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200 Dutkiewicz and Gorzelak As the analysis progressed, we also looked at the intriguing phenomenon of institutional schizophrenia—a profound disconnect between the level of economic transformation and the quality of CEE countries’ institutions. As the process of analyzing the data progressed, we went beyond those limited goals to extrapolate CEE countries’ current experience and offer a glimpse of the future. Let us offer some conclusions. First of all, the crisis has reinforced the transition-period experience that CEE countries no longer form a coherent socioeconomic group. It might be said that CEE countries have lost their collective identity; they became an integral part of the European space, and it therefore might be said that Hungary is closer (in an economic sense) to Portugal, and Latvia to Greece, than they are to each other. We have also shown a surprisingly deep “Europeanization” of most CEE countries in their response to the crisis but, simultaneously, also quite a high dependence on the European core. Second, the crisis in CEE countries underlined some global trends but also proved the presence of a locally made variety; the most lethal combination was the parallel presence of foreign ownership of banks, wages that grew faster than productivity, overvalued currency, and a credit/ housing bubble. This combination struck the Baltic republics (mainly Latvia and Estonia), though some of its aspects can also be detected (on a much smaller scale) in other countries. Third, as a result of high specialization in exports of not highly innovative products—especially if coupled with an overvalued currency attached to the euro or the euro itself some countries—some countries became very vulnerable and recorded serious economic decline (as in the case of Slovakia).28 Also, specialization in unprocessed raw materials became a serious crisis factor (as in the case of Russia). Fourth, we found a strong correlation between the initial (precrisis) economic conditions and CEE countries’ ability to cope with the crisis; as a rule, the precrisis imbalance of public finance aggravated the crisis and weakened the possible means of countervailing it (as was the case in Hungary and in Ukraine). What is surprising, generally, is not only that the depth of the crisis was quite differentiated across CEE countries but even more interestingly that the consequences were more shallow than in the core developed economies of the EU (except for Latvia and Hungary). We attributed this fact—paradoxically—to certain deficiencies Central and Eastern Europe 201 in the institutional development in the region; weak financial institutions combined with quite conservative banking and a popular approach to borrowing/lending practices made CEE countries less exposed to the crisis in the financial sector. Fifth, for CEE countries, the global crisis of late 2007–9 was not the only major slump during the past twenty years; while OECD countries all reported unprecedented growth (despite the dot-com bubble) for the past two decades, CEE countries experienced a huge downturn in the early to mid-1990s. In other words, there had already been a steep learning curve for those countries, and most of them passed the transformation lessons with medium to high grades. It was a very helpful experience in light of the current slowdown, as they faced the new situation without panic and with considerable policy confidence; moreover, the general public was less nervous than in most Western countries. There is, however, a considerable caveat to this story: the very fact that CEE countries generally coped well with the crisis challenges, combined with relatively shallow consequences of the crisis, paradoxically did not force them to more deeply rethink their economic policies and to come up with innovative solutions regarding their banking sectors, their dependence on the EU, or the structure of their economies. Quite the contrary—they seem to have entrenched themselves within the economic orthodoxies; most of the policymakers seem to count on the postcrisis era’s being similar to that before the crisis. The sixth observation distinguishes CEE countries from some other members of the EU. CEE countries—having been trained in overcoming several economic and political difficulties—seem to have passed through the crisis with necessary courage and the ability to sacrifice . This cannot be said about Greece, for example, but also about other nations and societies in Europe, who rather prefer defending the status quo and not paying too much attention to the future difficulties, which may stem from this attachment to the already attained—often too high—standard of living. As for the possible future(s), there...

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