Motor of German economy powered by eastern neighbours Alongside the highway north of Bratislava lies an enormous sprawl of low-slung grey buildings. The factory is Slovakia's largest exporter and one of its most important employers, part of a business that the country's prime minister calls "a motor" of the economy. But this factory is German, not Slovak - a Volkswagen car plant in which the German carmaker has invested €2.4bn over the past two decades. It is the only global producer of marques such as the Volkswagen Touareg and Audi Q7 sports utility vehicles as well as VW's new up!, Skoda Citigo and SEAT Mii small family cars. "We are building for the whole world here," says Vladimir Machalik of Volkswagen Slovakia. The factory, with 9,400 workers, almost doubled production from just over 210,000 units in 2011 to almost 420,000 last year. Some 99.7 per cent of its output is exported, 40 per cent of it to Germany. Volkswagen's leading role in Slovakia is symbolic of how the economy of former socialist central Europe has become enmeshed with - and reliant on - that of Germany. This marks an extraordinary turnaround since countries in the region shook off communism two decades ago. Then, they traded mostly with the former Soviet Union or among themselves. Today Poland, the Czech Republic, Slovakia and Hungary have become key components of Germany's economic competitiveness, offering a nearby pool of relatively low-waged, but well-educated and highly productive workers. The pace of integration has accelerated since the four countries joined the EU in 2004. About a quarter of each country's exports go to Germany; four-fifths or more go to the EU. Poland is now Germany's 11th biggest trade partner. Radoslaw Sikorski, the Polish foreign minister, noted in a recent parliamentary address that the four central European countries are together Germany's biggest trading partner, outstripping France. Germany has invested nearly €72bn in the four countries, in everything from car production to retail and real estate. That economic integration runs in parallel with closer political ties, above all in Poland. Polish premier - and German speaker - Donald Tusk has forged a special relationship with Angela Merkel, Germany's chancellor, who has a Polish grandfather. Relations between the historic foes are, in many ways, better than ever before. "This is happening just when the rest of the EU is becoming increasingly sceptical about the role of Germany," notes Marcin Zaborowski, director of the Polish Institute of International Affairs. Early German investments in the 1990s tended to be by the largest manufacturers, such as Volkswagen, which also has a plant in Poznan, in central Poland, and took control of the Czech Republic's Skoda, now one of the carmaker's most successful brands. Mid-sized German companies followed, often supplying components for local factories or for export back to Germany. Some homegrown suppliers have sprung up, too. SILS, a subsidiary of Germany's Ferrostaal, has a factory in Gliwice, southwest Poland, producing just-in-time components for a nearby Opel car plant. "We have caught up to German levels of efficiency," says Zbigniew Sikora, the plant manager. The work culture here doesn't really differ from Germany and, in fact, I think it's actually higher. The 100 Polish workers at the SILS factory earn about a quarter to a third of what their German counterparts make. Volkswagen's Bratislava factory is linked to suppliers across the region. About 44 per cent of its components come from factories inside Slovakia, but many are owned by German or international companies. Another 25 per cent come from Germany, while Hungary, which makes engines for VW, accounts for 10 per cent. "The German economy is of vital importance for us," says Robert Fico, the Slovak prime minister. He recently signed a deal in Germany with Continental, the German tyremaker, which pledged to invest another €250m into its plant in Puchov, northern Slovakia. But the economic reliance has proved double-edged. When the global financial crisis struck in 2008, Hungary, the Czech Republic and Slovakia went into steep recession - though Poland, cushioned by a bigger domestic market, kept growing. By 2010, with Germany growing again, its central European neighbours briefly saw an even stronger recovery. But after the eurozone crisis hit, Hungary and the Czech Republic fell back into recession; even Polish growth has recently slowed sharply. So central Europe has in recent years tried to lessen dependence on Germany, boosting trade with countries such as China. Hungary hosted a big trade fair for Chinese investors in 2011. Poland did the same a year ago, welcoming then premier Wen Jiabao, 300 Chinese businessmen and 14 prime ministers from central and eastern Europe. Chinese investment into the region has so far been an irregular stream rather than a flood. But while praising Poland's rapprochement with Germany in his parliament speech, Mr Sikorski lauded the fact that Polish exports to Latin America, Africa and Asia increased last year at several times its overall 4 per cent rate of export growth. "We very much follow the situation in Germany and France," adds Slovakia's Mr Fico. If something happens in January in Germany, in July it is in Slovakia - that is the reality in my country. As Poland's economy takes off, investment also flows from east to west Janusz Filipiak breaks off an interview at the Krakow headquarters of his IT company to take a quick phone call from Germany - the final details of a new €12m investment in a new data centre in Dresden are being ironed out. The experience is a familiar one for Mr Filipiak. His company, Comarch, was one of the first Polish companies to invest in Germany, opening a subsidiary in Frankfurt 13 years ago. "Germany is our second-largest market after Poland," says Mr Filipiak, whose company develops business management software as well as running data centres. We have to be present there. In all, Comarch has spent €60m on opening businesses in Germany, part of a broader trend of investment from central Europe starting to flow into Germany. Although much smaller than the surge of money heading into the region from Germany, Polish investment in Germany came to €273m in 2008 while in 2011 it was €579m. Over the same period, Czech investment rose from €180m to €487m. As a result, the view of the region is changing in Germany. Initially, German businesses reacted with suspicion when dealing with Polish counterparts, a feeling that shaded into outright disbelief when it turned out that the Poles were interested in investing, not just in selling. "The perception of Poland is always difficult in Germany," says Mr Filipiak. They still don't believe in us until you succeed. In Comarch's early years - the company was founded in 1993 - it made little sense to venture beyond Poland because a qualified programmer could be hired for as little as €150 a month. That made it cost-efficient to do all programming in Poland. But as Polish wages have risen - an experienced Krakow-based programmer now earns about €3,000 a month, not that much less than his German counterpart - the company is shifting some of its operations to western Europe to be closer to its customers. "We no longer have much of an advantage in people," says Mr Filipiak, the windows of his enormous office looking out of the Comarch campus in suburban Krakow, where thousands of people now work for him.