TCS Daily

New Europe's Lessons

By Craig Winneker - November 3, 2004 12:00 AM

A couple of weeks ago, at a press breakfast organized by Slovakia's permanent representation to the EU, Ambassador Maroš Šefcovic said something startling.

Having just been appointed to his country's top diplomatic posting in Brussels, he wanted to introduce himself to journalists in the European capital. He did this skillfully, demonstrating a thorough knowledge of the EU political process and a keen awareness of the challenges facing the bloc and its newest members - the formerly communist countries of Eastern Europe. The media-savvy Šefcovic also showed he could combine the requisite diplomatic charm with a willingness to speak frankly with reporters. But he made one comment that was disappointing, if perhaps inadvertently so, given the common expectation that Slovakia and its neighbors will inject some much-needed energy into the European project.

Šefcovic described the learning process the new EU entrants were undergoing, including a sort of buddy system in which ambassadors from new countries are teamed up with representatives of old ones. The placement of alternating seats at the meeting table - old member, new member, old member, and so on - seems designed to prevent any new power blocs from forming. The Slovak ambassador spoke of it as a kind of orientation into the EU's Byzantine legislative process, but it might more accurately be called an indoctrination.

"We have to absorb the new psychology of being a member state," Šefcovic said. This would have been music to the ears of French President Jacques Chirac, who last year famously scolded the then-applicant countries for not having been "well brought-up" and for not keeping their mouths shut on the subject of the Iraq war. Lately Paris and Berlin have been carping about the low-tax policies being adopted by new member states as a way to boost growth and even threatening some structural-fund blackmail if they don't get with the program. Does the new Slovak ambassador's remarks mean they are now ready to be good pupils of the entrenched Brussels eurocracy? Let's hope not.

True, Šefcovic was being diplomatic. That's his job, after all, and to be fair he doesn't have much freedom to be politically bold beyond what his bosses back in the Foreign Ministry give him. But Slovakia and the other new countries are now full-fledged EU members and they have just as many rights as Old Europe's stalwart nations or even the bloc's traditional driving force, the Franco-German motor. They've played ball for years with the EU in order to attain membership; it's time for them to flex their muscles. Getting up to speed in Brussels is one thing; drinking the Kool-Aid is another.

Fortunately, not everyone is striking such a deferent pose. Just a few days after that breakfast briefing I was in Bulgaria for the first meeting of the European Resource Bank, a network of free-market think-tanks across Europe, including several fledgling ones in Central and Eastern Europe. The keynote speaker at the two-day event - held in the slightly down-on-its-heels ski resort of Borovets - was the indefatigable Mart Laar. Elected prime minister of Estonia at the age of 32 and still currently serving as a member of parliament, Laar is a free-market legend who introduced the concept of low taxes and economic freedom to his country quickly after it threw off the shackles of Soviet communism. In the years since, Estonia has earned the nickname the Baltic Tiger, and its influence is spreading throughout the region. The latest country to accept Laar's gospel of low taxes is... Slovakia, which is now seeing a burst of economic growth and foreign direct investment.

Laar's speech (which included what must be the most entertaining PowerPoint presentation I've ever seen) was one of several encouraging contributions to the conference. His message to Europe's free-market forces was simple: anything is possible, and if anyone should be doing the teaching and trend-setting, it is New Europe.

The event was organized by French free-market guru Pierre Garello of the University of Aix-Marseille 3, Nikolay Nenovsky of the Bulgarian Hayek Society, and Krassen Stanchev of the Institute for Market Economics in Sofia, along with an energetic team of Bulgarian graduate students. Sponsored by TCS, the Institute for Economic Studies, and a host of other organizations, it successfully brought together the various groups working across Europe to further the cause of free enterprise and individual liberty - and helped plant the seeds for new groups. (There was also plenty of bowling and disco dancing, fueled by no small amount of rakia, a Bulgarian plum brandy; just because there's no snow doesn't mean you can't have après-ski.)

Another highlight was when Bulgaria's young and dynamic finance minister, Milen Veltchev, spoke during the conference's closing dinner. Veltchev, a former vice president of emerging markets for Merrill Lynch, is busy pushing his government to lower taxes (and thereby increase revenue while boosting growth). He joked that given his country's new budget surplus he might even do away with taxes altogether for a year or so. His audience included not just the European Resource Bank members but also a hundred or so representatives of the Bulgarian Teachers Union, who were seated elsewhere in the cavernous dining room, taking a break from their own conference. The teachers dragooned Veltchev as he was leaving and, like a good politician, he charmed them for several minutes. At one point a huge cheer went up (I don't understand Bulgarian but I assumed he'd just informed him of his zero-percent tax plan). As Veltchev left, the union's leader informed him that the teachers would be going on strike next month; some things take a bit longer to change.

But eventually they will. Laar said that when Slovakia was about to adopt a flat tax its premier, Mikulas Dzurinda, called him up and asked, somewhat nervously, whether it was really true that he would collect more tax revenues with a lower rate. Laar assured him it would happen, and indeed it has. Using his PowerPoint slide to great effect, Laar showed a small lizard running across water - accomplishing the impossible feat because it has no idea that it cannot. The Estonian told his audience in Borovets what he told Dzurinda and what he tells other world leaders looking to be bold in face of old thinking: just do it.

Now that's a new psychology the rest of Europe needs to absorb.


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