Foreign Investments In Europe Before the World Crisis

Although each investor is looking for the best investment, the decisions of the others reveal important characteristics of the investment destinations. The last reliable data internationally is available for 2008, the start of the world economic crisis. In the business cycle before the big criris the Visegrad Countries, especially Hungary and Slovakia has been very attractive investment targets.

The World Bank data are partly misleading, as they comprise equity FDI into the financial sector, which will partly be used elsewhere, where loans or insurance claims are made - this makes the Benelux area and the UK slightly incompatible with the rest of Europe. However, in Central Europe most of the direct investment went into manufacturing and services. The big question is if the Visegrad Countries will remain competitive after the crisis. The answer is most probably yes: Poland has conducted a large-scale privatization program during the world economic crisis and maintained growth even in 2009. The currency devaluation in Poland, the Czech Republic and Hungary will help export greatly in 2010.

Surprise Surge in Hungarian Net Wages

As more and more endebted governments find out that most of their expenses are wages paid to civil servants, public employees and a wage cost base for state owned enterprises, it is rather surprising to see that Hungarian net wages have grown in these sectors dramatically. Net wages are up by 4.2% in the private sector and 8.9% in the public sector after netting for some one-off payments.

Most of the net wage surge is do to a personal income tax reduction by the outgoing government, which was performed despite the dire state of the national budget in order to improve tax paying discipline. The public worker pay is up by 11.9 on a year-on-year basis but only because the government rescheduled some items from 2009.

If the government was right and the surge would be due to an increased tax base (i.e. non-tax paying illegal work shifted towards legalized income) the statistics would be most welcome. However, as such effects are unlikely to happen within the public institutions (well, who knows?) it is more likely that the wage increase will bite into the competitiveness of the national economy.

Crisis Takes Toll on Slovak Firms and Jobs

The Slovak Spectator has two interesting reports on the microeconomic level of the 2009 crisis. The biggest online job market had 50% less job offers in 2009 than the year before. The lack of job supply started in October 2008. The other article reports a 40% increase in bankruptcies. Although bankruptcy could be a part of the 'creative destruction' of a crisis, not in Slovakia: both creditors and owners complain that the Slovak bankruptcy rules give hardly a chance for restructuring the company and also fail to protect creditor's rights.