In the late ’90s and early oughts, western banks like Erste began buying up local outfits in post-communist Europe, eventually winding up with most of the banking assets in the Czech Republic, Slovakia, and their neighbors. In 2008, as the U.S. credit crunch morphed into a global financial crisis that hit Central and Eastern Europe particularly hard, worry spread that these parent banks would run for the hills. They had helped transmit the crisis to post-communist Europe through various channels – would they now, many observers asked, pull capital out of eastern subsidiaries to protect themselves?

Initially, the answer was no. But as the crisis morphed again – this time into a European sovereign debt crisis – Eastern subsidiaries suffered sharp “deleveraging” and financing flight, especially late last year, undermining the post-2008 recovery in these countries. That’s one reason the European Investment Bank, World Bank, and other global lenders just pledged $38 billion in aid to Eastern Europe through 2014 – a figure that surprised many analysts because the region seems relatively stable compared with a few years ago.

Perhaps it was only a matter of time, then, before someone asked whether foreign banks have done more harm than good in the region. The European Bank for Reconstruction and Development’s (EBRD) answer, in its Transition Report 2012, is of course nuanced – they’re economists, after all.

Before the crisis, the EBRD says, foreign bank ownership was positive, contributing to long-term growth and easier access to credit. For instance, when I moved to the Czech Republic, in 2004, new mortgages were soaring.

As a result, the net benefits of an integrated banking system in Europe became assumed. While acknowledging that there were risks involved, most economists saw foreign ownership as a positive step in post-communist Europe’s financial development, as well as an engine of growth.

But the crisis poked holes in this assumption by revealing the credit boom to be unsustainable, if not reckless. In particular, western sovereigns contributed to a foreign currency lending bubble that left many Central European households wondering how to pay their mortgages as national currencies like the Hungarian forint tumbled in 2008 and 2009. Hungary was among the worst hit, with its economy contracting 6.8 percent in 2009 and back in recession today. (For more on the Hungarian bubble, check out this article.)

A key lesson of the crisis, then, isn’t the risks of foreign bank ownership, the EBRD concludes – they were already known. It’s how much potential harm these risks pose.

But have foreign banks done more harm than good? The EBRD doesn’t have a clear answer, but I think not. If the global financial crisis has taught us anything, it’s that European integration cuts both ways for Central and Eastern Europe. The same process that saw living standards soar on rising trade, foreign investment, and credit brought the region to the brink. Foreign bank ownership played a role in that roller coaster ride. But the climb has been steeper than the descent. Even in Hungary, real GDP, while still shy of the 2008 peak, is considerably higher than in the early ’90s – a period in Central and Eastern Europe I doubt any serious person would want to revisit.

Picture from Flickr

I should say, however, that I still shake my head over anti-Roma, prejudiced comments that I hear from middle-class Czechs, people I know well and people in my community. One of my first blog posts was about a powerpoint presentation full of offensive jokes, and how many people that should know better apparently still feel no hesitation about sending such stuff around. But somehow I figured that the new generation, kids that have grown up in a different era, would be different. That’s why a recent trip that I made to Jihlava, about 90 minutes southeast of Prague, was so eye-opening and just plain depressing.

I was there for a showing of some of the videos about Roma that were produced a few years back as part our Colorful but Colorblind multimedia project. This was a special screening to a group of more than 60 high school students immediately proceeding the start of the Jihlava International Documentary Film Festival on 24 October. Arranged by the European Commission office in Prague, the event included an accompanying panel discussion that included me and two journalists from Czech Radio, Jarmila Balazova and Jana Sustova. Jana was the co-creator of one of the videos screened, and Jarmila is one of the leaders of Romea.cz, a TOL partner in Roma multimedia projects and one of the best Roma media outlets in Central and Eastern Europe.

The plan was to show several of the films and then answer questions about the films. The fateful decision was made to allow the students to write their comments on small slips of paper and pass them up to be read by the moderator, Jarmila. Given the still-ingrained reluctance of many Czech students to express themselves, that decision made sense if we hoped to have any kind of discussion. But anonymity undoubtedly contributed to the wave of ugly comments/questions that rolled in, which Jarmila bravely read out, gritting her teeth and trying, as we all did, to come up with some meaningful response. Here are some of the “highlights:

“I don’t mind gypsies when they work, have two children, and behave like people.”

