Comments on: Slovenia’s Economy Falls Off The Roof, While Slovakia Slides Into Recession

By: Latvian abroad

Latvian abroad — Tue, 17 Mar 2009 16:22:55 +0000

I talked with a Slovak friend last summer about the economy. The real estate prices in Bratislava at that time sounded similar (both in absolute numbers and relatively to Slovak incomes) to what Latvia had at the peak of the Latvian bubble in early 1997.

Slovakia has its export-oriented economy but I suspect they also had their own real estate bubble going on, also fueled by Western banks.

By: Devaluation, Euro Membership And Loan Defaults - Some Thoughts For My Critics | afoe | A Fistful of Euros | European Opinion

Tue, 17 Mar 2009 14:00:30 +0000

[...] I differ basically not because I doubt the assertion that Estonia’s inflation rate will meet Eurozone criteria later this year, but becuase I doubt the interpretation of how such an application would be considered. You see, complying with the minimal criteria is only a first step in the process, the EU institutions then have to make an evaluation of the sustainability of the path your economy is on, and of the realism of the exchange rate at which you seek to enter, and since Estonia’s economy, far from being clearly settled on a sustainable path is right in the middle of a boom-bust correction, and there is widespread agreement that your currency is, as of the present time, pretty overvalued. In have gone into all of this on an earlier occasion in the case of the review of the Slovakian situation, but it is clear that they will be unlikely to be sympathetic to any special pleading about your crisis in Estonia (all of Eastern Europe is in crisis), and (especially over at the ECB) will more than likely take the view that while financial support should be offered the best approach is to let you work out your own “imbalances” before you enter, since experience with those countries who entered in Southern Europe has not exactly been positive, and they may even already be having second thoughts as to whether they made the right decision in giving the go ahead to Slovakia and Slovenia. [...]

By: Is The Condition of Hungary’s Economy Really As Bad As It Seems To Be? | Bear Market Investments

Sun, 15 Mar 2009 15:51:00 +0000

[...] “demonisation” process, nor are the other Eastern Economies (even those in the Eurozone as I argue here in the cases of Slovakia and Slovenia) really as sound as some have been making out. Indeed in my view the Hungarian economy is not the [...]

By: Is The Condition of Hungary’s Economy Really As Bad As It Seems To Be? | afoe | A Fistful of Euros | European Opinion

Sun, 15 Mar 2009 15:06:02 +0000

By: wolff

wolff — Sat, 14 Mar 2009 22:56:54 +0000

Hi,

I’m really honored by your opinion on my pieces, thanks.

One more interesting phenomenon from Hungary and Slovakia (although as far as I know the same process is also underway in Poland) the suddenly emerged shopper-toruism in Hungary from Slovakia. As forint fell against euro and the latter was introduced with a relatively low rate against Slovak koruna the people from Slovakia are spending money in Hungary’s border region. It is hard to measure and evaluate its impact and importance and as a story in tabloids and popular news programs it can be simply marginal. We will see, I do not wnat to overestimate it. (But once again it was an opportunity to make felt that subdued fear from Slovaks being in front of Hungary. The whole story was presented not only with interest or astonishment, or pleasure – anyway everyone spending money in Hungary amidst crisis is contributing to the state budget and so on – but with a suppressed anger that Slovaks has euro to spend in Hungary and it is so “strong”, it is almost an insult or a challange to our face!)

By: Edward Hugh

Edward Hugh — Sat, 14 Mar 2009 21:17:28 +0000

Hello Wolff,

You raise a very interesting argument. I also looked at your blog, and again there is a lot more interesting stuff there.

I think you raise interesting, and entirely valid, concerns about the flat tax. I simply hadn’t been thinking about this issue, as it is a little distance away from my main concerns and areas of interest. But you may well be right that it goes quickly from win-win to lose-lose. At any rate this crisis will give some additional data for those working on this kind of problem. The data on Slovak VAT is indeed worrying, as it suggests a very high pass through rate from export contraction to direct consumption.

Unlike the Economist and the EU Commission I have never been especially convinced by the Slovak “miracle”. In addition, there is a much bigger question looming here, which is the one I am trying to flag, and that is the way in which the euro experience is working out for those countries in the east which are members.

We know it provides protection from balance of payments type currency crises, but what else does it do? The experience in the South has not been encouraging to say the least, and now we have disturbing indications from the East.

We all need to take a long hard look at how things are turning out in practice, and be prepared to make substantial reforms as necessary.

By: wolff

wolff — Sat, 14 Mar 2009 19:17:05 +0000

I would be very interested in Slovakia’s budget revenues, especially as the VAT in the first two months yielded only 50% of last years budget income. (The shortfall is 373 million euro.)
http://ekonomika.sme.sk/c/4345557/kriza-moze-rozlozit-rozpocet.html
(Sorry, it is in Slovak) The total budget income is under last years figures with 15%, and this years budget was planned with a 2,9% growth figure…
Maybe it is not independent from the fact, that due to the flat tax Slovakia’s budget is relying on taxes on consumption in a relatively high proportion? (Almost 40% for this year’s plan.) And consumption was driven by credit (now more or less stalled) and not by wages and earnings…