December 10, 2000

Envious east will take its piece of European action

Posted in International Economy ·
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‘I’m sorry Mr Mec Villiams, but without a visa you can’t enter Yugoslavia.” There was a pause as he surveyed the empty hall. Then he continued in fluent English: “However, as there are no more flights out this evening, you might be able to stay here.”

If the phrase ‘Yugoslav immigration officer’ were not so ludicrous I would have taken him more seriously from the outset. Last Monday night, alone in this great hall, the helplessness of my situation was becoming apparent.

“Can I not just buy it here? C’mon, how much is it in Deutschmarks?”

“Now Mr Mec Villiams, what would happen if I, Mr Dragan Matic, arrived in Dublin without a visa and claimed to be a businessman, particularly if I was from Pakistan?”

Good news travels fast in the internet age. For Serbian border guards, the new post-boom interpretation of Ireland’s ‘cead mile failte’ was a source of great amusement. However, unlike my unfortunate Pakistani counterparts who ended up in the ‘Joy, their phones having been confiscated, I was allowed to call my hosts and sort things out.

After much to-ing and fro-ing and a long, animated conversation about Celtic, Rangers and Roy Keane, I got my visa. A night in Belgrade Airport will have to wait for another time.

The Hyatt in Belgrade is one of the plushest hotels I’ve ever stayed in, and apart from the fact that there are no guests, it could be anywhere in the world. At first glance the rows of Porsches, Beemers and Mercs suggest Berlin rather than Belgrade.

I wondered if the cars had been robbed in the West and resold in the East. However, this didn’t explain why in Yugoslavia you can buy a new Merc for less than anywhere else in Europe. What’s more, you can order the type, specifications and colour. The reason is simple. Yugoslavia is the centre of a continent-wide car scam. Western car rental companies `rent’ top-of-the-range cars to Serb thieves. The Yugoslavs drive the cars back home and the car rental company bills the insurance companies, splitting some of the cash. The new cars are then resold in Belgrade and the operation starts again.

The same goes for fags and booze. It has been well documented that the President of Montenegro and darling of the West, Milo Dukanovic is, in fact, one of Europe’s leading cigarette smugglers. What is less well known is that many of the major brands have significant marketing budgets in Yugoslavia, despite claiming they have no sales there. Either the companies are in direct cahoots with the smugglers (after all where do the smugglers buy such quantities of fags in the first place?) or the western tobacco companies turn a blind eye. After all, brand building is paramount — no matter how it is achieved.

There are also suspicions that Yugoslavia is directly involved in human trafficking. In recent years the isolated and increasingly desperate Milosevic regime sought even closer ties with China. China extended credits, along with military, radar and monitoring equipment (which explains the bombing of the Chinese embassy in Belgrade — hardly a mistake). In return, Belgrade acted as an irritant for the Americans in Europe.

However, there has also been a marked coincidence between these closer ties and the arrival of so many Chinese illegal immigrants in Europe. Many in Belgrade suspect that Yugoslavia is been used as a staging post for human trafficking, with the explicit involvement of the government.

Although Yugoslavia is an extreme case, many of eastern European countries display the same frightening combination of corruption and lawlessness. A rich, amoral elite creaming it, while the vast majority remain in poverty.

This dichotomy is made all the more unbearable by satellite TV, the internet and advertising. Is it any surprise that any young person worth their salt is going to try to emigrate to the West?

Yet western Europe has pulled up the drawbridge. Here people rail about Romanians; in Britain the Tory party fulminates about sealing Dover; in France, Spain and Italy similar sentiments are expressed as a matter of routine politics. This weekend, although the Nice summit will talk about enlargement and the `unity of European peoples’, the real sticking point will be Germany’s insistence on tighter border controls.

However, there is one certainty for Europe in the next 20 years. If our cash does not go eastwards to rebuild their economies, their people will march westwards to take a piece of the action.

Present EU enlargement is a fudge. It is a delaying tactic, designed to keep as many immigrants out of the EU as possible at the smallest cost. It will also store up future problems as it reinforces the perception of a new economic iron curtain east of Poland, the Czech Republic and Hungary. By supporting the extension of Nato further east to the Baltics, Croatia, Romania and possibly Ukraine, the EU is creating the worst type of political/economic situation: the impression and recklessness of military might without economic strength. Upon such foundations the likes of North Korea is built.

Plato said that you can never have agreements between unequals, and consequently, without economic convergence, the EU will never strike a fair balance with the East.

There are plausible models of ensuring economic convergence between countries and regions. The first is the short sharp shock administered from the top with full political support. German unification is an example of this approach — a corporate takeover, where one country takes over another at immense expense for all. Don’t forget that we in peripheral Europe paid for German reunification via high interest rates.

The other model is Ireland, where 30 years of good policy but heroic economic failure finally paid off in the last half decade. During the failure there was always emigration. If 40,000 to 60,000 a year hadn’t left in the 1980s, this place would have been a political and social powder-keg, which undoubtedly would have exploded in the face of sealed austerity.

Ireland is an extreme case. A more plausible example would be Portugal, whose present rates of growth mean it will take nearly 50 years for Portugal to achieve EU living standards.

With present policies, it will take over 100 years for eastern Europe to achieve our wealth, yet they are supposed to put up with poverty and still be good boys devoid of bitterness and malice. Hardly likely.

Having travelled extensively in the region over the years, it is my opinion that only a new Marshall Aid plan will properly boost the prospects for the region. This would lead to a sharp rise in interest and exchange rates here, but it would deliver medium-term stability.

Europe’s major politicians are to big geopolitical initiatives as Willie O’Dea is to taxi deregulation; mass illegal migration of desperate eastern Europeans is here to stay.