“I’m no racist but I don’t like gypsies.”

“I don’t want to be a racist, but gypsies do it to themselves (violence, stealing). It doesn’t have to be every one of them, some are fine, but the great majority of gypsies are violent…Gypsies are, according to me, a lower race. What do you think?”

“I can’t believe that gypsies want to get involved in politics. Gypsies aren’t Czechs so they shouldn’t get into Czech politics…Gypsies multiply so quickly that soon there will be more of them than Czechs!”

“A decent Rom can be some Rom who doesn’t get used to the regular collection of social handouts. Why in some countries there aren’t such problems with Roma?

“My brother was beaten by gypsies because he didn’t given them a cigarette. How can I trust gypsies when they do such stupid things?”

Another writer seemed to be suggesting that the Czech Republic had fallen into debt because most Roma didn’t want to work and only wanted handouts.

One somewhat more thoughtful student said that he didn’t want to generalize about all Roma, but asked how he could respect the Roma in Jihlava when they had attacked his young sister without reason. “Why,” he asked, “can some Roma earn money, work, and try to improve their lives, but it definitely isn’t like that in Jihlava?” He concluded by asking “Do you think that such people can improve themselves or change?”

Just as disappointing was the behavior of the teachers that were present (I believe two men and two women). It would have been hard for them to get up the gumption to interrupt the event and plead for greater tolerance from their students. But you would have figured that they might have been embarrassed enough to approach their guests — who had traveled a few hours to be there, with one of them forced to listen to such awful comments about her ethnicity — and apologize on behalf of their students. No such luck — they sheepishly filed out and we never heard from them.

These kids obviously get their opinions from their parents, teachers, and fellow students; they can freely read as much racist propaganda online as they want (in Czech and on YouTube as this article showed); they hear about or personally experience some bad incidents (apparently there have been some recently in Jihlava); and too few people are telling them not to generalize about the entire race.

Perhaps some of these youngsters were just having fun and trying to provoke us, offering up the most outrageous comments that they could think of. Kids will do that. But somehow I doubt it. They obviously had some notion that being “racist” was unacceptable (why else would they deny that they were), but little to no understanding that comments such as “I’m not racist but I hate gypsies” are, actually, racist.

This is an extremely long process, even in countries that have a much longer history of multiethnicity and desegregation. (For anyone that thinks the United States is such a glowing model of tolerance, check out this article about the racist tweets that coursed through the Internet following Barack Obama’s election victory). But if this isolated experience showed anything, it’s time to yet again go back and see what can be done, at least in the Czech school system, to counter such destructive tendencies.

Back in June, the economist and New York Times columnist Paul Krugman wrote a blog post effectively mocking the argument that Estonia’s strong post-financial crisis recovery proved the merits of austerity.

“So, a terrible – Depression level – slump, followed by a significant but still incomplete recovery,” he wrote. “Better than no recovery at all, obviously – but this is what passes for economic triumph?”

Firing back on Twitter, Estonian President Toomas Hendrick Ilves called Krugman ignorant and smug. The former diplomat then told The Wall Street Journal the Tweets were a genuine and “immediate defense” of the painful belt-tightening Estonia undertook to buttress an economy that contracted 14 percent in 2009. The WSJ noted that Ilves had a point because Estonia had rebounded to robust growth.

This week’s publication of the European Commission’s (EC) fall economic forecasts is a good opportunity to revisit this argument, which is important because the debate over the merits of austerity is far from over. With beleaguered economies like Slovenia hoping public sector spending cuts and other belt-tightening efforts will help right ship, does Estonia demonstrate that the short-term pain of austerity is worth the long-term gain in “confidence” and, as a result, renewed growth and stability?

“Estonia: Returning to balanced growth,” the title of the EC’s country forecast says a lot. Here, “returning” seems a lot like a euphemism for “falling” because growth is expected to drop to 2.5 percent this year from 8.3 percent in 2011, the fastest rate in the European Union at the time. This is mostly due to falling demand for Estonian exports as the economies of the country’s key trading partners slow.

