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Some in Eastern Europe ask: What economic crisis?

Ahead of G-20 summit, Czech and Polish leaders say their banks have no toxic debt and auto factories are humming.

By Tony WesolowskyContributor / March 13, 2009

Rolling out new wheels: Skoda, the Czech automaker owned by Germany’s Volkswagen, has recently announced it is resuming near full production after shutting down some lines late last year. The company showcased its new Octavia Greenline model at the Geneva International Motor Show in Switzerland, which ends Sunday.

Martial Trezzini/Keystone/AP


PRAGUE, Czech RepublicCzech Prime Minister Mirek Topolanek thinks his country is being smeared.

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Headlines around the globe have spoken of once-booming, but now debt-ridden Eastern Europe dragging down if not the world then at least the whole of Europe. And because the Czech Republic is part of the neighborhood it gets lassoed in with the rest.

“It’s not right to lump all the countries together because each economy has its own specifics and we’re an example of that,” Mr. Topolanek said in an e-mailed response to Monitor questions. Czech officials have repeatedly cited a healthy banking sector, low domestic debt, and industries that still churn out goods.

On the eve of a meeting of G-20 finance ministers near London Friday and Saturday, Poland, Slovakia, and Slovenia have also been campaigning to set the record straight. This is no mere public relations exercise. At stake is the foreign investment so crucial for financing much of the rebuilding in the former communist East since the fall of the Berlin Wall in 1989.

“While no country has been unaffected by the economic crisis, in terms of the CEE [Central and Eastern European] countries, the Czech Republic, Poland, Slovakia, and Slovenia are faring far better than other economies in the region,” explains Elizabeth Stephens, head of credit and political risk analysis at London’s Jardine Lloyd Thompson (JLT).

Specifically, experts cite the following factors as signs of relative economic health:

- The banking sectors in both Poland and the Czech Republic are regarded as healthy, carrying little if any “toxic debt.”
- Auto plants in the region, like the Czech carmaker Skoda, are witnessing an uptick in production.
- Slovenia and Slovakia are now part of the eurozone, which offers a currency buffered from the worst of the crisis.
- Relatively low-wage, highly skilled workforces make the region more likely to recover faster than Western Europe.

But bad news has been squeezing out the good, and most news from the region in recent months has been dire.

Latvia has witnessed riots, financial collapse, and the downfall of its coalition government. Ukraine is desperate, barely able to pay its gas bill to Russia as production of steel – a main export – has dropped by 50 percent. Hungary, along with Latvia, have already received about €10 billion ($12.6 billion) of EU emergency financial aid.