Radar

A look at what's happening across Europe

The centre-right government of Anders Fogh Rasmussen won an historic third term after elections in mid-November gave him a one-seat majority over his Social Democrat rivals. He has committed himself to a tough package of constraining public sector pay and expenditure, reducing taxes and bureaucracy on business and tightly controlling immigration. To strengthen his hold on power, Rasmussen's Venstre party is expected to make overtures to a new centre-right party the New Alliance, possibly creating a centre-right coalition government.

With one of the highest tax burdens in the OECD and suffering from a tough government austerity package aimed at reducing the large budget deficit (which topped 9% in 2006), Hungary is expecting growth of just 2% this year, the lowest in central and eastern Europe (and a marked contrast to neighbouring Slovakia's expected 9%). The government hopes its reputation ' damaged after prime minister's Ferenc Gyurcsany's admission last year that it won the recent election by telling lies 'morning, noon and night' ' will improve after plans were unveiled for a constitutional amendment to prohibit budget deficits: finances have been thrown off kilter by successive governments going on spending and tax cut sprees ahead of elections.

The violent break-up of demonstrations against the government of Mikheil Saakashvili and his decision to impose a state of emergency put a question-mark over the future of the so-called Rose Revolution, with Georgia's closest ally ' the US ' calling for the immediate full restoration of normal democratic rights. Although the government lifted the state of emergency on 16 November ' just nine days after imposing it ' and has bought forward presidential elections to 5 January 2008, investors are concerned the fracas could damage economic prospects. Georgia is expecting growth of 11% this year and had been hoping for a further 10% in 2008.

Prime Minister Gordon Brown's political honeymoon came to an abrupt end as he and his government came under increasing attack as party funding scandals, the mismanagement of the Northern Rock crisis and ill-advised increases in personal and corporate taxation all suggested an administration adrift. Opinion polls now show the opposition Conservative Party ahead by 13 points, its largest lead since 1988. The Department of Revenue and Customs lost two CDs with the personal and financial data of 25 million people, almost half the population, yet the government still promises to press ahead with a scheme to introduce ID cards.

As investors and western leaders breathed a sigh of relief at the political passing of prickly former prime minister Jaroslav Kaczynski, new leader Donald Tusk promised a new era of closer cooperation with Brussels, better relations with Germany, and less antagonistic ones with Russia. His new finance minister Jacek Rostowski will make Poland's adoption of the euro a policy priority although he says it will not be in a position to join the single currency until after the next parliamentary elections in 2011. Poland is also to press ahead with economic reforms, including completing the privatisation process and improving the business environment.

Good and bad news for Europe's largest country. Berlin announced that GDP grew by some 0.7% in the third quarter with the full year figure for 2007 likely to be 2.5%, with employment growing by 1.5% over 2007. This would be the country's strongest rate of growth for 15 years, although there are concerns over its sustainability into 2008 as a result of rising energy prices and the strong euro, which has hit German exports beyond the eurozone. On the downside, the resignation of vice-chancellor Franz Muenterfering put a question mark over the future of the two-year-old governing Grand Coalition, despite the continuing popularity of chancellor Angela Merkel.