At the same time, though, growth is expected to climb to a solid 4 percent by 2014, and other indicators are positive. Unemployment is down significantly from 2010, and the 2012 deficit is projected at 1.1 percent of GDP, well under the 2.6 percent target. According to the European Bank for Reconstruction and Development (EBRD), foreign investment has rebounded since 2009, though this year’s projection is well below the 2010 and 2011 figures.

These data offer a muddled picture. Sure, growth is better than contraction, but the GDP figures are hardly a resounding endorsement for austerity. And while the EBRD praises Estonia for the “most prudently managed” finances in the EU, that’s not protecting its economy from slowdowns in its key trade partners.

Stepping back, then, a big question is whether austerity is necessary to stabilize a cratering economy, as Estonia’s was in 2009 and Slovenia’s is today – i.e., Would Estonia be much worse off now without the belt-tightening back then?

“Obviously,” some might say. But, taking another step back, then why is GDP in the austere EU set to contract this year while the U.S., which went the route of stimulus, is growing, albeit slowly?

Anybody?

Picture from Flickr

This is a guest post by TOL intern Nino Tsintsadze.

After Georgia’s parliamentary elections in October, the confrontation between the winners and losers is moving into another arena.

Last week the new government announced cuts in the budget for the office of President Mikheil Saakashvili, with his palace residence the first target.

On 2 November, prime minister and billionaire Bidzina Ivanishvili said the maintenance costs of the building are too high and called on the president to move his administration back to the communist-era government headquarters.

The history of the presidential palace dates to 2004, when shortly after the Rose Revolution newly elected Saakashvili decided to build a presidential residence to unite his home and office. Previously, he had rented a flat near the parliament building, refusing to move into the official residence, part of which had been given over to the use of Eduard Shevardnaze, Saakashvili’s predecessor and Rose Revolution adversary.

The new presidential palace officially opened on 12 July 2009, in timing that rankled many as the toll of Georgians living in makeshift refugee quarters had swelled after the August 2008 war with Russia.

The palace complex sits in the picturesque historic center of Tbilisi on about 22,000 square meters (237,000 square feet) – several times the size of the White House – overlooking the Mtkvari river. It includes several buildings of distinct architectural styles united around a massive internal yard. The main building is in the classical style with a gigantic glass dome in the center, and the yard contains a few statues and sculptures by Spanish, German, and Georgian artists. Since its opening, the proud president has shown off the palace to Western politicians, diplomats, and at least one Hollywood star, Sharon Stone.

The government has never said exactly how much the project cost. Various Georgian media, depending on how friendly they were to Saakashvili’s administration, have put it at 40 million to 800 million lari ($24 million to $482 million). In response to criticism about the opacity of the palace’s construction costs, Saakashvili once said it had soaked up “approximately, less than one-fifth of a percent of the Georgian budget expenditure for last five years.”

The new government has vowed to investigate and make the costs public. At the same time, Ivanishvili says the palace’s annual electric bill of 800,000 lari ($482,000) is indefensible in a country where 36.5 percent of people live below the poverty line, according to government statistics.

With the cuts envisioned in the 2013 budget, which has already been submitted to parliament for approval, the presidential administration says it has been forced to turn off the palace’s exterior lights.

Ivanishvili’s supporters in the social media sphere have chimed in, arguing that that money would be better spent elsewhere, but others say the palace represents the image of new Georgia, enlightened and modern. Some even fear that the decision to shut out the lights might come in for mockery from abroad.

Directly opposite the darkened palace stands an illuminated business and residential complex developed by Ivanishvili and designed by Japanese architect Shin Takamatsu. Works by Roy Lichtenstein and Damien Hirst are said to hang on the walls inside, and the yard boasts works by Henry Moore, Zaha Hadid, and others. All of it – including outdoor lighting – is funded by the billionaire himself. As for his office, Ivanishvili chose the government headquarters. It is there, in the former office of Shevardnaze, that the new prime minister invites Saakashvili to work also.

