EU’s Visegrad Countries Stagnating while New Sanctions Loom

Written by | Wednesday, September 3rd, 2014

In addition to slowdown in the common currency area, European Union’s Visegrad countries – Czech Republic, Hungary, Poland, and Slovakia – are headed toward stagnation as well.

Visegrad economies that bounced back soundly from a sharp stagnation or perhaps even recession in 2013 have now markedly slowed down. In Poland, the region’s biggest economy, production activity decreased in August for the second month in a row as demonstrated by HSBC’s manufacturing PMI index, which hit its 15-month low. In the Czech Republic, anticipated expansion has similarly disappointed as it has not yet met expectations, while in Hungary, manufacturing has also contracted.

Central European economies are believed to be the first victims of the anti-Moscow sanctions imposed by the European Union and the United States. Visegrad countries share intensive trade links with Russia and the looming full-scale conflict in Ukraine is not helping the region either. Although the crisis beyond the eastern Schengen border is considered the most serious obstacle to economic growth in the Visegrad, Germany’s economic slowdown significantly complicates the region’s economic rebound. While Germany is the most important export market for all four Visegrad countries, its contraction mainly impedes on Poland’s growth prospects.

The negative impact of sanctions on the region continuously translates into sharp divisions among EU policy makers over the contents and timing of the next batch of punitive measures against the Kremlin as announced on Saturday (30 August) in response to a recent escalation of military confrontation in eastern Ukraine. Slovakia’s Prime Minister, Robert Fico, described the sanctions as “meaningless and counterproductive” and threatened that Slovakia would veto any further actions that would harm the country’s interests. Hungary, Czech Republic, and Austria are also likely to raise serious objections when it comes to the next wave of anti-Russia measures.

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