Around 18 months ago a Hungarian friend bought a new apartment in one of the smarter districts of Budapest. It was small, but perfectly formed, with a view of the Danube if one craned one's neck. Ilona fell in love with the flat while looking for a new home after her divorce. The price was at the top end of her budget, but she could just about manage. If the worst came to the worst, she would accept a paying guest.
She thought it odd when her bank recommended a mortgage in Swiss francs. But local interest rates were in double digits; a loan in Hungarian forints would be 13-14 per cent, against 5 or 6 per cent for francs or euros. Ilona, an academic in her early forties, was confused. But most of her friends were doing the same thing, many even borrowing in Japanese yen. Everything would be fine, she was told, when Hungary entered the eurozone. If Ilona didn't exactly understand globalisation, for a few months she felt the benefits in a low-cost loan for the home she adored.
Then, last autumn, came the crunch. The forint crashed, falling up to 40 per cent against the franc by the end of 2008. Ilona's cheap loan suddenly sapped three-quarters of her income. She couldn't find a lodger or a buyer for her beloved apartment, even if she had wanted to sell.
She can, though, rail against the political class, as eastern Europeans have been doing for the past year. In 2009 three prime ministers have already fallen in ex-communist EU countries, with more likely to follow. Among them, in mid-March, went the unlamented Hungarian leader Ferenc Gyurcsány, who negotiated the £15bn IMF bailout that has kept Hungary afloat.
Gyurscány's rise and fall is a typical post-communist oligarch's story. He headed a communist youth organisation before 1989, then became one of Hungary's richest men, making a fortune from insurance before returning to lead Hungary's socialists. He became deeply unpopular a couple of years ago when a private recording became public in which he claimed to have won an election by lying about the economy: "We lied in the morning, we lied in the afternoon, we lied in the evening," he declared with passion.
Cynical though it sounded, he was trying to make a broader point about public life after communism. The Hungarians may have told the biggest whoppers, but most of the former iron curtain leaders have not been entirely honest. At the least they have been in denial about the difficulty of recovering from decades of dictatorship, not only economically, but morally and culturally. A decade of foreign loans and credit, and its get-rich-quick ethic, has hidden underlying problems that went untackled after 1989.
In western Europe we mistakenly lump the east together as one place, "over there." Yet, apart from the experience of living under Soviet rule, these countries have little in common. That slice of shared history will not shape their future, and often they have more antagonisms than similarities. Poor southern Bulgaria is not the same as developed Czech Bohemia.
And not all east European countries are faring badly or need bailing out. Broadly, the countries that swiftly introduced market reforms after 1989, and made tough choices on welfare and subsidies—for example Poland and the Czech Republic—are doing best economically. This is probably because they had popular, trusted leaders like Lech Walesa and Vaclav Havel to guide them along democratic paths. Poland may talk up its economy too much. But most indicators suggest that even with negative growth in 2010, its large internal market will help it to fare better than Greece or Ireland. The Czech Republic has been hit by an export slump, but its debt burden is low and few Praguers were seduced by yen mortgages. Days before President Obama spoke to thousands in Wenceslas Square, the prime minister fell. But there, as in Slovakia and Slovenia, the doubts are about certain politicians, not democratic politics in general.
Countries that dithered over reforms after 1989 and remained partly communist for years afterwards—Bulgaria, for example—are in deeper trouble. In mid-March the prime minister, Sergei Stanishev, asked the EU to run parts of his country, including the justice and national payroll systems, in a novel form of voluntary neocolonialism. Hungary did attempt reforms, but successive governments borrowed beyond their means, subsidising public services to buy popularity. Ukraine is the biggest worry, with a continuing political crisis (they can't find a president and prime minister who can stand to be in the same room), epic corruption and the near collapse of exports to Russia.
Pessimists fear that faith in democracy will evaporate, just as it partially has in the market. I, for one, worry that ancient patterns will reassert themselves. In Poland, a recent local election had to be rerun because too few turned out to vote, while a demonstration against foreign workers from Ukraine and Kazakhstan attracted thousands. In Hungary many of those close to opposition leader (and likely future premier) Viktor Orbán, regularly use "cosmopolitan" as a traditional euphemism for "Jewish."
The comfortable parts of the EU cannot build protective walls beyond which the poorer parts must sink or swim. The commission offers fine words about all of us being in the same boat. But at election time in la France profonde or rural Bavaria, politicians must show they mean it. It was bankers who kept communism afloat, with loans to Soviet bloc regimes. This debt burden hastened communism's fall—East Germany, it turned out, was spending three quarters of its income on interest payments. If nothing is done to nurture fledgling democratic values in the east, it could again be debt that kills belief in capitalism behind the former iron curtain.