German jitters over the spiking asylum claims by Roma from Serbia and Macedonia has got some in the EU talking about reinstating the visa requirement for those countries. This would be a major blow for the union’s integration efforts toward the Western Balkans, as Gerald Knaus and Alexandra Stiglmayer of the European Stability Initiative write.

They quote the German interior minister, Hans-Peter Friedrich, as saying, “We have to send a clear signal to the relevant countries: people who are really persecuted will be accepted, economic refugees won’t.”

Deutsche Welle paraphrased Friedrich as saying most of the asylum seekers don’t qualify for political asylum. Rather, they are fleeing poverty and economic ruin in their home countries.

That sounds fairly dire to me, certainly not grounds to summarily send them back to such an economic disaster zone. Well, maybe his meaning got pumped up in translation.

A faction of member states led by Germany, Sweden and a few others are now calling for the visa rules to be tightened. One proposal is to allow visa requirements to be re-imposed if asylum claims rise by 50 percent over a six-month period, according to EUObserver.

Knaus, usually a canny observer, and co-author Stiglmayer pick out the holes in these arguments, but their counterproposal leaves almost as many questions unanswered.

As they write, the European Commission’s suggestion that Serbia, Macedonia and Albania mount public awareness campaigns to dissuade potential asylum seekers is disingenuous, while the recommendation to increase border checks raises hackles. After spending the past 20 years celebrating the fall of the Iron Curtain and crying up the wonderful things that come from a borderless society, now we want these poor, backward neighbors to stop their citizens leaving the country, because they are poor, uneducated, or brown-skinned?

“As almost all the asylum seekers are Roma, it is hard to avoid ethnic profiling and open discrimination if this [‘exit controls’] were systematically implemented,” they write.

But Knaus and Stiglmayer’s Gordian-knot-cutter – “The best way forward for reforming visa requirements” – amounts to much the same thing. Tangled grammar makes it hard to tease apart their argument, but the gist of it is that all countries that enjoy visa-free travel to the EU be declared “safe countries of origin” – those with good enough regimes so that returned asylum seekers will not be in danger.

Knaus and Stiglmayer write that processing times were cut drastically in Austria and the Netherlands when they enlarged their “safe countries” lists. Presumably, the western Balkans are on those lists. Belgium compiled its official safe country list, for the first time, a few months ago. Asylum requests by nationals of those countries are to be handled within 15 days. The list isn’t long: the four Balkan states that enjoy visa-free travel to the Schengen area, plus Bosnia, Kosovo, and India. Belgium was one of the first countries to complain about rising numbers of Balkan asylum seekers when the no-visa regime took effect.

What safe country lists do is shift some of the vetting process back to the source countries, and that is as it should be. But in the short run, this amounts to “exit controls,” or racial profiling at the borders. Knaus and Stiglmayer seem to argue that western Balkan countries should be given another chance to step up human-rights protection before this new, all-EU safe country list comes into effect. That simply shunts their “best way forward” years into the future.

It’s pretty clear that a large majority of these asylum seekers don’t qualify for political asylum under the international refugee convention or EU law. Indeed, they are “economic” migrants. Yet, people motivated primarily by economic concerns can be political refugees at the same time. When you have virtually no chance of finding a better than menial job – ever – because you lack the education and training, and you lack education because of deep-seated prejudices against your kind sharing classrooms with “white” kids, isn’t that something like persecution? What could be more political?

At Transitions Online, we often cover the bumps in the road for post-communist Europe and the former Soviet Union. Today’s feature, Ukraine’s Democratic U-Turn, is on the very real threat that vote buying and other irregularities ahead of Sunday’s parliamentary polls pose to the country’s recent record of generally transparent elections. As TOL Executive Director Jeremy Druker noted in a recent blog post, the transition is far from over.

Yet it’s also important to step back and appreciate just how much progress has been made – and is being made. A reminder came with this week’s release of The World Bank’s 10^th annual ranking of global business climates. Six of the top 10 reformers in Doing Business 2013 are in TOL’s coverage area, and Poland boasted the most improvement worldwide.

A few highlights:

• Poland leapt 19 spots to 55^th place in the 185-economy survey thanks to four business-friendly reforms that made it easier to pay taxes and resolve bankruptcy, among other improvements. Ukraine jumped 15 places, Mongolia 12.

