Petőcz Kálmán (szerk.): National Populism and Slovak - Hungarian Relations in Slovakia 2006-2009 (Somorja, 2009)
Zsolt Gál: Argentina on the Danube - Populist Economic Policy as the Biggest Enemy of Sustainable Economic Growth
Argentína on the Danube... ToTaI I INeFFeCTÍ VEIN ESS Al\d HARMfullNESS of PopuliST EcONOMÍC Policy ín CEE Countríes There are two countries in the Central European region that experienced textbook cases of the classic populist cycle: the beginning with consolidated public finance as well as balanced and sustainable economic growth; subsequent fiscal expansion that caused significant internal and external imbalances and a ballooning debt; the crisis when economy faced imminent collapse of the financial sector and government became insolvent due to mass withdrawal of capital and significant devaluation of the national currency; and finally adoption of an emergency austerity and stabilization package designed in cooperation with international institutions. The two countries were Slovakia between 1996 and 1999 and Hungary between 2002 and 2008/09. Other countries in different periods faced various hallmarks of economic populism but none of them experienced the entire cycle since the major change in political and economic system in CEE countries in 1989. There is every reason to believe that Slovakia entered another populist cycle approximately in 2007/08 but it remains to be seen whether it will complete it; in order to do that, the incumbent administration would have to remain in office for another electoral term and continue to produce similar public finance deficits that are projected for 2009 and 2010. A characteristic feature of both the Slovak and the Hungarian populist cycle was that fiscal expansion took place during the period of solid economic growth and amidst generally favourable international economic situation; this suggests that both countries’ economic policies defied all economic textbooks.9 An interesting coincidence is that the Slovak and the Hungarian cycle had opposite amplitudes, i.e. one country pursued populist economic policy while the other country implemented stabilization measures and vice versa. A partial difference was that a significant proportion of budgetary deficits in Slovakia was implicit in nature and only later was it transformed into public debt while in Hungary a vast majority of deficits appeared explicitly in budgets and debts of the public sector. The most recent Slovak cycle is essentially different in two aspects: first, fiscal expansion coincided with world economic crisis; second, the deficits increased after Slovakia had adopted the single European currency. The experience of both countries indicates that fiscal incentives failed even in the short term to bring about an essential increase in economic growth or employment, even though their public finance deficits and deficits of the current account of the balance of payments reached sizeable pro189
