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Chinese Cash Offers Eastern Europe a Hedge Against the Influence of Brussels

(OECD TiVA)

(Bloomberg) -- When Robert Fico returned to the town where he’d been shot at point-blank range, he was in no mood for reconciliation, instead blaming the opposition and the local media for motivating his attacker and warning of further violence.

The increasing aggression of the 60-year-old premier isn’t just a problem for those who depend on the rule of law in Slovakia. It’s also a challenge for the European Union.

For more in our series on Europe’s decline, click here and here. 

Fico’s high-wire act is where small-town populism meets geopolitics.

He gained his power by channeling the frustrations of working-class voters. He’s trying to consolidate it by tapping into a new global power structure in which Chinese money and Russian fossil fuels can support friendly leaders. He heads to Beijing at the end of the month in search of investment. 

“He doesn’t trust the EU, so he’s looking for new opportunities in the East,” said Brigita Schmognerova, a former Slovak finance minister who emerged from the same family of left-wing parties as Fico. 

It’s a playbook that Fico’s friend and ally Viktor Orban has developed in Hungary over the past decade — courting Beijing and Moscow even as he declares allegiance to the EU and NATO. Their fellow traveler Andrej Babis may be employing similar tactics in the Czech Republic after next year’s election if the polls prove right. Serbia, which has longstanding ties to Moscow and is a candidate for EU membership, has received $5.5 billion of Chinese investment. 

“By dangling investments to friendly countries, that opens a divide within the EU,” says Noah Barkin, a visiting senior fellow at the German Marshal Fund in Berlin and an adviser at Rhodium Group, a research firm.

Fico and his inner circle don’t really believe much of the toxic rhetoric they use to fire up their base, according to one senior official who’s worked with them for years. It’s a ploy that serves their political strategy.

Despite their homophobic rhetoric, they don’t have a problem with lesbians, gay people or bisexuals, the official said, but they know that they can play on the sentiments of their core voters outside of the capital. 

“He has become a slave to the fact that he radicalized his voters,” said Peter Weiss, a former ally who worked with Fico when he was starting out in politics in the 1990s. 

Read More About China’s Strategy in Europe: 

  • Xi Is on a Mission to Drive a Wedge Between US and Europe
  • China’s Billions Help Xi Make Useful Friends in Eastern Europe
  • Europe’s Snub Turns Xi’s Belt and Road Into Global South Event
  • Xi Builds Eastern European Ties as EU Hardens Line on Trade

In Handlova, where he was shot four times in May, Fico blamed the opposition and the local media for motivating the shooter and warned there may be more attacks unless they leave him and his allies alone. Investigators haven’t presented any evidence to back up those claims and told the courts that the attacker acted alone. Targeting the opposition with hate speech is just part of the strategy.

“You have to have an enemy,” the official said. 

In a different political context, that kind of pragmatism played out very differently.

When Fico first won power 18 years ago, Slovakia had just joined the EU, unlocking a funding windfall. Fico himself fought against the euroskeptics as he led his country into the single currency bloc in 2009. 

But then the Chinese economy was barely a third of the size it is today and Beijing’s foreign policy sought to avoid conflict with the US and its allies. Since taking office in 2013, Xi Jinping has used China’s increasing financial muscle to expand China’s influence around the world in a more assertive fashion, primarily through the Belt and Road Initiative, a giant infrastructure program that seeks to challenge the US-led world order.

That is a factor shifting the incentives for leaders like Fico who chafe at the demands of the EU.  

In neighboring Hungary, Orban has forfeited billions of euros of EU money through his refusal to allow the country’s democratic institutions to function independently. But he’s replaced at least some of those funds with investment from China.

“Orban wants to hedge and that makes strategic sense for him. But the EU is too strong of a link,” according to Antonio Barroso, a senior analyst at Bloomberg Economics. “The growth that these states get from being part of the internal market is just phenomenal.”

To be sure, China’s influence has taken a hit since its so-called 17+1 initiative, a framework for ties with countries in eastern Europe, lapsed into disuse. 

But Orban can still hamper policy-making in Brussels. Last year he held up a €50 billion ($55 billion) EU aid package for Ukraine as he sought to force the bloc to release funds assigned to Hungary under the pandemic recovery fund. The EU eventually agreed to unlock €10 billion but around €20 billion remains frozen. 

Chinese investment into Hungary, in contrast, doubled in 2023 to €3 billion, making it the biggest single destination with 44% of the EU total, according to a report by Rhodium and the Mercator Institute for China Studies. Orban is working to deepen that relationship, signing a raft of agreements when Xi visited Budapest in May. 

Slovakia got €364 million, mainly directed at battery plants. That’s tiny fraction of the €30 billion that the country has received from the EU over its 20 years of membership, but Fico is aiming to get more from his forthcoming trip.

The Slovak embassy in Beijing recently hosted a film screening to commemorate the resistance against the Nazi occupiers during World War II. Among those who attended were a group of Chinese students who were studying Slovak and hoping to get jobs with Chinese companies operating in the country. 

Cui Hongjian, a former Chinese diplomat who now teaches at Beijing Foreign Studies University, argues that leaders like Fico and Orban are reaching out to Beijing because “the EU or some major European countries have not met the needs of those countries.” The way the EU handled Brexit has also made some leaders in eastern Europe wary of Brussels, he added. 

“China is a suitable scapegoat,” he said. 

In Beijing Fico will be seeking Chinese investment to upgrade the Slovakian rail network, construct a new hydroelectric plant and repair some 500 bridges. Ahead of that trip, Slovakia this month voted against EU plans to impose tariffs on Chinese electric vehicle producers as the bloc tries to prevent European manufacturers being hurt by what it says are unfair subsidies in China. 

 

It’s a risky game for Fico though, as he seeks to play China and the EU off against each other — China on Oct. 8 said it is considering increasing levies on cars with large engines in retaliation at the European measures, a move that would hit Germany and Slovakia most heavily. 

But while he succeeds, the effect on Slovakia’s institutions is corrosive. 

He’s replaced prosecutors and police officers who investigated high-profile corruption cases, changed the law to shut down probes into his affairs and imposed controls on the media. Even some of Fico’s current allies say privately that they can’t remember a time when the country was so divided. 

One 31-year-old lawmaker close to Fico punched a former premier in the face for disrupting the party’s rally. Lubos Blaha, the party’s deputy chair and a European lawmaker, was banned from Facebook for hate speech, harassment, bullying and incitement to violence. But he still reaches tens of thousands of followers via Telegram with his vehemently pro-Russia messages. 

Fico “can no longer get off that train,” Weiss said. “If he stopped pursuing such policy, a policy of hatred, retaliation and fear, his voters would start leaving him.”

--With assistance from Colum Murphy and Flavia Krause-Jackson.

©2024 Bloomberg L.P.