• In the past year, Eastern Europe and Central Asia boasted the most economies to register improvements, with at least one institutional or regulatory reform in 88 percent of countries. And despite the EU’s shakiness these days, The World Bank gives European integration some of the credit for the progress in Eastern Europe.

• Eastern Europe and Central Asia edged out East Asia and the Pacific as the second most business-friendly region this year.

Since the first Doing Business report, in 2003, Eastern Europe and Central Asia has improved the most, The World Bank says. True, it’s easier to improve on modest beginnings. But these strides are impressive generally, and especially so considering that many political scientists thought post-Communist Europe and the former Soviet Union would be an incubator of instability.

Photo of Warsaw from Wikipedia

But I want to talk about Libor Michalek. As you might recall, Michalek was a fairly anonymous state official until late 2010. when he went public with allegations of kickbacks and manipulated tenders at the State Environment Fund, which he was heading at the time. Government officials attempted to smear his name, and he eventually lost his job. But he won a new anti-corruption award for his whistleblowing, and his public appearances and comments convinced a large number of people of his integrity and, yes, bravery to stand up to the normal, behind-the-scenes machinations of the powers-that-be. I interviewed him at the time (see video here), and I became a believer as well. The guy seems legit.

So I was both heartened and worried when I heard that he declared for the Senate elections this summer, backed by a coalition of the Greens, the Christian Democrats, and the Pirate Party — heartened because it’s great when people like that don’t get discouraged and want to change things, but worried that he’d be blown away in a confrontation with the entrenched campaign machines of the dominating parties. And I worried some more when I ran into Michalek as he handed out leaflets close to the TOL office. I asked him how it was going, and he said that he had been encouraged by the turnout at a big, initial rally, but things had since tailed off. It was hard to tell if he was just being cautious or setting himself up to be less disappointed if he didn’t win.

But not only did Michalek easily win the first round, he garnered over 74 percent of the votes cast in the second round. Yes, not many people turned out for that second round (he got around 11,800 votes), but, still, that’s a lot of committed people that joined together to defeat the favored candidates of the country’s main political parties. The Pirate movement is even claiming that he’s the first pirate ever elected to a national parliament. That’s probably taking things a bit far (as I understand it the Pirates were just one of the three parties to support his bid), but this could become a big deal. Michalek is already contemplating whether he should ride this momentum and try to get nine other senators to nominate him as a presidential candidate (he wouldn’t then need the 50,000 signatures normally necessary, a practical impossibility until the 6 November deadline). The country’s first direct presidential election will be held early next year.

I’ve already read some criticism (here, in Czech) that Michalek is even considering a run. His first priority should be to serve the voters that elected him and complete a term in the Senate, that line of thinking goes. It would be a better for him to prove himself, then go for the one of the highest offices in the land. OK, I get it. That makes sense. But with the main choices an uninspiring former head of the Statistical Office who was a member of the Communist Party (Jan Fischer) and the buffoonish former head of the Social Democrats who oversaw a very corrupt era (Milos Zeman), is it really such a bad idea?

Also running counter-intuitive to the general 24/7 news machine mentality, AP has also been telling its reporters here to slow down and take their time on coming up with and reporting feature stories. The one editorial leader, cross-format approach has worked so well, that Ian and several others at AP just won the agency’s highest award for their coverage and the model is now being replicated in Moscow (for the former Soviet Union) and Cairo (for the Middle East) For more on those topics, please see excerpts of our interview below. And to hear more in person from Ian, join us next week in Prague for a panel discussion, “Changing Media Business Models,” that TOL is helping organize at this year’s Forum 2000 conference in Prague (and which I’ll be moderating).

But first, a bit more about Ian: Ian Phillips has reported and edited from Europe, North America, Africa, Latin America, and Asia for AP and was deputy Europe editor in London prior to moving to Prague in 2011. Before joining AP, Ian worked in Argentina for Reuters and The Buenos Aires Herald. He is British and graduated with a degree in Spanish and French from St. John’s College, Cambridge University, in 1992.

You’ve said that this region’s broadcasters have had a lot of interest in coverage from other countries from this region. What do you think the reasons are for that?

