THE TATRA TIGER

In February, four Central European countries – Poland, the Czech Republic, Hungary and Slovakia – celebrate the 30 years of cooperation as part of the so-called Visegrad Group (V4). It is believed that these ties were established back in 1335, when three kings – John of Bohemia, Charles I Robert of Hungary and Casimir III of Poland – sealed their friendly relations with a strong handshake in the Hungarian city of Visegrad.

Today, the combined economic potential of these four countries is the fifth largest (compared to countries separately) in Europe and 12th in the world. With a population of 64 million, it is the 4th in Europe and 22nd in the world. Moreover, before the 2020 crisis, their economy was the fastest growing in the EU. Although the main direction of cooperation within V4 is political rather than economic, the size of the economy clearly indicates that V4 is capable of influencing processes both in Europe and beyond. Polish Prime Minister Mateusz Morawiecki believes that the Visegrad countries are "the driving force behind the economic development of Europe."

All V4 countries are members of the EU, but only Slovakia is part of the Eurozone. Observers often refer to this alliance as "two plus two" because of the different attitudes towards European integration. Slovakia and the Czech Republic are relatively European-friendly, while Hungary and Poland are much more Eurosceptic.

The Danube miracle

With €475 billion worth economy and continuous high growth rates (ave. 4.2% annually from 1992 to 2019), Poland is almost as powerful as the Western Europe. Since 2018, Poland is not considered a developing market any more, being the seventh largest economy in the EU. Even the 2.8% decline last year did not particularly affect Poland’s position. Moreover, Poland's foreign trade surplus has increased ten times from €1.14 billion in 2019 to €12 billion in 2020.

The results of 2020 were one of the best in the EU. One of the most important features of the Polish economy is the large internal consumer market (38 million people) accounting for 61% of GDP, which is higher than the EU average. This means less dependence on the German economy. In fact, the country would hardly have achieved this progress without external support: Poland is the largest recipient of funds from the EU (€208 billion in 2007-2020).

According to EC forecasts and with 3,7% increase in 2019, Hungary until recently has been ranked as the fifth fastest growing economy of the EU. After a 6,1% decline in 2020, it is difficult to make forecasts.

The Czech Republic had the lowest pre-crisis GDP growth among the V4 countries - 2.6% in 2019. However, it also had the lowest unemployment rate in the EU (2.2%). In 2015-2017, 40% of all public investments in the Czech Republic were financed from European structural and investment funds. The modest but stable economic growth suggested that from 2027 the Czech Republic could become one of the EU's net payers. However, a 6.5% drop in GDP in 2020 will certainly make adjustments to the plans.

Since 1998, after Slovakia abolished the authoritarian regime of Vladimir Meciar, the country has made a giant leap forward in terms of development. It topped the list of the fastest-reforming economies in the World Bank's Doing Business ranking. Now, instead of being a “black hole in the centre of Europe,” Slovakia is now referred to as “the Tatra tiger”, “European Detroit” or “the Danube miracle”. The automotive industry in Slovakia accounts for 44% of industrial production and 40% of exports. It is because of the structure of its industry and its export orientation that Slovakia's GDP suffered the most in V4 last year (minus 7.1%).

Thus, in general, the role of the Visegrad Group in the EU is increasing, and not only in economic terms. At the same time, the Four does not always demonstrate complete agreement with Brussels on some common European problems, including those related to migration and development. For example, Slovakia was the only V4 member, which in 2015-2017 agreed to accept a small number of refugees from North Africa, the Middle East and South Asia. Therefore, unlike its neighbours, it avoided prosecution by the EU Commission. The V4 is often referred to as a troublemaker in the European Union.

The EU has adopted an ambitious aid program called the Next Generation EU to tackle the crisis and put countries back on a growth path. The bulk of funds comes from the €672.5 billion Recovery and Resilience Fund distributed in grants (€312.5 billion) and loans (€360 billion). Thus, the Czech Republic will receive €6.7 billion, Hungary - €6.3, Poland - €23 and Slovakia - €5.6 billion euros as grants.

EU government underlined that if member states do not fulfil the basic criteria of the rule of law, for example, the principle of independence of the judiciary, then it may be rejected funding from the European treasury. In particular, this ‘warning’ concerns Hungary and Poland, which for several years have been criticized for the judicial reforms carried out by their leadership.

Disagreements

For many years, the V4 states have successfully promoted their strategic interests within the EU. This success is based on flexibility and "transformational ability". The group may disagree on some strategic issues, such as relations with Russia, but at the same time, it shows strong cohesion in defending its interests on other issues, as it was during the migration crisis.

