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Select Briefing Summary: Central and Eastern Europe (December 17, 2004)

Core Content Overview

This briefing highlights key political, economic, and military developments in Central, Eastern, and Southeast Europe during late December 2004. It includes updates from the Czech Republic, Poland, Slovakia, Hungary, and the Baltic States (Latvia, Lithuania, Estonia), as well as Southeast Europe (Slovenia, Croatia, Romania, Bulgaria), and the EU.

Czech Republic

• 2005 Budget Approval: The Lower House of the Czech parliament approved the 2005 budget, which projected revenues at 824 billion crowns and spending at 908 billion crowns, resulting in a deficit of over 80 billion crowns (2,700 million euros). The deficit narrowly missed the EU’s 3% of GDP threshold.
• Mutual Extradition Agreement: The Czech Republic and the U.S. agreed to negotiate a new extradition treaty, replacing the outdated 1925 agreement. Discussions focused on combating terrorism, people trafficking, and drug smuggling.
• U.S. Investment: The U.S. company Central European Media Enterprises (CME) acquired the Czech commercial TV channel TV Nova for $642 million, marking the largest direct U.S. investment in the country.

Poland

• Troop Reduction in Iraq: Poland announced a reduction of its 2,400-member contingent in Iraq to 1,700 by mid-February 2005, with 700 soldiers remaining on standby. The reduction is part of a regular rotation but will not affect troop levels for the 2005 elections.
• Military Support to Iraq: Poland will provide $236 million in weapons and equipment to the Iraqi army. Some items are already in use, while others are being negotiated. Bumar group secured a contract to deliver water and fuel cisterns, ambulances, and weapons.

Slovakia

• New Coalition Formation: The opposition party Smer plans to merge with the Democratic Left Party (SDL), Social Democratic Alternative (SDA), and Slovak Social Democratic Party (SDSS) into a new coalition named Smer - Social Democracy, led by Robert Fico.
• Economic Growth: Slovakia's GDP grew by 5.3% in Q3 2004, slightly down from Q2 but up from 2003. This marks the fastest-growing economy in Central Europe.
• Central Bank Governor Appointment: Ivan Sramko was approved as the new governor of the National Bank of Slovakia, set to take office in January 2005.

Hungary

• Military Aid to Iraq: Hungary pledged to donate 77 decommissioned tanks and ammunition to Iraq, contingent on NATO covering the transport and refurbishment costs. The announcement was made during a visit to Hungarian troops in Baghdad.

Baltic States

Latvia

• Budget Deficit Reduction: Latvia plans to reduce its budget deficit from 2.0% to 1.9% of GDP for the current year, with a parliamentary vote on 20 December.

Lithuania

• New Government Program: The new cabinet of Prime Minister Algirdas Brazauskas was approved by parliament with 68 votes in favor, 44 against, and 3 abstentions. The government aims to reform the tax system, reduce unemployment, and strengthen transatlantic ties.

Estonia

• Troop Withdrawal from Iraq: The ESTPLA-9 platoon will end its service in Iraq this month and be replaced by ESTPLA-10. Estonia also plans to expand its mine clearance team in Afghanistan in February 2005.

Southeast Europe

Slovenia

• Minority Rights Study: A study by the Institute of Ethnic Studies found that 170,000 minority group members in Slovenia do not enjoy adequate "social rights." The report, classified by the Office of National Minorities, calls for greater recognition of these groups.

Croatia

• Railway Equipment Contract: Gredelj, a subsidiary of Croatian Railways, signed a $2.3 million contract to renovate 10 train engines for the U.S.-based National Railway Equipment Company. The renovated engines will be available for purchase.
• Russian Investment Talks: Russian Foreign Minister Sergey Lavrov met with Croatian officials, discussing potential Russian investments in tourism and energy, including a planned oil pipeline (Druzda Adria) from Russia to Croatia’s port of Omisalj.

Romania

• Presidential Election: Traian Basescu won the presidential election, prioritizing anti-corruption efforts and EU accession in 2007. He supports the U.S.-led mission in Iraq and will not withdraw Romanian troops.
• Debt Negotiations: Romania will not write off Iraq’s $2.6 billion debt, as it is not a member of the Paris Club. An agreement with Iraqi officials is pending, with experts from Ernst & Young assisting in determining the exact figures.

Bulgaria

• NATO Consultations: Bulgarian Defense Minister Ilko Dimitrov met with NATO officials to discuss military reform, including Plan 2015, which aims to reorganize and upgrade the armed forces with 2.6% of GDP allocated.
• Military Engagement in Iraq: A Bulgarian patrol in Iraq came under fire, marking the first attack since the battalion was relocated to Al-Diwaniyah. Local leaders reportedly support the Bulgarian presence.
• Rightwing Political Alliance: Eleven rightwing groups in Bulgaria agreed to run together in the 2005 parliamentary elections and called for the election date to be set on 19 June.

EU Developments

• Turkey's Accession Talks: The EU summit in Brussels approved launching accession talks with Turkey on 3 October 2005.
• Romania and Bulgaria Accession: The EU discussed dates for signing accession treaties with Romania and Bulgaria.
• Croatia and Cyprus: Croatia was urged to increase its participation in The Hague war crimes prosecutions, and Turkey was pressured to recognize the government of Cyprus.
• EU Budget Dispute: The six largest EU financiers threatened to freeze spending, while Commission President Jose Barroso advocated for increased funding to accommodate new and poorer member states.

Key Themes

• Economic Growth and Fiscal Policy: Several Central and Eastern European countries reported economic growth, with focus on reducing deficits and aligning with EU standards.
• Military Involvement in Iraq: Multiple countries, including Poland, Hungary, Romania, and Bulgaria, are involved in military operations or providing support to Iraq.
• Political Realignment: Political parties across the region are forming new alliances or coalitions in preparation for upcoming elections.
• International Cooperation: The Czech Republic and U.S. are working on updated extradition agreements, while Croatia and Russia discussed potential energy and tourism investments.

Conclusion

This briefing underscores the dynamic political and economic landscape in Central and Eastern Europe, marked by budgetary decisions, military engagements, and efforts to strengthen international relations and regional cooperation.