Growth potential across Central and Eastern Europe has fallen sharply from the levels seen around EU accession, with ageing populations, weak productivity, Chinese competition and slower German industry increasingly testing the region’s economic convergence.

The economic model that transformed Central and Eastern Europe after EU accession is losing momentum, according to the International Monetary Fund, which is warning governments that structural reforms are needed if the region is to continue narrowing the income gap with Western Europe.

Carlos Mulas-Granados, the IMF’s regional representative, said on Tuesday that medium-term growth potential across Central and Eastern Europe had declined to around 2.5 per cent, compared with roughly 5 per cent before countries in the region joined the European Union.

The slowdown does not mean that every economy is stagnating. Poland continues to grow faster than much of Western Europe, while the Czech economy has recovered from recent shocks. The concern is instead about the underlying rate at which these economies can expand once temporary fiscal stimulus, EU funding and post-crisis recoveries are stripped out.

Several of the forces behind the region’s earlier success are becoming weaker.

EU accession opened access to the single market, attracted foreign investment and integrated Poland, Czechia, Slovakia and Hungary deeply into European industrial supply chains. German manufacturers in particular moved production eastwards, taking advantage of lower labour costs, skilled workforces and geographic proximity.

That process generated rapid gains in productivity and incomes. It cannot simply be repeated.

Demographics are one of the most immediate constraints. Working-age populations are shrinking across much of the region while ageing increases spending requirements for pensions, health care and social support.

The IMF’s country assessments illustrate the problem. Its assessment of Poland says demographic pressures are mounting even as labour productivity remains comparatively strong, and calls for higher labour participation, better skills and deeper capital markets.

In Slovakia, the Fund expects growth of only 0.9 per cent this year and says adverse demographics and weaker productivity are weighing on the medium-term outlook. The economy remains particularly exposed to manufacturing and the automotive industry.

The Czech Republic faces a similar structural constraint. The IMF estimates its medium-term potential growth at around 1.8 per cent, with population ageing and modest productivity gains limiting further convergence.

External conditions have also changed.

Germany, the region’s principal industrial partner, has experienced prolonged weakness in manufacturing. Central European producers therefore face softer demand from the market around which many of their supply chains were originally built.

At the same time, China has moved from being primarily a source of imports and components to a direct competitor in sectors where Central Europe has substantial industrial exposure, including cars, batteries, machinery and electrical equipment.

That combination is particularly difficult for economies built around export-oriented manufacturing.

The problem overlaps with the wider European competitiveness debate. EU Today reported in July that only 15.7 per cent of the reforms recommended in Mario Draghi’s competitiveness report had been fully implemented at that stage, with important work still outstanding on capital markets, energy and investment.

For Central Europe, progress on those issues has a direct bearing on growth. Smaller national capital markets make it harder for companies to finance expansion. Fragmented energy systems add to industrial costs, while limited access to venture capital can restrict the development of businesses outside established manufacturing sectors.

There are significant differences between countries. Poland’s larger domestic market gives it more insulation from industrial weakness elsewhere and the IMF expects relatively strong growth. Hungary has faced a different combination of weak investment and fiscal constraints, while Slovakia’s dependence on car production leaves it particularly exposed to changes in the European automotive sector.

EU funding remains an important source of investment across the region, particularly for infrastructure and modernisation. But EU transfers cannot by themselves replace improvements in productivity.

The IMF’s argument is therefore less about an immediate recession than about the end of an unusually favourable period of convergence.

Central Europe entered the EU with lower wages, substantial scope to import Western technology and a powerful incentive for Western European manufacturers to move production eastwards. As those gaps narrow, future growth depends more heavily on innovation, skills, investment and domestic productivity.

The region is still converging with Western Europe. The question raised by the latest IMF warning is how quickly that process can continue once the economic advantages that powered its first two decades of EU membership become less powerful.

The left’s capacity to build knowledge, organization, and struggle was a central theme at this year’s ManiFiesta, introduced during a discussion of Peter Mertens’ new book, “The Last Days of the Old Normal“. In the context of Europe’s ongoing armament, these questions are crucial not only for progressive movements in core countries but also for those building alternatives in Central and Eastern Europe.

The festival featured several sessions examining developments in Central and Eastern Europe, including an intervention by Ukrainian sociologist Volodymyr Ishchenko on the class character of the Ukraine war. Another session – “East of the former wall: the AfD, the industrial crisis, and the war economy” – brought together Markéta Juřicová of the Czech party Levice, Orsolya Haboczki from the Hungarian progressive movement Szikra, German Bundestag representative Cem Ince from Die Linke, and Member of the European Parliament Marc Botenga from the Workers’ Party of Belgium (PTB-PVDA). 

They discussed how the growth of the far right in core EU countries is interacting with events eastwards – and what lessons Western left movements can learn from their Eastern counterparts.

Read more: ‘Ukraine is no longer a sovereign country,’ says sociologist Volodymyr Ishchenko

As Juřicová and Haboczki pointed out, while movements in the West are worried about the popularity of parties like the Alternative for Germany (AfD), many nations in Central and Eastern Europe already have experience with far-right participation – even leadership – in government. More than 15 years of Viktor Orbán’s rule in Hungary, Haboczki noted, offers an important lesson on far-right governments’ economic agendas and tactics. As the Orbán administration used identity issues to capture opposition parties’ attention, it channeled resources into the hands of the local bourgeoisie and served transnational capital by securing huge state subsidies, she said. 

