“Last year,” Leopolis notes, “if one said that Kazakhstan was the “Iceland of Central Asia” it would have been a compliment.”

Now, not so much. Earlier this month, Bloomberg reported, Kazakhstan’s central bank devalued the national currency, the tenge, by 18%.  Propping up the currency at the old rate proved unsustainable after the country spent $1.6 billion, or 6% of its foreign-currency and gold reserves, in January alone to do so. Economic growth is down from a healthy 10% to 1%. Profit for Kazakhstan’s 37 banks plunged 93%. The four biggest banks were seized by the government as part of an emergency program costing the equivalent to 20% of GDP. (In comparison, the $800 billion the US federal government reserved for TARP last year amounted to less than 6% of America’s GDP.) The government is now trying to hawk off the largest bank to the Russian Sberbank. 

Experts are expecting future currency devaluations, even if central bank chairman Grigory Marchenko emphatically rejects the prospect. As one said: “As long as oil prices remain subdued, there is nothing telling you to buy the tenge and there will be pressure there.” The one-sided character of the Kazakh economy makes it very vulnerable, Stratfor noted: the country depends on oil for 70% of its export revenue and 76% of all FDI. With the oil price down and the government spending $21 billion – or another 18% of its GDP – on a stimulus plan this year, the oil-funded National Fund which the country had built as buffer for bad times will all but run out this year.

As Nouriel Roubini commented to Bloomberg:

Kazakhstan looks like a small version of Iceland with its banks borrowing from abroad [..] A currency crisis becomes a banking crisis, it becomes a housing crisis, a sovereign-debt crisis, it becomes a corporate crisis because each one of these agents in these economies has a large amount of foreign liabilities. 

Kazakhstan has one of the highest rates of privately-held foreign debt, Stratfor explains; one which equaled 100% of the country’s GDP in 2007 (compared to 35% for Russia).

And still, how unique is this? The Russian currency is down 35% and the Ukrainian one down 47%, Bloomberg notes. The size of the Kazakh bailout-cum-stimulus seems exceptional, it’s true, with the sum total equalling 38% of the country’s GDP. In comparison, Russia is spending $240 billion, or close to 20% of its GDP, on bank bailouts and stimulus, while the combined bill for TARP I and the new stimulus bill Congress will vote on now will be about 10% of America’s GDP (though TARP II will come on top of that).

Still, at least Kazakhstan is still recording some economic growth, however anemic. The Czech economy entered in a recession in the last quarter of 2008 and will probably see a 2% contraction in 2009, while Hungary, which also entered a recession and is registering the worst data since 1996, may face a 4-5% drop in GDP this year. Which pales, in turn, in comparison with the numbers from the Baltic states, where Estonia’s economy contracted 9% in the fourth quarter from the same period a year earlier, and Latvia’s GDP plummeted 11%. Latvia, in particular, is looking economic collapse in the eye as its GDP may shrink by as much as 20%.

The Baltic states, like Kazakhstan but unlike Hungary, at least enjoyed a number of years of high economic growth until now, with annual growth reaching up into double digits. That doesn’t mean that people have been able to built a protective buffer for the crisis setting on now, though. The economic growth characteristically benefited the upper middle class, and especially the top layer, disproportionally. The collapse now, conversely, is likely to hurt the poor and elderly hardest.

So basically, we’re fucked. Luckily far-right Russian demagogue and all-round buffoon Vladimir Zhirinovsky, who is also deputy chairman of the Russian parliament, had some advice on surviving the crisis. “I have been thrifty,” he boasted last year: “I am not having my hair cut. My hair has already grown longer than ever. I only shave every other day. [..] There is no need to buy new clothes. They can be swapped with others. I am prepared to give a couple of suits to someone, several pairs of shoes, a wristwatch.”

