EU membership Calling for a Czexit

The Czech economy is booming. But politicians are calling for a referendum on leaving the EU anyway. Business interests in the country, including German ones, are starting to fret.
Quelle: dpa
The Prague chapter of the anti-Angela club.
(Source: dpa)

Nearly two years after the Brexit bombshell, another EU member state is considering a stay-or-go referendum. Debate is raging in the Czech Republic over whether to let the people decide on membership of the 28-member European Union via direct democracy. Since every possible departure deserves a name, this one is being dubbed "Czexit."

The country joined the EU in 2004 after a referendum in which locals voted 77 percent in favor. But there’s never been much enthusiasm for the EU from the country’s recent leadership. The country’s president, Milos Zeman, who is close to Russia, and his eurosceptic predecessor Vaclav Klaus have both talked down membership of the bloc. Mr. Zeman, who actually supported the Czech Republic’s entry to the EU, now says he is sympathetic to a referendum.

The party that has been ruling the country since October’s elections, Action for Dissatisfied Citizens, or ANO, has not given the official go-ahead for any such referendum. But the party’s leader, populist multimillionaire Andrej Babis, has also been critical of the EU.

Are you ready to risk your very good economic prospects for more independence? Clemens Fuest, president, Ifo economic research institute

There are a number of other political heavyweights lending their voices to the cause. The Communist Party, ruler of the country before its democratic revolution in 1989, also favors a referendum. So does Tomio Okamura, the Czech-Japanese businessman who founded and leads the radical right-wing party, Freedom and Direct Democracy (SPD).

Mr. Babis’ current hold on power is precarious: ANO, founded in 2011, has no majority in parliament and although the party is most likely to team up with the communists or the Czech social democrats, there have also been talks with the extremely anti-EU Freedom and Direct Democracy party. Whoever ends up agreeing with ANO will surely influence whether a Czexit referendum goes ahead, or not.

All of this is happening despite the fact that the Czech Republic possibly benefits more than almost any other country from the EU’s single market. Between 2004 and 2017, gross national income, or GNI, at constant prices grew by 37 percent according to the Brussels-based economics think tank Bruegel. Across the whole of central and eastern Europe, per capita GDP grew by 52 percent between 2000 and 2007, on average.

Quelle: dpa
Czech mates of the EU in Prague.
(Source: dpa)

“Most likely, EU membership played a strong role in these huge GNI growth rates,” Bruegel senior fellow, Zsolt Darvas, wrote. “By improving market institutions and the protection of property rights; by attracting foreign investment that brought new technologies and management skills … and perhaps the inflow of EU funds also supported the development of key infrastructure and competitiveness.”

There has also been a steady stream of German investment. Skoda, a Volkswagen subsidiary located close to Prague, is the largest industrial employer in the country. And in fact, the Czech Republic continues to bloom, with GDP growth at 4.5 percent and the lowest unemployment rate in Europe – so much so, that business has been calling for immigration to fill gaps.

All of which is why the prospect of any kind of Czexit vote is creating considerable anxiety in the business community. “People here have to realize that such very positive economic development will not continue if the country leaves the EU,” Clemens Fuest, head of the prestigious German economic research institute, Ifo, said while visiting Prague. “The question for the Czech people is this: Are you ready to risk your very good economic prospects for more independence?”

Business leaders are also sounding the alarm. “We do not view a Czexit as a viable possibility for improving the existing conditions,” said Milan Slachta, who was appointed CEO of German car supplier Bosch’s Czech subsidiary last year.

“None of the initiators of the debate have so far clearly stated what a Czexit would mean for the country, in economic, social or international terms,” noted Jörg Mathew, president of the Czech-German Chamber of Industry and Commerce and CFO of the Czech operations of the German construction company, Hochtief.

In fact, according to a survey of 150 companies in the country by the Czech-German Chamber of Industry and Commerce, 78 percent are worried about a possible departure from the EU. If it happened, 28 percent said they would consider changing location.

Hans-Peter Siebenhaar is Handelsblatt’s correspondent in Vienna and specializes in media and telecommunications coverage. Brían Hanrahan adapted this story into English for Handelsbltt Global. To contact the author: [email protected]