CSFR at the Crossroads
Promising Signs in Czechoslovakia
By Thomas S. Sigel

Before World War II, Czechoslovakia was one of the most industrialized countries in Europe. The Czech lands had been the industrial heartland of the Hapsburg empire; per capita income equaled that of Austria. More than 40 years of communism has isolated the country from the West and repressed most private initiative through a program of collectivization and state ownership more extensive even than those of the other East European countries.

After the collapse of the old political system, will the country be able to regain its traditional position as an important industrial nation and through close economic and financial ties become an integral part of western Europe? The chances are good even though the transition to a market economy is still proving difficult. The potential breakup of Czechoslovakia, or the Czech and Slovak Federal Republic (CSFR), is the biggest question looming over the future of the state, which was formed in 1918. Since the agreement to dissolve the country was signed on 23 July, the premiers of the Czech and Slovak republics have had second thoughts about the breakup and have been working on ways to save aspects of the federation rather than go through a complete "velvet divorce," which is scheduled for 1 January 1993. Although Slovaks elected Prime Minister Vladimir Meciar in June on a platform of full independence for Slovakia, most of them now agree that breaking up the union is a mistake. Most Czechs feel similarly. The differences between the republics are vast and the breakup would have more negative affects on Slovakia than it would on the Czech lands of Bohemia and Moravia.

Shock of reform
The Czechoslovak government's reform program, which was introduced in January 1991 by then finance minister (and current Czech prime minister) Vaclav Klaus, consisted of a shock therapy for the economy....

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