Books on Poland
% of GDP
Update No: 104 - (01/01/06)
Populism triumphs in Poland
The electoral triumph of populists in the autumn is changing Poland's political
landscape. After an uncertain start, in which noises unfriendly to foreign
business were made, they are settling in.
The Kaczynski twins are curiosities, being identical twins. As politicians, Lech
and Jaroslaw, pulled off two consecutive electoral upsets that handed them the
reins of power over the European Union's largest eastern member state, although
the latter has decided to wield power behind the scenes.
Their surprise emergence atop Polish politics comes with many unanswered
questions. Jaroslaw Kaczynski's Law and Justice party won last autumn's
parliamentary elections with a mix of conservative and populist promises,
although he is not to be premier. Lech Kaczynski claimed the presidency,
scooping up left-wing as well as nationalist votes. Jaroslav must have reckoned
that to have an identical twin to the president as premier would be giving the
Poles too much of a good thing.
The only thing that one can now say for certain is that the new Polish power
couple proved themselves to be political bruisers full of perseverance and
street smarts. Lech Kaczynski clawed his way back from a seemingly
insurmountable deficit against Civic Platform's Donald Tusk. Both men were
children of Solidarity. Mr. Tusk came from the urbane, economically liberal wing
of the old anti-communist movement while Mr. Kaczynski always felt more at home
with the socially traditional Catholic one.
To differentiate himself from his right-wing rival, Mr. Tusk launched an attack
on Platform's more daring economic ideas, among them a 15% flat tax. Mr.
Kaczynski contrasted his "Poland of solidarity" with Mr. Tusk's
allegedly "liberal Poland." That won him the backing of "Polska
B," the Poles in peasant villages and small towns who often lack jobs and
opportunities. The younger, better-educated "Polska A" went with Mr.
Tusk. This split is a geographic one too. The prosperous western regions voted
for Mr. Tusk, while the backward eastern half stayed with Mr. Kaczynski, who
emphasized that his party wouldn't push as hard for cuts to welfare protections
as Civic Platform.
The tactic worked. According to exit polls, 83% of the votes for Andrzej Lepper,
a pig farmer-turned-populist who won 15% in the first round, migrated to Mr.
Kaczynski in the second. But his success in courting those voters doesn't mean
that the president now embraces the Lepper agenda.
Poland is ready open for business
Poland's new right-wing Law and Justice (PiS) Prime minister, Kazimierz
Marcinkiewicz, has vowed his government will make the European Union newcomer
Euro-ready by 2009, prop its doors wide open to investors and make it easier for
both Poles and foreigners to do business. The 45-year old physics teacher -
turned premier - was on a fix-it mission speaking to foreign journalists in
Warsaw recently, after markets and investors were rattled earlier when his party
eschewed a long promised-coalition with the liberal and fiscal reform-minded
Civic Platform (PO).
Instead, the party chose a strategic parliamentary voting alliance with populist
and interventionist parties.
Comments by Marcinkiewicz's Finance Minister, Teresa Lubinska, to the Financial
Times that foreign hypermarkets were "unwelcome" in Poland also
tarnished the new administration's image and jolted markets.
Large retail chains are welcome in Poland, Marcinkiewicz assured, but
investments in this sector "must be balanced" with the interests of
small domestic retailers. He also vowed his government would pass a package of
new urban zoning laws to regulate the unbridled development by some hyper-market
retail chains in city centres.
Under his PiS government, European Union newcomer Poland would "become more
attractive to investors" through a "radical" streamlining of
Byzantine commercial bureaucracy and procedures, he pledged. Corruption would
also be tackled through a special agency now being set up. A recent study by
global anti-corruption watch-dog Transparency International characterised levels
of corruption in Poland as being similar to the Third World.
"Soon investors will feel a lot better when these burdens are removed from
their shoulders," he said. Market deregulation, new powers for Poland's
Information and Foreign Investment Agency (PAIIZ) and bringing down labour costs
are also on the government's agenda.
With concern running high that campaign promises for a strong welfare state will
translate into a spending spree, market watchers have been keeping a hawkish eye
on 2006 budget plans. To that end, Marcinkiewicz pledged to keep the fiscal
deficit at 30bn zloty (US$8.88bn) per year for the next four years. That's three
billion zloty less than the deficit in the draft budget drawn up by former
left-wing Prime Minister, Marek Belka.
Belka, who is widely respected for his hawkish fiscal discipline, is now vying
to become secretary general of the Organisation for Economic Cooperation and
Marcinkiewicz anticipates GDP growth will jump to five per cent by late 2006.
