Coming in from the Cold

Nearly a decade on from the Velvet Revolution, the Czechs go to the polls later this month with the 'end of history' an increasingly distant memory. The reinvented nations from behind what was once the Iron Curtain are ready to join the European mainstream

A WALL crumbled, watch towers came crashing down, fences were uprooted, dead ends and mine fields were transformed into transport hubs overnight. Such was the wonder of 1989 that, upon the conclusion of those miraculous events, history itself was proclaimed to have expired.

In a sense it did, at least from the perspective of Western onlookers. Not a great deal of what has happened in the region re-emerging under the "central Europe" appellation has caught the attention of the rest of the continent. No wars, no riots; just the odd flood that became interesting only when it crossed the German border.

But history did not end. As the Soviet Union and Yugoslavia disintegrated into various grades of chaos, the old Mitteleuropa has been quietly reinventing itself, and is now ready to rejoin the European mainstream. Poland, Hungary and the Czech Republic are set to become full members of Nato next year - a wonder to behold in itself. Those three, together with Slovenia and Estonia, will be within the EU in perhaps five years. The date of their admission depends not so much on their continued progress, as on the amount of time the EU needs to prepare for intense competition from the newcomers. Those Poles, Czechs, etc are underpaid, overworked and soon they will be over here.

It is time to lift the curtain, and take a peek. The money men of the West have been doing that for years, buying, building and trading. Business- class seats on planes flying to Warsaw, Budapest and Prague are packed with men in grey suits. Their companies have invested tens of billions (pounds, not zlotys) into factories and farms that will soon be competing head on - Brussels allowing - with enterprises near you.

You may have heard about the dynamic British economy described as the fastest growing in Europe. Well, east of the Elbe the Polish economy has been growing at around 6 per cent in every one of the last four years, and may hit 7 per cent in 1998. In Hungary, the party promising more than the current 5 per cent growth rate has just been elected to power. The stock markets of Budapest and Warsaw have offered some of the best returns on investment anywhere in the world in the last two years.

The ridiculous zloty, by the way, which could not buy you a bar of soap 10 years ago, is now regarded as a shrewd investment, for those who want a cheap stake in the euro. That eventuality is no longer pie in the sky. Poland may even reach euro-land before Britain.

Many problems remain, of course, and the social cost of the transformation has been high. Unemployment in Poland and Hungary is only now dipping below 10 per cent. From the air, even at this time of the year, Warsaw has the colour of rust: factories, trains, even some of the buildings seem to be decaying.

On the ground level, however, things look more cheerful. Where there was once rubble there now stands an expansive old town, full of well-stocked shops, restaurants, cafes and cinemas showing Anastasia. Progress of a kind. On balmy summer evenings, Poles sit out on the royal street, tucking into sausages and slurping them down with beer, while listening to four musicians - a cross between a rock group and a gypsy band, playing "Love me tender". It could be anywhere in Europe - and it is.

On the steps near the presidential palace, an old lady, bent double, trembling and covered head to toe in rags, begs for money. She would make a perfect frame for your standard television report on eastern Europe, subtitled "Poverty". Except at the moment when she glances furtively at her wristwatch. A small patch of skin - white, smooth, clearly that of a young person - is exposed. The shakes are gone, the "beggar" shuffles away with a full cup.

There are, admittedly, many poor people in the region, and even those with average income would be regarded as destitute in western Europe. At its current pace of development, says a government official, Polish living standards will reach Portugal's by the year 2010. At the moment, an average Pole can afford to buy about a third of what an average EU citizen can.

DESPITE the upheavals of the past decade, society has remained at peace and the hastily built democratic system has proved resilient. In Poland and Hungary, voters have seized every opportunity so far to kick out the government of the day. The conservatives replacing the communists were subsequently replaced by the reformed ex-communists. Last September, the Poles got rid of the reformed communists and brought back Solidarity. Last month the Hungarians voted their reds out and a new bunch of conservatives in. Their next prime minister, Viktor Orban, is 35 years old.

