It was being overtaken by ambitious reformist neighbours such as Poland, Hungary and the Czech Republic, that were speeding towards membership of Nato and the EU, while the authoritarian government in Bratislava cuddled up to Moscow.
But by January 1 next year, Slovakia will have left its older and more established neighbours behind as it joins the eurozone, marking its final acceptance into one of the most exclusive clubs in the world and cementing its place as one of Europe’s most promising economies.
Last year it joined the Schengen zone, with its liberalised internal border controls, and the EU’s eastern frontier now lies in the forested hills of Slovakia, where guards scan dozens of television monitors linked to cameras watching for illegal migrants trying to sneak into the EU from Ukraine.
That the final stages of this process have been achieved under the unlikely leadership of Robert Fico, the prime minister and a fiery left-wing populist, makes Slovakia’s success even more surprising.
Mr Fico’s most singular accomplishment was not to implement his more radical anti-reform ideas from the 2006 election campaign. Even one of his economic advisers, Peter Stanek, admits that this has been a government of “no change”.
Now Slovaks, whose economy grew last year at 10.4 per cent, are feeling flush enough to start buying houses just across the border in neighbouring Austria, while developers scan the hills around the capital for sites for new real-estate projects.
The credit crunch that has hit the US and parts of western Europe has had little impact and banks continue to lend.
Slovakia’s fast growth and low wages have made it a magnet for foreign investors, with the government expecting about $2.7bn in foreign direct investment this year.
The country is the world’s biggest per capita car producer, with three state-of-the-art factories churning out cars for export. Much of the foreign money has gone into productive investments such as car and flatscreen television factories, pushing up productivity and cutting the current account deficit.
By contrast, the three Baltic countries – which, combined, are of a similar size to Slovakia and which, for a time, vied for the title of Europe’s fastest-growing economies – saw much of their FDI used for real estate and construction.
This helped cause the property bubble that is now painfully deflating, says Christoph Rosenberg, the IMF’s representative for central Europe and the Baltics.
The booming economy has allowed Mr Fico to keep his popularity high by making small changes, such as eliminating a much-disliked fee for accessing the healthcare system, while not reversing the reforms of his centre-right predecessors.
The prime minister makes no bones about his dislike for large retail chains and financial groups, as well as his preference for a good dose of state control of the economy. “This government hasn’t privatised anything,” he says proudly.
Much of the local media dislikes him, an antipathy that is heartily returned, with the prime minister labelling a couple of the country’s leading papers “prostitutes”.
Mr Fico pushed through a controversial media bill this year that caused worries about press freedom. “I think Fico hates the media,” says Matus Kostolny, editor-in-chief of the SME daily.
But, as in most countries, taking a swipe at the media and questioning the pricing policies of large energy companies tends to be popular with voters, and those gestures have helped make Mr Fico Slovakia’s most popular politician, with many analysts expecting him to win the next parliamentary elections scheduled for 2010.
Mr Fico’s politics of small gestures may have helped get his country into the eurozone. However, he may be called on to be more active to deal with challenges in future, as Slovakia, with only 70 per cent of the EU’s average GDP per capita, tries to make up the distance separating it from the rest of the continent, while the world economy enters a turbulent period.
There are severe regional disparities between the fast-growing west of the country and the more depressed east, where unemployment is stubbornly high, and where the large Roma minority lives in poverty.
“We need improved road and rail links to the east,” says Andreas Tostmann, chairman of Volkswagen Slovakia.
The labour market in the west of the country is tight, but the education system is lacklustre at best, dangerous for a country which will not be able to rely on cheap wages for much longer.
Tourism has not yet been able to develop as a money spinner, which would benefit the northern Tatra mountain region.
The economy is dominated by foreigners, who control the bulk of the banking sector as well as the country’s most important industries. Local companies, as opposed to foreign companies with Slovak factories, still have not made headway in becoming suppliers to the car industry. The most successful local businesses are financial groups, Penta and J&T, both of which have grown large enough to look beyond Slovakia.
The local business and political elite is small and tightly interlinked, as shown by the scandal surrounding finance minister Jan Pociatek’s trip aboard a Mediterranean yacht organised by a private equity group accused of profiting from currency speculation before the koruna was revalued against the euro in May. Mr Pociatek denies wrongdoing.
In foreign policy, Mr Fico’s coalition with Jan Slota’s xenophobic, anti-Hungarian nationalist party strained relations with Hungary, whose politicians have in turn fanned anti-Slovak sentiments.
“Relations are basically normal, but they should be better,” says Jan Kubis, foreign minister.
After he formed his coalition government, Mr Fico’s Smer party was initially suspended by the Socialist grouping in the European parliament. However, it was reinstated earlier this year, a sign that the shudders which greeted his victory have subsided.
Mr Fico made an obvious break with the pro-US stance of his predecessor, dropping by the Cuban embassy in Bratislava and making trips to Libya and Venezuela, as well as withdrawing Slovakia’s small contingent from Iraq. Although he is now less provocative, the prime minister is still unafraid to buck regional trends.
While neighbours such as Poland and the Czech Republic look fearfully at Russia’s growing strength, Slovakia is relatively unconcerned about being reliant on Russia for oil and gas.
“We consider them a very reliable partner,” says Mr Kubis. “We don’t have any Russophobia.” Slovakia is also opposed to the planned US missile defence shield, which would see a radar system built in the Czech Republic and, possibly, an anti-missile base in Poland.
“We are not happy with rockets and radars in Europe,” says Mr Fico, who also has opposed the majority of fellow EU countries by not recognising Kosovo’s independence.
“Our view is that international law has not been respected in this case,” says Mr Fico.
Slovakia’s self-confidence is a reflection of the growing sense that, only 15 years after arriving on the international scene, the small country of 5.4m is about to join the eurozone and is now confidently taking a seat at Europe’s top table.