The construction of the Nord Stream 2 gas pipeline, strongly opposed by Poland, is one of the subjects of dispute. Poland insists on the suspension of construction, as the new pipeline could seriously damage the country’s economic potential. And it is not only about a sharp drop in revenues from payments for gas transit to Western Europe. This also applies to political influence, which will inevitably decrease in proportion to the diminishing importance of the current pipelines. Slovakia and the Czech Republic, although they support Poland's position, emphasize the irrelevance of this issue, while Hungary openly objects, because it seeks to maintain good relations with Russia. First of all, this concerns the gas and nuclear energy, where the Hungarian giant MOL cooperates with Gazprom.

The Visegrad Four have different positions on other issues as well, including the issues concerning their relations with the rest of the EU, sometimes leading to serious conflicts. But there is an area in which the V4 has an undeniable advantage over the ‘veteran’ members of the Union. This is their unique experience of transformation from a communist to a capitalist system, a good knowledge of the neighbouring regions of Eastern Europe and the Western Balkans, as well as social, historical, economic and cultural ties with the republics of the former USSR.

Eastern partnership

Therefore, in 2008, Poland was the main initiator of the Eastern Partnership (EaP) project. It was launched in 2009 thanks to the efforts of the Czech Republic, which organized an EU summit in Prague and invited the leaders of Azerbaijan, Armenia, Belarus, Georgia, Moldova and Ukraine to take part in the summit.

As a result, the V4 members became responsible for actively interacting with the Eastern Partnership countries to share with them their experience of political and economic transformations.

On June 18, 2020, the 11th Eastern Partnership Summit was held online. The heads of state and government of 33 countries (27 + 6) discussed the general priorities of the partnership. It was decided that a new set of tasks aimed at expanding EU ties with six post-Soviet countries will be approved in 2021 at a face-to-face summit.

During the videoconference, President of Azerbaijan Ilham Aliyev underlined that cooperation with the European Union is one of the main priorities of Azerbaijan's foreign policy. Strategic partnership documents have been signed with nine EU members, and negotiations on a new partnership agreement with the European Union are at the final stage.

To mitigate the socio-economic impact of the coronavirus pandemic on the Eastern Partnership countries, the EU is ready to provide more than €800 million. V4 also announced that it is launching the V4EastSolidarity program for EaP countries under the Visegrad International Fund (€250 million).

Visegrad Fund was established in 2000. Its donors, in addition to the V4 countries, are also the USA, Canada, Germany, the Netherlands, South Korea, Sweden and Switzerland. The fund finances projects in various spheres, including culture, education, innovation, entrepreneurship, media, environment, tourism, etc. In 2019, it financed the training of 100 students (bachelor's and master's degrees) from the Eastern Partnership countries, including 13 from Azerbaijan.

V4 and Azerbaijan

Economic, political and humanitarian relations between Azerbaijan and the V4 countries are strengthening every year.

The Czech Republic is one of the main partners of Azerbaijan in energy cooperation with the EU countries. Azerbaijan supplies about 30% of Czech demand for hydrocarbon products. In turn, Azerbaijan’s share in the Czech Republic's trade turnover with the South Caucasian countries is more than 85%, reaching $1 billion in 2018.

The trade turnover with Poland reached $104 million in 2018. As a proof of the long-standing and close interstate relations between Azerbaijan and Poland, a monument dedicated to the 540th anniversary of the establishment of diplomatic relations between the two countries and the 20th anniversary of restoration of diplomatic relations was opened in the Polish city of Gnierzno in 2013.

In 2018, trade turnover of Azerbaijan with Hungary and Slovakia peaked at $70 million and $30 million, respectively. Hungarian oil and gas company MOL is the largest Central European investor in Azerbaijan and has the third largest portfolio in the Azeri-Chirag-Guneshli consortium ($1.5 billion). According to the Minister of Foreign Affairs and Trade of Hungary, Peter Szijjarto, "Azerbaijan is a key factor in the reliable energy supply to Hungary." Hungary expects to annually buy 1-2bcm of natural gas from Azerbaijan, which is supplied to Europe through the Southern Gas Corridor.

The Visegrad Four, which has supported the territorial integrity of Azerbaijan over the past 30 years, expressed its readiness to assist in the restoration of the destroyed districts of Garabagh.

Generator of ideas

Historically, the Visegrad Four is older than the European Union, albeit not much.

Thirty years ago, trying to quickly get rid of the legacy of the communist past, these countries united in order to support each other. Together they joined NATO, and then the EU, where the old democracies of Europe initially arrogantly tried to protect themselves from the influx of new citizens.

Contrary to numerous predictions about the fragility of the union, it not only survived, but also got stronger organizationally, and continues to generate pan-European ideas, such as the Eastern Partnership, the Three Seas Initiative, the integration of the Western Balkans into the EU, etc.

Therefore, it seems reasonable, perhaps, to add to the statement of the Polish prime minister - the Visegrad Group is becoming a driving force not only for the economic, but also for the political development of Europe.