Right-wing parties in Eastern Europe also look to their international peers for inspiration. In the Czech Republic, Juřicová said, the far right “loves” the AfD, picking and choosing many of the same topics the German group campaigns on. The discussion signaled this is particularly important to recognize as the growth of extreme right parties is fueled largely by popular dissatisfaction with mainstream parties’ programs. 

Read more: Far-right victory in German state elections shocks the center

Ince emphasized this was the case in Germany, where a large share of AfD votes came from those believing the party would bring upheaval compared to the status quo, marked by massive job losses and cuts to welfare. But while European progressives recognize this, they still struggle to incorporate it into their programs, recent experiences show. Instead, many of them ponder attempts to prevent the far right from seizing institutional power by providing support to establishment parties, failing to shape a concrete alternative to both the mainstream and the extreme right.

In Central and Eastern Europe, the work of progressive parties is further complicated by the need to rebuild credibility after decades of vilification of socialism and austerity measures implemented by liberal options, Haboczki added. 

Read more: “We cannot eat grenades once the grains no longer grow:” European peace movements organize against militarization

While recognizing workers’ material concerns in Central and East Europe is imperative for building local alternatives, the panel showed, it will also be necessary to build region-wide partnership to challenge topics dominating the narrative in Germany, Belgium, and other core countries.

Militarization stands out among these topics, Botenga and Ince outlined in their interventions, though its implementation might differ by sub-region. Botenga added that German industry stands to gain the most from European armament, yet these gains will not trickle down to the working class – meaning the left in the region can find in anti-militarism a common cause to rally around. 

Ince echoed these observations by emphasizing that, even as their profit lines stand to gain from billions of euros directed towards rearmament, German companies continue to shift significant parts of their operations to countries including Poland, Slovakia, and the Czech Republic – making most of eroded workplace protections and labor rights. This shows that the left across Europe must work together to protect workers’ interests everywhere, building a joint struggle for peace and civilian industry, he indicated.

On Saturday, September 5, around 100,000 people took to the streets of Zagreb to protest against illegal toxic waste disposal in the Lika region. The mobilization, one of the most notable in recent years, brought together diverse networks from all over Croatia.

Protesters demanded not only the clearing of the affected areas in Gospić, but also accountability from the government and a pledge to temporarily halt waste imports into the country. This final demand relates to the fact that tens of thousands of tons of illegal waste found at several dumping sites across the country originated from Slovenia, Italy, and Germany.

The protest built upon over a year of campaigning by local groups in Gospić. These initiatives have been fighting for the urgent removal of approximately 37,000 tons of waste, including hazardous material, exposed during a EU corruption investigation in early 2025. State institutions’ records indicate complaints were filed locally as early as 2023 and 2024 but received minimal, if any, reaction from authorities.

The government’s inaction is particularly striking given that the region is a traditional stronghold of the ruling Croatian Democratic Union (HDZ). On the ground, many perceived their stance – implicitly or explicitly – as profound betrayal and arrogance, likely compounding political headaches for party leadership. In practical terms, this widened the protest’s political spectrum, bringing together an unusually broad group of demonstrators.

The notable lack of official response continued even as it became apparent that the dumping site is likely to have long-term impacts not only in the area immediately surrounding it, but also in downstream regions through underwater pollution. Materials found at the site included shredded plastic from electronic components and medical-grade waste. In addition to having been left lying around, they were also buried underground.

Read more: Local communities in Croatia oppose mega-farm project

Locals raised environmental and health alarms from the beginning, including concerns about soil pollution by heavy metals and PFAS contamination of the area. Only after a long period of pressure, authorities published related analyses. All showed local concerns were grounded, recording high levels of metals like zinc, lead, and chromium, as well as PFAS presence in water courses. The most recent of these reports, made publicly available by the Office for the Suppression of Corruption and Organized Crime (USKOK) on Monday, September 6, confirmed microplastic presence in water samples taken downstream of the illegal dump, adding urgency to demands for removal.

For its part, after a year and a half of alarms sounded by the community in Gospić, the government announced it would cover the waste with foil as a first step of the sanitation process. They claimed further steps would follow, yet without guarantee of timing.

On Monday, Gospić je naš dom reasserted the planned actions were not enough. “The liner can reduce the amount of rainwater entering the landfill from above, but the waste is buried an average of three meters deep in karst rock” they wrote. “Groundwater flows in from below and through cracks in the rock from the sides. A surface liner cannot stop this. Covering the waste will make it less visible, but all 37,000 tons will remain in the ground.”

“Last Saturday, on Zagreb’s central square, before tens of thousands of people from across Croatia, we presented our demands to the Government of the Republic of Croatia. These were not a negotiating position, but a minimum we refuse to go below. After this latest finding, that minimum remains unchanged, but the urgency can no longer be disputed.”

“Eighteen months later, we are still waiting for answers,” they added. “How did 37,000 tons of waste end up buried underground? Who brought it? Who took it? Who was paid for it? […] There is also the question of responsibility for what happened after the waste was discovered. Who knew, and when? Who decided it was not urgent? Who decided to withhold the initial analyses?”