Central and Eastern Europe 25 years on

By András Simor


In June 1990, some six months after the fall of the Berlin Wall, I was working at the first western-owned investment banking boutique established on the wrong side of the recently opened Iron Curtain. We were busy preparing the public offering memorandum of one of Hungary’s first companies to be listed on the newly reopened Budapest Stock Exchange.

 At around two o’clock in the morning (such documents always get finished at unearthly times) one of my junior colleagues remarked: “When people talked about market economy and democracy we always thought of the shopping cavalcade on Vienna’s Mariahilfer Strasse. Nobody mentioned that it also means having to work regularly through the night.”

This sentence epitomises for me the early expectations as well as the subsequent frustration of large segments of the population in Central and Eastern Europe with the reform process after the fall of communism in 1989. We expected a relatively quick convergence with the living standards of our western neighbours and did not realise that fundamental changes were needed to our way of life and for lack of comparable experience we had no way of knowing what toll these changes would take on us.

As early as 1988 thousands of Hungarians travelled to neighbouring Austria as passport restrictions for us had already been removed. Beyond the wish to breathe some “clean” air, many were looking for goods that were not available at home. One of the favourite products was the Yugoslav-made (now Slovenian) Gorenje refrigerator. However, few had enough foreign currency as we had access to only a limited amount annually.

But this could not stop the re-emerging entrepreneurial spirit of our nation and a solution was soon found: Take your grannies with you, so that you can spend their currency allocation as well.

Sailing along the potholes of the Hungarian highways in a dilapidated Trabant car with a Gorenje fridge on top of the roof rack and as many people as physically (im)possible squeezed inside the infamous “plastic Mercedes” – that was la dolce vita for us Hungarians in the late 1980s.

One year later came the euphoria of 1989. Under the pressure of thousands of East Germans, who had been camping for weeks on the premises of the West German embassy in Budapest, and sensing the lack of resolve and the weakening of the Soviet Union, Miklós Németh, then the Prime Minister of Hungary (and later a Vice President of the EBRD), decided in the summer of 1989 to open the Iron Curtain.

When this happened, a seemingly endless stream of jubilant people flooded from Hungary via Austria to Germany where they were given a hero’s welcome, often from relatives they had not seen for years.

All this seems simple and in the distant past now and my children will never understand what it means not to have a passport in your pocket. But then everything was uncertain and the air was still full of tension and fear. Nobody could be sure about the tolerance level of the Soviets as memories of the 1956 revolution which had been crushed by Soviet tanks were still all too vivid. But we had had enough and we wanted change. Fear and euphoria lived side by side in us back then.

The hole in the Iron Curtain quickly created an even bigger hole, the fall of the Berlin Wall in November 1989. In the following months and years we witnessed what we believed would be a complete reshaping of the post-World War II order in the hope of a united, peaceful and prospering Europe. Today we can see how mistaken we were!

Why did our hopes partly end up as illusions? Answering this question properly would provide enough material for at least one book, if not, more likely, a series. I would make only two points.

First, when a society moves ahead and undergoes fundamental changes, it is vitally important not to leave too many people behind. In fact, the changes in our region resulted in not enough winners. Perhaps this is the reason why so many people living in Central and Eastern Europe today are claiming that they seem to have had a better life under communism (or socialism, as we called it then).

I think what they are really trying to say is that although the standard of living has improved and the choice in the shops and the breadth of available services are incomparably larger and better, the emergence of an enormous gap between rich and poor and winners and losers is not acceptable to them.

What is the right balance between moving away from the egalitarianism of our communist past to ignite and stimulate entrepreneurship and creativity, while at the same time protecting a level of comfort of togetherness and equality? What is the right speed at which a society and its inner culture can change? These are questions many countries in our region still struggle to find answers to.

Second, institutional and legal changes can happen quite quickly in a country when there are good external examples and standards that can be followed. This is especially the case in Central and Eastern Europe where we were united in our goal to join the European Union and on this path we adopted and implemented the necessary laws and regulations in the course of the accession process. However, to fill this new system with life and to make the new system sustainable is a much harder challenge.

The problem is that when you are only importing something ready-made, you do not feel that it is yours and “you do not walk the talk”. The rules of democracy and market economy have evolved over hundreds of years in Western Europe, whereas further to the East we did not have this opportunity until recently. This lack of organic development is one of the reasons why today we in our region are often confronted with setbacks.

Nevertheless, our world is never going to be the same and there is no going back to a divided continent. Progress might be patchy and have its ups and downs. But none of us will ever forget what happened during the latter part of 1989.