Official projections expect four per cent growth in GDP this year, a figure
revised downward from five per cent. The World Bank projects only 3.6 per cent
growth this year and 4.5 per cent for 2006.
Crucial steps would be taken to improve Poland's feeble and dangerous road
infrastructure, also key to boosting investments, the new premier said.
Privatisation of state assets would continue but the Treasury would retain
shares in approximately 100 companies. A special new Truth and Justice
parliamentary committee would screen past privatisation for corruption or graft.
Courts would adjudicate over any discovered cases of fraud.
Although he has refused to set a deadline for Poland's adoption of the single
European currency, the Euro, Marcinkiewicz vowed Poland will meet the so-called
Maastricht macro-economic convergence criteria for euro-zone readiness by 2009.
Earlier in November, the European Commission urged Poland to fix a deadline for
Euro adoption, stressing it was the only EU newcomer, which had failed to do so.
Although PiS President-elect Lech Kaczynski vowed to put the adoption of the
Euro to a public referendum in 2010, market watchers in Poland now peg 2012-2014
as the earliest realistic date for accession.
Studies by the country's independent central bank shoe the economic benefits of
Euro adoption would be tangible, with Poland standing to gain 0.2-0.4 per cent
in GDP growth per year.
All the government's moves are broadly aimed at combating Poland's stubborn 18
per cent jobless rate. It remains by far the highest in the 25-member state EU,
which Poland joined as the largest of 10 mostly ex-communist states in May 2004.
The interest of the following article is self-explanatory:-
Poles on ramparts of EU culture war
By Graham Bowley International Herald Tribune
When Polish members of the European Parliament erected an anti-abortion display
in a parliamentary corridor in Strasbourg recently, Ana Gomes, a Socialist
legislator from Portugal, felt she had to act.
The display showed children in a concentration camp, linking abortion and Nazi
crimes. "We found this deeply offensive," Gomes said. "We tried
to remove it." A loud scuffle ensued as Gomes and the Poles traded insults
before the display was bundled away by the Parliament's guards.
But the matter did not end there. The incident was the latest skirmish in what
some here see as an incipient culture war in the heart of Europe, a clash of
values that has intensified since predominantly Roman Catholic countries from
Central and Eastern Europe joined the European Union last year.
In the 732-seat European Parliament, and more widely in the EU, the clash
extends beyond abortion to issues like women's rights and homosexuality.
"New groups have come in from Poland, the Czech Republic, Latvia, and
Catholicism is certainly becoming a very angry voice against what it sees as a
liberal EU," said Michael Cashman, 54, a European parliamentarian from
Britain who has campaigned for gay rights. "On women's rights and gay
equality, we are fighting battles that we thought we had won years ago."
With a population of 40 million, Poland is the biggest of the 10 states that
joined the EU last year. It is still uncertain, 19 months later, how the
formerly Communist and overwhelmingly Catholic nation will fit in with the rest
of the EU on issues from foreign policy to economic management.
However, since the election of President Lech Kaczynski, a conservative defender
of family values and a critic of abortion and homosexuality, concerns are being
voiced that, on social policy at least, Poland is on a collision course with
"This is for real," said Christopher Bobinski, director of Unia I
Polska, a pro-European research organization in Warsaw. "This is a very
reactionary, conservative group of people that have taken the helm, and on these
issues we are going in the reverse direction to the direction everyone else in
Europe is going." The effects of Poland's religious conservatism were felt
in 2003, during the drafting of the European Constitution, when Warsaw led the
argument that the preamble should refer to Europe's Christian heritage. After
much debate, the reference was not included.
Then, last November, Polish diplomats played a key behind-the-scenes role in the
fight to save Rocco Buttiglione, an Italian nominee for the European Commission
whose remarks about women and homosexuality at a European Parliament hearing
were widely regarded as offensive.
Although Buttiglione's candidacy was rejected by the Parliament, the affair
provided the first glimpse into a broad-based clash of cultures.
Poland's impact on the European debate has, of course, been economic as well as
social. Its fast-growth, low-wage and low-tax system is perceived as a threat by
the stodgier, high-unemployment economies of Germany and France.
West European worries have also been fuelled by suspicions in the foreign policy
arena ever since Poland sided with the Bush administration on the war in Iraq
nearly three years ago.
A year ago, Poland played a stronger role than desired by some countries,
including Germany and France, in arguing for firmer EU support for the
pro-democracy presidential candidate in the disputed elections in Ukraine.