Personal hygiene products are just “all [..] chemical and hazardous” anyway, so you can leave those as well. (Though this, admittedly, wouldn’t present much in the way of savings for the Kazakhs, as anyone who’s seen Borat will know.) Finally, when it comes to the holidays, well: “no need to travel abroad or to go to a restaurant. Stay [..] at home or invite yourself over to someone else’s place”.

So there you are. When you fall on hard times this year, go to Vlad for clothes. Just make sure to stock up on vodka and cabbage rather than soap and shampoo in case he shows up in turn for Easter. He won’t mind the smell.

Entropa, a controversial exhibition

Eternal Remont flagged this story a few days ago already – before it hit all the news stands. I laughed out loud but didn’t think of bringing it here until I came across more detail at openDemocracy and elsewhere. If the story missed you by so far, read the account of a credulity straining clusterfuck at the highest European levels – which manages to tie in some urgent developments in individual countries as well.

Chronicle of a wreck foretold

As of the beginning of this month, the Czech Republic took over the presidency of the European Union for the next six months.

To celebrate the occasion and underline the presidency’s commitment to art and Europe’s cultural variety, the Czech EU Presidency embraced the idea of an exhibition on the premises of the European Council, one of the EU’s three main institutions. The commission was won by David Černý, a Czech artist. In his proposal, one artist from each of the twenty-seven member states would contribute a symbolic representation of their country. In a postmodern, playful kind of way, of course. The Czechs boasted, recounts the BBC’s Mark Mardell, that the artwork would speak where words fail.

Černý may be best known for the stunt he pulled back in the heady years after the velvet revolution. He and his friends took to a Soviet tank that was still being preserved as monument to WW2 Soviet tank crews, and painted it pink. After he was promptly arrested and the tank was repainted green, 15 members of parliament took advantage of their official immunity and re-painted the tank pink again. In short, the artist had the kind of fame that would allow him to land a job like this, but might also have alerted the Czechs to what was going to happen…

Entropa: Bulgaria portrayed as a series of squat toilets

The resulting Entropa exhibition is shaped as a giant, 256 m² (2,760 sq ft), “Airfix” sprue frame, which is affixed to the European Council seat, the Justus Lipsius Building in Brussels. Each country, adorned in various, um, colourful and controversial ways to reflect national specificities, is shaped as a snap-out plastic part inside a frame of tubes, like one of those old-fashioned modelling kits.

The Czech EU Presidency published (6MB, PDF) a suitably fancy brochure. It features an introduction by Černý:

The EU puzzle is both a metaphor and a celebration of this diversity. It comprises the building blocks of the political, economic and cultural relationships with which we ‘toy’ but which will be passed on to our children. The task of today is to create building blocks with the best possible characteristics.

The cost of the work has been variously put at €373,000 or $500,000 (EU Observer), 10 million Czech crowns or $606,000 (National Post) or 13.2 million crowns (Wikipedia). Czech Deputy Prime Minister Alexandr Vondra spent lavish praise on the artists. “I am confident in Europe’s open mind and capacity to appreciate such a project,” he said, and, a tad defensively: “in today’s Europe there is no place for censorship”.

The EU Observer sketched the scene on the 13th:

Gaggles of EU officials, diplomats and journalists were to be found standing under the construction throughout the day trying to puzzle out where their country could be found. [..]

“We’re Ikea …of course,” said one grinning Swedish official, referring to the representation of his country as a giant flatpack [..]. “Who are you?” he asked. But his colleague was unsure. She thought she was the “one with meat on it.”

Not amused

Even before it was unveiled, the exhibition backfired, however. While some Germans expressed unease at how the pattern of highways that crisscrossed their country in the exhibit was somewhat redolent of a swastika, it was the Bulgarians in particular who were not pleased at what they saw.

“It is preposterous, a disgrace,” declared Betina Joteva, spokeswoman of the Bulgarian permanent representation to the EU. “It is a humiliation for the Bulgarian nation and an offence to our national dignity.” The government promptly demanded that the Bulgarian piece of the puzzle be removed before the official opening.

More photos and video below the fold.