P30 - Socialist Institutions and Their Transitions: GeneralReturn

The paper compares the quality of the institutional framework of the Czech Republic with other new EU Member States and the EU 15 average using the World Bank data on Governance Indicators and argues that the pressure from the EU institutions during the accession negotiation period to reform the legal framework was not sufficient to improve significantly the business environment. Among factors that prevented the improvement of institutions the influence of strong interest groups, ineffective enforcement of legal rules and corruption are discussed and empirically illustrated using data on "state capture".

Banks played a central and, at times, controversial, role in the post-1989 transformation of the Czech economy. This article is trying to assess that role by setting it in a historical and comparative context. Economic historians have specified two broad models of banking behaviour, although the differences can be exaggerated. Transition economies show some common characteristics, but past history gave Czech banks a particularly important role and policy makers pursued a conception under which they would finance rapid economic transformation, partly following a model from the past. With varying degrees of willingness, established banks took on this role, undermining their own financial solidity. As the Czech road ran into difficulties, so a different conception of banks' development was adopted, closer to policies more familiar across Central and Eastern Europe.