Concerns about American influence on Warsaw grew this month when Human Rights
Watch charged that Poland was a host country in a network of secret CIA prisons
for suspected terrorists. EU foreign ministers agreed recently to write to the
United States to seek clarification.
"We need to put a protective wing around some of our new countries that are
quite unused to US bullying," said Sara Ludford, a Liberal member of the
European Parliament from Britain, referring to the alleged covert prisons.
From the perspective of the Cold War and decades of Soviet bullying, Poland's
proclivities toward the United States may be understandable. In a similar
fashion, Poles adhered to the Catholic Church for comfort during the Communist
But such understanding has done nothing to ease the trepidation felt in the EU
toward Poland's new rightist government. This was highlighted when the European
Commission reminded the country - on the morning after Kaczynski's election - of
its duties to abide by EU laws on sex discrimination and the death penalty.
In fact, Kaczynski's victory on Oct. 23 was unexpected. His Law and Justice
Party came from behind after opinion polls predicted a victory for the liberal
Civic Platform. Now, Kaczynski's party has a minority government and, analysts
say, relies on the support of small anti-European extremist groups, like the
rightist Catholic League of Polish Families, to exercise power.
In forming the new government, Kaczynski, a former mayor of Warsaw who banned
the city's annual gay pride rally, has abolished the post of women's minister,
making Poland the rare EU country without such a position.
In a broader sense, Bobinski says, the new government is creating a generally
less-tolerant atmosphere, as illustrated when Poznan became the latest city to
ban its gay pride march.
"We want to see Europe based on a Christian ethic," said Maciej
Giertych, one of 10 European Parliament members from the Law and Justice Party.
"We accept the teachings of the Catholic Church on all moral issues. If you
want to know our opinions, read the opinions of the Catholic Church."
Giertych, who helped stage the recent anti-abortion display in Strasbourg, said
its forced removal was a reminder of the intolerance to open debate once shown
by the Communists in his country. "It reminds us of what we had in Poland
before 1989," he said.
But if Giertych wants to bring his views into the wider councils of the EU, then
liberal deputies in the Parliament are just as ready to stop him. "I would
rather we had moved on." Gomes said, "but if we have to have that
ideological and political fight, then I am ready."
Polish PM pushes EU to reach budget accord
The 10 new members of the European Union (EU) have taken an independent joint
initiative to press for a speedy solution to the current crisis over the EU
budget, Polish Prime Minister, Kazimierz Marcinkiewicz, said in London,
Deutsche-Agentur-Presse (dpa) reported.
Speaking after a working lunch with British Prime Minister Tony Blair in Downing
Street, Marcinkiewicz said the 10 had laid down their "common
position" in a letter to the EU. The two leaders had also confirmed their
"close relations" within the EU and NATO, and pledged to continue
their military cooperation in Iraq and Afghanistan, a Polish spokesman said.
The Polish premier, on his first visit to London since he came to power, said he
pressed Blair to step up efforts to clinch an agreement on the 2007-2013 EU
budget at the European Union summit next month.
In what appeared to be a message directed at Britain and France - whose
arguments over the Common Agricultural Policy (CAP) and the 5 billion euros (5.9
billion dollars) British budget rebate have delayed a deal - Marcinkiewicz
called for EU members to overcome "selfishness" and show
"solidarity" with one another.
"All countries are interested in the matter of the budget, but the new
member countries of the European Union are particularly interested because each
euro that reaches them is devoted to development, to economic growth," he
"I also spoke today about solidarity which is capable of overcoming any
selfishness," the new Polish leader added.
Blair told journalists he was aiming to strike a deal on the budget for 2007-13
before the British EU presidency expires at the end of the year. "We'll do
our best to make sure we reach a budget deal in December," he said.
"I've made it clear throughout that I understand entirely why particularly
the accession countries need the budget certainty to be able to plan ahead and
the prime minister obviously made that point to me very strongly and that's
obviously the reason why we're going to try very hard to do it," said
Britain had championed EU enlargement and was prepared to pay its share towards
it, but only "on the basis of an overall settlement that is fair."
IMF predicts GDP growth at 3%, urges Euro for Poland
The International Monetary Fund (IMF) on November 21 predicted European Union
newcomer Poland would register three per cent GDP growth this year and four per
cent in 2006, a senior IMF officials said in Warsaw.