Even the Czechs are flirting with change. In next weekend's parliamentary elections, the Social Democrats are expected to emerge as the biggest party, perhaps big enough to form the first non-conservative government since the "Velvet Revolution" and the subsequent "Velvet Divorce" from Slovakia.

That is as much drama as one can get in central European politics these days. For those used to more interesting times, this can be a little disconcerting. "By and large, I would say Poland is a depressingly normal country," says Konstanty Gebert, a Warsaw columnist and editor, who helped launch the independent trade union movement in 1980. "We've got voter apathy, cynical politicking and coalitions contrary to nature - which is the stuff democracy is made of."

Mr Gebert describes Poland as a "normal, poorly performing European country, rather than a European wannabe". Although things might still go horribly wrong in Russia, he does not think that Poland will ever fall into Moscow's orbit again.

"We have crossed the point of no return," concurs Slawomir Tokarski, an adviser to the minister negotiating Poland's entry into the EU. Two- thirds of Poland's trade is conducted with the EU, he points out, though the question of policing what will soon be the EU's longest eastern border continues to cause friction. At German behest, the Commission has ordered Warsaw to clamp down on traders from the former Soviet Union bringing business to Poland's deprived towns in the east. It is an extremely sensitive - and costly - issue, one that the people in Brussels sometimes fail to appreciate. "We don't want to create another Iron Curtain," Mr Tokarski says.

Border controls and the huge scale of potential agricultural subsidies are the topics that will be haggled over ad nauseum in the coming rounds of accession talks. The volume of legislation that aspiring members must pass in order to come into line with EU members is shrinking in Warsaw and Budapest, where the opposition and governments of the day have largely been united in according the project priority.

Not so in Prague, the capital which used to pretend it was doing the EU a favour by applying for membership, and thought at one time that it could dictate terms. From Vaclav Havel's presidential palace in the castle overlooking the vibrant city, aides have been watching the government make a hash of it. Two austerity budgets last year failed to avert the collapse of the crown, the national currency. The economy has since ground to a halt, real wages are dipping, and unemployment has taken off.

The "Czech model", which has maintained almost full employment while Poles and Hungarians were being laid off in their thousands, has shattered. Its guru, former prime minister Vaclav Klaus, who had the temerity to lecture Baroness Thatcher on Thatcherite economics and the democracies of western Europe on democracy, has been ousted in a corruption scandal. The economic miracle that has turned Prague into one of the most glittering cities in the world has been unmasked as a gigantic pyramid scheme, administered by a kleptocracy as greedy and unbridled as the Suhartos. The "coupon privatisations" did no more than redistribute public property among the government's friends. And the laws the Czech parliament should have passed, by edict of the EU, have not been touched.

"What we have seen in the last year and a half is that the government is not doing anything," says Tomas Jelinek, an adviser to President Havel. With the "philosopher king" recuperating from his latest brush with death, the whole country seems adrift. Much of the economy, especially the banks that have ended up owning the former state-run factories, are crying out to be privatised.

But if next week's elections turn out, as feared, to be inconclusive, who will carry out the reforms that have been postponed by the Klaus administration all these years? Instead of surging ahead of Hungary and Poland, Czechs are finding themselves several years behind their neighbours in economic and political development.

THE STRAINS arising from mass unemployment may further heighten existing racial tensions. Poland has so far been spared the embarrassment of a xenophobic party gaining seats in parliament. In Hungary, the anti-Semitic Truth and Justice party was voted into the legislature for the first time last month, and the incoming coalition of conservatives are also fervently patriotic.

But in the Czech Republic, the extreme right-wing Republicans already have MPs, and are set to gain 10 per cent of the votes this time around. Two local authorities are building walls around neighbourhoods inhabited by gypsies.

The rising tide of xenophobia, and the justified disgust it elicits in western Europe, is emerging as the biggest obstacle to the three countries' plans for European integration. Mr Gebert, the Polish intellectual, fears his people may fall short of established standards of civilised behaviour because of their "high uptake of alcohol, and low uptake of deodorant". But what really stinks is racism, which seems to afflict the countries of the region in equal measure, and may yet impede their progress to the community of European nations. "Xenophobia is like soap and vodka," he says. "We have to change our habits if we are to get into the club."