The people of the Czech and Slovak Republics share a region once located between two great empires: the German in the West and the Byzantine in the East. For most of their histories, they have followed separate paths. At the start of the 20th century, both are part of the Austro-Hungarian Empire, with the Czechs in the North under Austria's control, and the Slovaks in the South under Hungary's.
In June 1914, the assassination of the heir to the Austrian throne leads to world war. Few Czechs or Slovaks want to join their rulers in a war against fellow Slavs in Russia. Many leave the country or defect on the Russian front, some to form the Czechoslovak Legion to work for an independent state. At the war's end, the Austro-Hungarian Empire collapses, and the Czechoslovak Republic is formed.
The Paris Peace Conference sets borders for the new nation. The multiethnic Republic comprises Bohemia, Moravia, Silesia, Slovakia, and Ruthenia. It inherits some 80 percent of the Austro-Hungarian Empire's industry, making it one of the world's 10 most industrialized states. Most of the industry, though, is in Czechoslovakia and Moravia, in the North; Slovakia relies on agriculture and forestry.
The 1920 constitution establishes a parliamentary democracy, held together largely by the presidencies of revered leaders T.G. Masaryk and Eduard Benes. The state's centralized structure makes it difficult to unify groups of national minorities. Also challenging is the economic split between the industrialized North and the agrarian South, where a reform program gradually redistributes land.
German nationalists in the Bohemian borderlands gain a backer in Adolf Hitler, who demands the Sudetenland's return to Germany. The Czechoslovak government insists that losing the industry-rich region will lead to economic ruin and open the door to invasion. But the Munich Agreement signed by Germany, Italy, France, and Britain, forces the split. In March 1939 Germany invades Bohemia and Moravia.
The former republic is in pieces. While there is resistance in both the North and South, regions fare differently during the war. Bohemia and Moravia become a German protectorate and suffer oppression, mainly aimed at politicians and intellectuals. Slovakia declares independence, becomes a German puppet state, and experiences an economic boom when Germany invests in industry, especially armaments.
At war's end, Soviet troops occupy much of the country, setting the stage for Soviet influence in Czech affairs for decades to come. Democratic forces, led by Eduard Benes, hope the Soviets will allow Czechoslovakia to choose its own government and plan for a national election in 1946. The Czech Communist Party wins 38 percent of the vote and stops the advance of anti-Communists.
Under instructions from Moscow, the Communist-led government backs out of participation in the Marshall Plan. The economy is relatively undamaged since German occupiers maintained industrial plants, which the new government now takes over. Foreign trade and agriculture remain in private hands.
In 1948 the Communist Party of Czechoslovakia assumes complete control, effectively establishing a one-party system and imposing a Soviet economic model. Most economic sectors are nationalized; central planning is in place by '52. Stressing industrial development, the model falters in part because the country is already industrialized, has few natural resources, and is dependent on foreign trade.
The nation suffers from shortages, inflation, and the lowest industrial growth rate in Eastern Europe; economists suggest reforms. A "New Economic Model" launched in 1965 limits central planning and expands the autonomy of individual enterprises. Economic reform brings with it calls for political reform. Students in Prague demonstrate in support of liberals.
Moderate reformer Alexander Dubcek becomes the Czech Communist Party's first secretary. Enjoying popular support, he espouses a "democratic socialism" that will guarantee freedom of religion, press, assembly, and speech and also continue economic reform. Anti-reformists press for intervention from Moscow. On August 20, troops from the USSR and other Warsaw Pact countries occupy Czechoslovakia.
Reformers are removed from office, and central authority is effectively restored. Under a "normalization" program, the country revives pre-reform policies, such as mandatory central planning and price controls. Personal and political freedoms are again curtailed. Economic growth exceeds planned rates and wages rise, but the 1973-74 oil shock foreshadows decline.
Culture and independent thought suffer, as does the economy. The government can't sustain expansion, and planned goals are missed in all areas, including agriculture, industry, and labor productivity. The government introduces limited management and worker incentives. By 1983, the economy begins slowly to grow, and the government invests in the electronic, chemical, and pharmaceutical sectors.
Activists see a chance for change as the USSR liberalizes policies toward Eastern Europe. In November 1989 the bloodless "Velvet Revolution" begins when police violently break up a pro-democracy demonstration. The Civic Forum led by dissident playwright Vaclav Havel gains popular support. In December Czech Communist Party leaders resign, and Havel is elected president by the Federal Assembly.
Reformers win landslide victories in the first free election since 1946. New leaders include Social Democrat Milos Zeman and free-market economist Vaclav Klaus, who becomes finance minister. Economic reforms begin, including price liberalizing and privatization. Signs of economic improvement appear, but with the end of the communist economic alliance, manufacturers lose their traditional markets.
In 1992 citizens receive vouchers for investment in state-owned companies. The North tolerates reforms better than the South. Slovak calls for autonomy block government's functioning. Czech and Slovak leaders agree the regions will separate. On January 1, 1993, the Czech Republic and the Republic of Slovakia are peacefully established. Free marketeer Klaus becomes the Czech Republic's prime minister.
To attract foreign businesses, the Czech government revamps legal and administrative structures governing investment. Promoting privatization, it issues citizens vouchers that can be invested in any state-owned company. The economy grows at first, but transformation is bumpy, and in 1997 the Czech Republic enters a recession. In 1998 Havel is reelected president; Zeman is appointed prime minister.
Economic policy aims to follow European Union norms. Investment and consumption increase, and growth resumes. In 2002, a centrist coalition takes office led by Vladimir Spidla. The country suffers devastating floods. The EU extends its formal invitation: The Czech Republic will join in 2004. Vaclav Havel leaves the ceremonial presidency in 2003; parliament struggles to choose a successor.
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