Poland's government predicts GDP growth to tally at 3.3-4 per cent this year,
while freshly elected right-wing Law and Justice (PiS) Prime Minister, Kazimierz
Marcinkiewicz, recently optimistically boosted GDP growth expectations from 4.3
per cent to five per cent by late 2006. The World Bank has project GDP growth at
3.6 per cent growth this year and 4.5 percent for 2006.
IMF estimates project inflation at slightly lower levels than the official
Polish government projection of 2.2 per cent for 2005 and 1.5 per cent for 2006.
According to Susan Schadler, head of the IMF's office in Poland, cuts in public
spending and deficit reduction should be the top priority of the freshly elected
Marcinkiewicz minority government.
Marcinkiewicz has vowed to cut some three billion zloty (US$887.6 million) in
spending each year for the next four years by consecutively reducing the deficit
from 33 billion to 30 billion zloty.
Schadler said this reduction may not be enough to meet Maastricht convergence
criteria for adoption of the European Union's common currency, the Euro.
Maastricht criteria demand a low public spending deficit and low inflation among
others. Marcinkiewicz vowed last week that Poland will have met Maastricht
criteria by 2009, but has declined to specify when it may actually replace the
Polish currency, the zloty, with the Euro. The IMF's Schadler also encouraged
Poland to adopt the Euro at the closest possible juncture. A study by Poland's
independent central bank showed the May 2004 EU member stands to gain 0.2-0.4
per cent in GDP growth per year upon joining the Eurozone.
Poland's Lot airline may float shares in mid-2006
Poland's flagship airline PLL Lot may go ahead with a share float in the second
quarter of 2006, the Polish PAP news agency reported quoting company CEO,
The company reported 194.7 million zloty (US$57 million) profit during the first
nine months of 2005, but according to Grabarek year-end profits would be lower.
Passenger numbers continued to grow in 2005 with some 2.786 million travellers
flying with Lot during the first 9 months of the year, compared to 2.683 million
during the same period in 2004. Lot intends to cut costs by 500 million zloty
(US$146 million) between 2004-06.
Poland's State Treasury controls a majority 67.96 per cent of the company. A 25
per cent share is in the hands of the liquidator of Swissair, a bankrupt Lot
shareholder. Employees control some 6.94 per cent.
The Polish carrier recently launched Centralwings, its no-frills wing to draw
passengers in Poland's rapidly growing budget airline market shared with Ryan
Air, Sky Europe, Easy Jet and Germanwings among others. Industry experts believe
air passenger traffic in Poland will grow by 12 to 14 per cent per year in the
near future. Budget airlines are expected to capture some three-quarters of the
business. PLL Lot is part of the Star Alliance airline consortium grouping 16
carriers including the US's United and US Airways, Air Canada, Germany's
Lufthansa, SAS Scandinavian Airlines and Singapore Airlines among others.
The group is in competition with the One World alliance, including British
Airways, American Airlines and Cathay Pacific among others.
Poland talks with Lithuania on new nuclear reactor
A state-owned Polish energy company confirmed it was in talks with Lithuania on
the possible joint construction of a new nuclear reactor at Lithuania's
Soviet-era Ignalina plant, Deutsche-Presse-Agentur (dpa) reported.
Polski Sieci Elektroenergetyczne SA (PSE SA), which manages Poland's power grid,
said the reactor was raised in talks with Lithuania's Lietuvos Energia AB on the
construction of a cross-border electricity grid linking Elk in north-east Poland
with the Lithuanian town of Alytus.
"In the documents of the European Commission on trans-European grids, this
(grid) is a priority project," a PSE SA statement said. According to PSE
SA, the current electricity generation capacity of the Ignalina reactor would
not justify such a link. Also, Lithuania promised the European Union it would
shut down a second reactor by 2009. "This is why PSE SA has proposed to the
Lithuanian side the possibility of the construction of the 400 Kv Elk-Alytus
line within the framework of an increased project which could be, among others,
the joint-construction of an atomic bloc at the Ignalina electric plant,"
the PSE SA statement said. If the project went ahead, it would be the first time
nuclear- free Poland engaged in an atomic energy project. "The (PSE SA)
proposal is interesting as one of the possible variants," Arturas Dainius
of Lithuania's economy ministry said, Poland's PAP News Agency reported.
Dainius pointed out that Lithuania had not yet decided whether to build a new
reactor at Ignalina after the closure of its second Soviet-era reactor in 2009,
but that such a decision might be taken as early as January 2006.
