Low costs and taxes bring foreign investors to the "Tatra Tiger", writes Daniel McLaughlin.
While Peugeot's Ryton car plant in the English midlands faces imminent closure, Slovakia is preparing to take over its workload as part of its evolution from post-communist backwater into the world's biggest per capita carmaker.
The anger of the 2,300 workers at the Coventry factory is unlikely to prevent its demise, which comes as no great surprise after Peugeot named its state-of-the-art Slovakian plant as the place it wants to build its new 207 model.
Peugeot says the economics of the matter are stark: it costs about €16.50 per hour to build a Peugeot 206 at Ryton, one company manager said last week, compared to just €3.50 at Trnava, the Slovakian town known in communist days for churning out Skoda vans.
Peugeot is investing €1.1 billion into a Trnava factory that it hopes will make 450,000 cars per year by 2009 and be producing 60 per cent of all Peugeot 207s by 2010.
By that time, Slovakia's 5.4 million people will be making a million cars a year, or more per head that anyone else in the world.
South Korea's Kia Motors hopes to begin production this year at its own €800 million Slovakian plant, and Volkswagen has been building cars in the country since the 1990s.
Makers of car components are beginning to follow the manufacturers to Slovakia, with Getrag-Ford building a €300 million factory in the eastern part of the country, which became part of the EU's border with the former Soviet Union when Slovakia joined the bloc in May 2004.
Slovakia's low labour and land costs, simple fiscal code and flat tax rate of 19 per cent - and its location at the hub of central Europe - have brought foreign investors flocking and pushed economic growth along at a robust 6 per cent. It is little wonder, then, that the country is dubbed the "Tatra Tiger", after a mountain range that arcs through it.
That is quite an achievement for a country that then-US secretary of state Madeleine Albright called a "black hole at the heart of Europe" during the autocratic rule of prime minister Vladimir Meciar from 1993-1998.
The sweeping liberal economic reforms that followed his demise have not only transformed Slovakia's economy and ushered it into Nato and the EU, but made it an example to other European countries on how deregulation can invigorate an economy.
Along with most other EU states from the old communist bloc, Slovakia has developed the kind of open economy and flexible work force espoused strongly by Britain, but scorned by France and several other members of "old Europe".
It is the ease with which a company can hire and fire employees in Britain that Mr Blair credits with encouraging firms to invest there. But this advantage has proved to be a double-edged sword, slicing deep last week when Peugeot wielded it in the English midlands.
"It is getting the balance right between protecting workers and creating a situation where it is so difficult to shed jobs that companies don't recruit in the first place," said UK trade and industry secretary Alan Johnson.
Derek Simpson, leader of Britain's Amicus trade union, said the balance was wrong.
"Peugeot workers are told that the government's adherence to a free labour market policy has created a dynamic economy in which they will soon find jobs to replace the well-paid employment they are losing," he said. "This claim does not stand up to scrutiny."
Slovakia, amid its boom, is already wary of rivals looming on its shoulder: Romania and Bulgaria, which hope to join the EU next year, offer investors even lower costs for labour and land, as do longer-term EU hopefuls Ukraine and Croatia.