I was just in Slovakia, and one of the points of interest in Slovakia is Hungary, and they want us to produce more about Hungary. We’re doing a lot, but they want more. I think there are historical reasons. Some of these borders are recent, or not even official, or ethnic, so on the other side of the border, there is a lot of interest in the other side, perhaps? I think it stretches beyond that. I think there is genuine interest, and we’re seeing it in terms of how many channels are using our content for video. When we do a story from this part of the world, often the play is surprisingly strong, from places such as Hungary, Romania, Bulgaria, the Balkans.

Can you think of any specific stories?

One was called “Search for World War II Heroes,” and we profiled someone who volunteered to go to Auschwitz as an undercover spy to sneak information to the West. Beautiful, beautiful story that hadn’t been told much, and, again, we made it work for all formats. The video journalists from Prague was at the mass grave [where the man's remains were thought to have been buried], and there were people pulling out skeletons. Very strong video. That video actually helps a bit the text story because it’s so visual and helped us zone it on what the actual storyline was going to be because of the strength of the images, which is also interesting because sometimes textual things tell a different story. Sometimes it is the photographer who provides the inch that is the overriding theme.

We did a story in Poland and in the U.S. about the Katyn massacre. In New York, we got hold of some documents that were being declassified about 75 years after the killing, and we sifted through them for weeks, and we found what we think is as strong evidence as you could get that the U.S. administration knew precisely what had happened, that the Soviets had massacred these Polish officers and covered up what was then told. We got documents of an American prisoner of war sending documents back to the U.S., going missing mysteriously. Primarily a text story. It was a powerful text story. We found a way to do it on TV. We interviewed the son of the man who was killed. We went to the ceremony in Washington, where they were declassifying documents. That, again, had a huge impact nationally in Poland itself, Russia, back in the U.S.

Some people might also be surprised to hear of such interest in the West and elsewhere for content from this part of the world, which is often considered boring these days and not worth investing in.

My personal view is that we are aided by the fact that there is no breaking news story or an economy story, which some of our competitors are having to report on every day in minutiae. We can do what our journalists want to do and have time to do it, and I think part of it is that this part of the world is less mainstream than the West. In Western Europe obviously there are some great stories that have gotten a lot of play, but it looks a little similar. I think in East/Central Europe there are stories being told, whether right now or catching up with the past. Some of our stories are being told of tragedies from the 20th century that are just now coming to light, that are still relevant to people, that happened in their lifetime.

Maybe we get lucky because people in the West are very savvy. They control what you can see, what you can’t see. There you have very loyal PR machines that want to direct you in one way. Our job is to get beyond that. In our region, and I’m certainly surprised, we get officials speaking to us on the phone, which is pretty hard in Western Europe. They have that potential downside of saying something on camera that might be controversial. People take a few more risks here, so I think that’s great for better journalism for us.

And you are even adding people these days, right?

Yes, absolutely. We have hired new people. We’ve trained photographers to do video, and we, I think, breathed new life into text reporters who felt that they had been forgotten, that there wasn’t a story. That no one really cared. We’ve just set them back in motion again. [We told them] “You have got the luxury, you have got the time to find stuff that others can’t,” and the mantra now is “don’t do what everyone else is doing, because if you don’t some of us are going to go out of business.” If it’s something original, ground-breaking, and distinctive, you will retain business, and whatever we earn we put back in the news. So, it’s vital we keep that revenue flowing. So, yeah, we’ve invested. It’s paid off.

I personally think that some of the most exciting stories in Europe are happening in this region – to my surprise, I have to admit. At the start, I was looking at the stories, thinking, “What can we do here?” But people come up with a pitch, and it always works out well. Not just here. Not just Hungarians using the Slovak coverage. We can get play in Asia. We can get play in Western capitals. A lot of the media then covers what we’ve done. They match it. Imitation is a form of flattery – isn’t that right? Isn’t that what we all strive for?

—-

Interview transcribed by Andrew McIntyre, a TOL intern.

