Paying The Price

For most of the '90s, Czech governments delayed restructuring the country's banking system. Now the bills are in

Since the collapse of Communism, capitalism has had an uneven triumph in the republics of Central and Eastern Europe. In the Czech Republic, which became an independent nation in 1993 after Slovakia broke away, not much changed for years, despite partial privatization of state enterprises. State-owned banks, very slow to privatize, doled out credit without much supervision, and old-fashioned state enterprises dominated the wheezing economy. One result: a three-year contraction of GDP from 1997 through 1999.

Reality dawned in 1998, just months after the victory of the centrist Social Democrat party. Jan Mladek, the republic's current Deputy Finance Minister for Privatization,...

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