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Little Czech Nation Latches Onto a Big Neighbor, Germany

THE border divides an economic powerhouse and a poorer nation it once invaded. But the region near Germany in the Czech Republic, far from being tense, is booming.

Souvenir shops decorate the approaches to border towns like Cheb, where Czech motorists line up at the frontier on their commute to work in neighboring Bavaria.

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''Europe's zone of prosperity is expanding, and we're fortunate to be located right next to the continent's strongest economy,'' says Jan Mladek, director of the Czech Institute of Applied Economics in Prague.

Germany surrounds half of the Czech Republic. It has six times as many people as its eastern neighbor and an economy 50 times as large. Germany is its biggest foreign investor and among its most important allies.

No one doubts that the Czechs' road to European Union membership runs through Germany. Bonn is lobbying for early Czech, Hungarian, Polish, and Slovak membership in the EU, while German companies like Siemens, the electronics giant, and Volkswagen have injected more than $1 billion into the Czech economy. A tidal wave of German tourists bring billions of Deutsche marks more into the country annually, spending on everything from Prague restaurants to Cheb dentists.

Some 50,000 Czechs living in the border regions commute to Germany each day under a special bilateral agreement, fueling the local economy with Deutsche marks.

''They work in construction, retail trade, and nursing -- areas where it is difficult to find German citizens willing to do the work,'' says Peter Utsch, Germany's commercial attache in Prague. ''There's a growing understanding that the Czechs are a major buyer of German products, thus securing jobs for Germans as well.''

As important as Germany is, Czechs well remember a troubled past with their big neighbor. Until after World War I when Czechoslovakia was created, ethnic Germans made up nearly half the population of Czech lands, and many Czechs spoke German. Relations soured when Hitler annexed Czech lands and Prague deported 3 million ethnic Germans after the war.

But market forces appear to be overcoming history. ''The dust from World War II is beginning to settle here,'' says sociologist and political consultant Ivan Gabal.

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''Our view of Germany and Germans is improving, and everyone understands that they must be our closest partner. The fear is to avoid becoming a colony again,'' he adds.

''Originally there was a xenophobic feeling, but I think people are realizing that it's not simply German capital coming here, but European capital, and that Germany is the biggest proponent of an eastward expansion of the European Union,'' says Jiri Pehe, a director at the Open Media Research Institute in Prague.

Wherever its origins, German-channeled capital has helped the Czech Republic surge ahead of its East European neighbors. A survey at the end of last year by the London-based European Bank for Reconstruction and Development placed the Czechs ahead of Poland and Hungary in progress toward economic transition.

''German companies are thinking in the long-term, and the Czech market is more oriented toward us,'' Mr. Utsch says. ''Czechs may drink Coca-Cola ... but beyond that, they tend to prefer European products.''