TOLS’s executive director, Jeremy Druker, asked in a blog post back in February, “What is it about Belarus that brings out the best in photojournalists?” I’ve been wondering what it is about Belarus that brings out the funny in dissenters. In April, we wrote about a satirist there who besieged officials and got readers of his blog to join him in a campaign to restart production of low-fat yogurt.

Then there was the campaign to use applause as a form of dissent, which resulted in a presidential address being met by an uncomfortable silence (and this funny YouTube video):

And the stuffed toys that showed up in front of the government building holding placards with messages like, “Toys Against Lawlessness!” And the teddy bears dropped from a plane with free speech messages pinned to them.

The yogurt crusader, Evgeny Lipkovich, accounted for the mischievous streak in the Belarusian opposition this way: “I don’t think my position is absurd, because the situation we live in is even more absurd. In general, our reality, when taken to its absurd conclusion, is perceived more clearly.”

I’m thinking about this now because we’re preparing a story about another dissident/prankster, and today I came across another incident that made me laugh out loud.

The punchline, from Charter 97, a dissident-run news website:

Police began to hunt Ivan Amelchanka after a rally on April 26. The young man raised a poster “Musorok” (a Russian slang word for a policeman literally meaning “garbage”) near a plainclothes police officer who was filming participants of the peaceful sanctioned rally. Ivan Amelchanka said in court he used letters of the Latin alphabet and the poster should be read as “MY COP OK” that can be considered a praise to police. The judge didn’t take this explanation into account. Ivan was jailed for 15 days and then to 10 days.

Because these struggles for freedom and still going on, and because each one is different, who knows if this approach is more effective than playing punk music in a cathedral? What I do know is that if you are in a fight for the hearts and minds of ordinary people, you want the funny guys on your side.

Over at TOL, we’ve been following developments rather closely of the Slovakia-born online paywall system known as Piano. This is a highly unusual story of a media-related innovation originating in our coverage region, but generating a lot of press in Western Europe and the United States (almost always, it’s the other way around). And while the system’s technology has understandably drawn much attention (similar to cable, a single fee gains access to multiple content channels), probably the company’s biggest success has been to convince fierce competitors in the same market to team up and restrict access to their sites in a way that should benefit all of them (the media outlet that takes the initial group subscription gets 40 percent; Piano gets 30 percent; and the rest is divided up according to how much time readers spent on the collected sites). I blogged about the May 2011 launch on the pages of East of Center, but since then, we’ve blogged over at NetProphet, TOL’s tech/social media blog, on Piano’s initial success in Slovakia, expansion into Slovenia, new seed funding, and further expansion into Poland, by far the biggest market and biggest test so far of the system.

OK, the amount of our coverage indicates that we’re a bit biased on the topic (TOL was a pioneer in paywalls way back in 1999, and we’re big fans of Tomas Bella, the CEO of Piano, who played a huge roll in the development of new media in Slovakia and trained for us in the not-so-distant past). But we do feel strongly that Piano is one of those few companies not simply lamenting the death of newspapers as we know them, but actually trying to figure out a way to save them. That topic is also the subject of a panel discussion that TOL is helping organize at this year’s Forum 2000 conference in Prague (and which I’ll be moderating). This year’s theme is Media & Democracy, and you can still register to attend our panel “Changing Media Business Models” and the rest of the conference, but act quickly since registration closes 11 October.

Given what I’ve written above, no one should be surprised that I’ve invited a member of Piano’s management to sit on the panel and to answer a few questions (below) in the lead-up the conference. Piano watchers know David Brauchli as the company’s chief communications offer, but they might not know that for nearly 20 years, he was a professional news photographer for some of the most prestigious media outlets in the world. Over that time, David covered many of the world’s violent conflicts and was a three-time Pulitzer Prize Finalist for his work from Sarajevo, South Africa, and Grozny.

Some of our readers might still not understand the difference between a metered system and what you do at Piano. Could you please explain?

What we do at Piano is involve a majority of publishers in a single market and we get them to group content together. By grouping their content together, most publishers recognize they don’t have enough premium-type content by themselves, but they do have enough exclusive content that it would make sense for them to charge something for it. Using our system, we can take all the premium content, group it together, and sell it for added value for the end user because one low price and one login allows the ability to access all the content on any participating site. Now a metered paywall is offering content from just one particular publication, be it a paper or a magazine, and only the articles on that site. So if you want to read articles on more than one site, if you want information from five or 10 newspapers, then you have to subscribe to five or 10 different newspapers and in the end that becomes more hassle than it’s worth and you end up cutting your news-reading diet. We think that the Piano system lets you read as you would have read before, but for a very low price.

