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For a politician, Ivan Miklos exhibits a rare honesty. "This may be the most unpopular government in our country's short history," says Slovakia's Finance minister and a principal architect of one of the world's toughest reform programs. Though it's applauded by economists, polls show a bare 2.5 percent of Slovaks are satisfied with their circumstances. Still, Miklos is not about to apologize for the shock therapy he has imposed on one of Europe's most backward economies. "People don't like it--but they respect and accept the necessity."
Miklos is a leading member of the center-right government that, in just two years, has transformed an economy shunned by foreign investors into a money magnet touted by its admirers as a global model. Forget its larger and richer rival, the Czech Republic, and other reform-minded neighbors. The World Bank now rates Slovakia the world's top performer for improving its investment climate. "What Slovakia shows is how much can be achieved and how fast," says World Bank economist Simeon Djankov, the report's coauthor.
The enthusiasm of neoliberals is easily understood. In effect, the reforms strip the state of the outsize role it enjoyed under communism, pushing free-market principles even further than in many of Slovakia's new EU cousins. "In some respects the Slovaks are more advanced than the French," says Nicolas Doisy, an expert on Slovakia at the European Bank for Reconstruction and Development. Paul Hoffheinz of the Lisbon Council, a pressure group that campaigns for a more competitive Europe, says that "countries across Europe preach innovation; very few practice it. In Slovakia, there has been a real revolution among the elite. This is exactly the sort of thinking that's needed in France and Germany, which have really serious problems."
Admirers draw a comparison with Ireland, the "Celtic tiger" of the...