Built by the Soviet Union in 1983, the Ignalina reactor is similar in type to
Ukraine's infamous Chernobyl reactor which spewed radioactive material into the
atmosphere across Europe in a catastrophic 1986 meltdown. In a deal with the
European Union prior to its May 2004 accession, Lithuania agreed to shut down
one Ignalina reactor in December 2004, and a second in 2009.
Construction of a third reactor at the plant was cut short in the wake of the
Chernobyl disaster. Environmentalists have criticised the existing Ignalina
plant as a "Chernobyl waiting to happen," but the 3.7 million-strong
Baltic republic is heavily reliant on the plant for electricity. Poland, for its
part, depends heavily on coal-burning electricity plants and is anxious to
explore new sources of energy. The European Union newcomer is especially keen to
reduce its dependence on natural gas from the Russian far east.
Poland seeks to reduce dependence on Russian gas
Over the next four years Poland intends to find at least one new supplier of
natural gas in order to ease its almost exclusive dependence on Russian
supplies. "The situation is too difficult and the sector is very threatened
by the risk of supplies being cut," Poland's new right-wing Law and Justice
(PiS) Economy Minister, Piotr Wozniak, said recently, Poland's PAP News Agency
The search for non-Russian natural gas supplies became a top priority in Poland
after Russia and Germany announced they would build a pipeline along the bottom
of the Baltic Sea linking the two countries but bypassing Poland, Estonia,
Latvia and Lithuania. All four European Union newcomers have vehemently
protested against the move, claiming it will compromise their energy security
and that, as a fellow EU member, Germany should give priority to their concerns.
Polish energy sector analysts argue that once gas flows directly from Russia to
Germany via the Baltic line, Poland could be more exposed to the risk of Russia
shutting the valve on the Yamal pipeline, which supplies it and western Europe.
Polish Prime Minister, Kazimierz Marcinkiewicz, is expected to raise the issue
of the Baltic Sea pipeline with Germany's new Chancellor Angela Merkel during
her first visit to Warsaw on December 2. The Polish leader has also endorsed the
construction of a second branch of the Yamal pipeline to carry natural gas from
the Russian Far East to western Europe via Poland. The decision by private
German and Russian energy companies to build the pipeline along the Baltic Sea
floor was taken earlier this year with the backing of Russian President,
Vladimir Putin, and former German chancellor, Gerhard Schroder.
PGNiG to construct LNG terminal
Recently Polish Oil and Gas (PGNiG) held talks with its prospective partner Gaz
de France for the construction of a Liquefied Natural Gas (LNG) terminal, one of
the largest investments in the domestic gas sector. It is estimated the terminal
project will cost roughly 1.6 billion zloty. However, as a condition for a deal
PGNiG is demanding it be given equal rights as a partner in the project, New
Orlen bids for Mozejki but still open to partnership
Domestic oil concern PKN Orlen has been unable to find a partner to join it in
the purchase of Lithuanian oil refinery Mozejki. So the company has submitted an
independent offer for acquiring the oil refinery, but it is still willing to
enter into an alliance with a Russian refinery. Ironically though, this has
helped PKN's chances for a successful tender as Lithuanian authorities want the
purchaser to be as independent of the Russian government as possible. Most of
the companies deemed suitable to act as PKN's partner in the purchase were
Russian, New Europe reported.
Favourable time for exporters
A National Bank of Poland (NBP) report shows that Poland's current account
deficit in September totalled 357 million Euro. The deficit in foreign trade
amounted to 102 million Euro. Most economists feared the results might be worse.
Piotr Bielski Bank Zachodni WBK economist said, "It is clear that the
favourable time for exporters continues. The value of exports in September
exceeded seven billion Euro which is the best result since NBP began to collect
data on foreign trade." According to the Central Statistical Office, in the
first nine months of 2005, exports increased by 18.5 per cent, New Europe
Netia's new ISM network
Poland's second-largest provider of fixed-line telecommunications services,
Netia SA capital group and Lucent Technologies, signed a framework contract for
the delivery of equipment and services for the construction of Netia's new ISM
network. Netia will be the first service provider in Poland to offer Internet
protocol multimedia ISM-based services to business customers throughout the
country, New Europe has reported.
This allows telecom operators to provide mobile and fixed multimedia services,
such as video streaming, digital sound encoding and more, into stationary
telephones using an Internet connection instead of a phone signal. Krzysztof
Klinski ISM product manager at Netia says, "We are going to have this
service totally implemented by the beginning of 2006. Even though it will be
available to every single Netia customer, we are going to focus on the business
sector and try to acquire new customers." Neither of the parties have
disclosed the value of the contract.