Do you foresee some kind of mixed system with certain, maybe larger countries with diverse media adopting a metered system, and other smaller countries going for something such as Piano?

First of all I think that there is only going to be some kind of paid content going forward. It’s going to be one of three models: either a pay-to-play model like the Times of London where you don’t get anything unless you pay for it. You can have a metered pay wall if you have a paper like the New York Times, the FT, the Economist, the Wall Street Journal, where you have enough content and people value the brand enough. You might have a paywall like Piano has and that can be vertical or horizontal integration. Vertical integration is like what we have set up in Slovakia, Slovenia, and Poland where a number of publications be it four or 10 or 12 all participate and they provide their premium content, their audio, and video. In Poland, for example, we have Polish Radio they provide a high-quality, high- definition audio feed to Piano subscribers as opposed to low definition.

Or you can get a combination of those, where you can be involved in the Piano system in general and you can set up a metered system if you wish, so if you pay a basic amount, you can assess, say 10, articles and then you can top it off with a gateway. But I think down the line, five years from now, 2015, 2020, I don’t think there is going to be any free content except for Reuters, except for AP, but that’s already been monetized because the newspapers, the websites have already paid AP, Reuters, Bloomberg for that information.

Free content makes no sense. It was a historic mistake. Actually there was a guy who wrote this very famous memo in 1992 called the “Boiling Frog” memo. His name was Bob Kaiser and he was managing editor of The Washington Post in the 1990s. The memo described how the media was in the midst of this paradigm shift and he equated it to a frog in a pot of water. If you turn the heat up gradually the frog doesn’t even notice that he’s boiling to death, even though if he would normally jump into a pot of boiling water, then he’d die. The media was the frog in the boiling water. They never even noticed that the whole paradigm had shifted.

What kind of advice are you actually providing publishers?

We take an in-depth look at his website or websites and we see where people come in, where they go out, what they are looking at, how they long they are staying on the site, and then we can compare this information to what we have in our database with our active publishers and then we are able to make a recommendation to them about what we feel is going to monetize the most people, like we can say this column has a large following and gets a large spike when it comes out, that would be a good thing to monetize, and you aren’t going to be able to monetize general news that going to appear or a lot of sites, or horoscopes or the weather. But you can monetize podcasts, for example. And the other thing that we sell is convenience. We’ve found that above 40 percent of the subscribers to Piano actually subscribe before they run into any payment zone, before they get to any article is locked, they sign up, and so they never run into a paywall. It’s a convenience thing. It’s like the person with cable television who says I don’t need 10,000 channels, but when I want to watch something on one of those 10,000, then I can.

I was surprised that in some places people can’t comment on articles without a Piano subscription.

That is in Slovakia. We created an option because apparently in Slovakia there were apparently were millions of trolls and comments, and it took an incredible amount of time to moderate. So we made it free, I think it was, for three comments. And what this did was to eliminate all the trolls because if you trolled, then you got banned and had to re-sign up and no one wanted to spend four euros a month spamming.

Was there anything else surprising from the reader data so far?

One of the most surprising things was, as I said, that people signed up even before they hit the paywall. And the second most surprising thing that we found that the presentation of the articles made a big difference. One of the most popular pages on the SME site in Slovakia is a list of articles that shows what’s paid and what’s not paid. To get to that page paid, that’s a paid page, that’s one of the most popular pages because it gives you the quickest access to what you want to see.

Do you think it will really be possible for you to enter large, English-speaking markets?

Absolutely. And what we are going to do is we’re go in horizontally rather than vertically, vertically being an entire country. Horizontally would be groups of similar interest things, like fish magazines, like car magazines, so we can take a group and put all those guys together so all that information is no longer available unless you pay. We can also do it regionally. It would work really well in a state like Montana because there isn’t a lot of general information about Montana.