surveys/Overview_Poland_2014.pdf Last accessed: 20-02-2015 OECD (2014b): Economic Survey of Hungary. http://www.oecd.org/eco/surveys/economic-survey-hungary.htm Last accessed: 20-02-2015 Ódor ,L’udovít: Fiscal framework in Slovakia. http://www.oecd.org/gov/budgeting/49778688.pdf Last accessed: 20-02-2015 Reichardt ,Adam: Poland and the global economic crisis: Observations and reflections in the public sector. http://www.cipfa.org/-/media/files/policy%20and%20guidance/the%20journal%20of%20finance%20and%20management%20in%20public%20services/vol%2010%20number%201/adam_reichard.pdf Last accessed: 20-02-2015 Visegrad.info (2009): Economic crisis. http://www.visegrad.info/economic-crisis-inceecs/factsheet/economic-crisis.html Last accessed: 20-02-2015 WEF (2014): Global Competitiveness Report 2014-2015 http://www3.weforum.org/docs/WEF_GlobalCompetitivenessReport_2014-15.pdf Last accessed: 20-02-2015 WEF (1999): Global Competitiveness Report http://www.cid.harvard.edu/archive/res/gcr_2000_overview.pdf Last accessed: 20-02-2015 World Bank: GDP/capita in current US $ http://databank.worldbank.org/data/views/reports/tableview.aspx?isshared=true# Last accessed: 20-02-2015 World Bank (2014): Doing Business 2015 http://www.doingbusiness.org/reports/global-reports/doingbusiness-2015 Last accessed: 20-02-2015 World Bank (2015): Exports of goods and services % of GDP. http://databank.worldbank.org/data/views/reports/tableview.aspx?isshared=true# Last accessed: 2002-2015