In spite of relatively positive New Year's projections that estimate Poland's economy growing by approximately two percent in 2010 (one of Europe's highest rates), much of Poland's recovery will depend on successful growth within the euro zone. Currently, prospects remain challenging due to a looming European debt crisis.

By the end of 2009, bank lending across the euro zone decreased significantly, particularly to the private sector.

With the real estate market is still in decline and firms continuing to hold off hiring or making new investments, the EU economic engine seems stalled. In addition, ballooning public deficits in several euro-zone economies, including its newest (and first) Eastern members Slovakia and Slovenia, are simply unsustainable.

Not only do they threaten Europe's long-term recovery prospects, but they also raise the cost of borrowing (for both the public and private sectors) and increase the risk of inflation. This will surely affect Poland, which is dealing with its own widening public deficit as well as euro entry bid.

One major thorn in Europe's recovery is the lack of a common recovery plan. Regarding monetary policy among euro zone members, there is only so much that the European Central Bank can do. Unlike, the US, individual EU and euro zone member states, through independent fiscal and other stimulus policies, have set the recovery agenda and in many cases acted unilaterally out of self-interest rather than with the common market in mind.

Case in point is Italian carmaker Fiat considering relocating the production of its best-selling Panda back to Italy, despite Poland's lower labor and production costs, thereby addressing government demands of increasing Italy's domestic car production. Although Poland's recent success at avoiding large-scale recession rested on lower dependence on and exposure to euro zone export and credit markets, its recovery may be more closely tied to the euro zone's public debt balance and its members' short-term ability to get their fiscal houses in order.

The resignation of Poland's Environment Minister, Dr. Maciej Nowicki, highlights the growing difficulties governments face between meeting increased global environmental standards and ensuring long-term sustainable growth. Ultimately, this challenge presents governments, businesses and citizens with a complex set of choices.

For instance, should Poland (and other Central European economies) prioritize an aggressive green agenda over job creation and much-needed infrastructure development? Is one impossible without the other? Should growth rate limits be placed on Central Europe, which comprises the EU’s most rapidly developing economies but some of its biggest polluters?

As the global economy readjusts an unprecedented opportunity exists to develop a greener business environment. This will require considerable capital investments, structural changes, and public support for social trade-offs.

The front line of this debate resides in Europe’s eastern member states, particularly Poland, an economy that is heavily dependent on coal. The UN Climate Change conference currently taking place in Copenhagen aims to provide both the political capital and technical mechanisms best suited for the transformation into to a low-carbon world.

The move from economic crisis to green recovery will ultimately create winners and losers. What Central Europe’s governments need to assess is how best to incentivize the adoption of new technologies while acknowledging and gauging its affect on high-carbon industries.

Equally, they must identify the most effective metrics for success, be it funds invested, amount of CO2 reduced, or jobs created. Central Europe’s climate strategy also has bold implications for a variety of broader EU initiatives, including energy security, economic integration and future transatlantic relations. Without a clear directive from Copenhagen, Central Europe’s internal politics and domestic agendas threaten to derail progress on curbing climate change.

That, in the end, may be the region’s greatest obstacle to successful sustainable development.

Much of the celebratory banter marking the two-year anniversary of Donald Tusk's government focused on its ability to successfully steer Poland through the worst economic storm in decades. Unlike other economies in Europe (both emerging and developed) Poland's exports didn't decline dramatically, internal consumption increased and GDP growth remained positive throughout all four quarters of 2009. Even the once-depreciating złoty has made a recovery and continues to gain strength. Many analysts expect the Polish economy to grow as much as three percent in 2010, a far better performance than anywhere else on the continent.

Although the Tusk government, in particular its Finance Minister Jacek Rostowski, should be applauded for promoting fiscal restraint and reassuring global investors against panic and a premature market sell-off, much of Poland's success rests on the strength of its internal consumer market. Specifically, when the złoty declined (and the euro became more expensive) Poles stayed and spent money in Poland. As the global economy recovers, Poland will have to do much more than rest on its laurels, especially as it seeks to attract future investment, grow its economy and gain membership into the euro zone.

As we head into the 2010 election season, reform fatigue and the lack of a concrete reform agenda may tarnish the Tusk candidacy. Despite the government's laudable response to the financial crisis, it could have done more to improve Poland's business and investment climate – notably by enacting simpler business rules, easier tax-filing procedures, investments in e-government solutions and introducing radical steps to cut red tape.

In this respect Poland still has a long way to go. For instance, Poland's ranking in the World Bank's “Doing Business 2010” report were little improved on the previous year. Overall, Poland's ease of doing business ranking was 72 (out of 183 countries surveyed), behind most Central European countries and many Eastern European countries.

Although some factors, such as the ease of starting a business and access to credit have improved, others such as employing workers, paying taxes and contract enforcement have all declined. In a country where high unemployment and significant underemployment are all too familiar, the Tusk team should take notice and put structural economic reform high on their campaign agenda.

Otherwise, voters may have the final word.

Contrary to what some believe, Poland's returning migrants are not finding it easy to integrate back into the local labor market. Although domestic wages and labor demand have increased in the past five years, there is still a major talent and wage gap. Many Poles, despite having gained new language and job skills abroad, were employed in low-skill sectors. Polish waiters, cleaners, nannies and construction workers were a common sight throughout the UK, Ireland and Scandinavia.

This labor force included both unskilled and educated Poles who wanted to take advantage of their higher earning potential abroad. Others, including nurses and IT specialists, were able to work in their chosen professions, though mostly on a contractual basis.

Many workers with university or advanced degrees are now finding it difficult to translate work experiences garnered outside Poland into well-paid or highly-skilled jobs at home. Those with management or executive-level experience overseas may demand compensation packages on a par with those in developed markets.

Without a deep restructuring of Poland's education, transportation and pension systems, all of which would encourage development of higher value-added jobs, Poles will most likely leave again as the global economy picks up. According to a survey by the Organisation for Economic Co-operation and Development (OECD), more than a third of Polish migrants who worked in the UK plan to live outside Poland again. Their numbers will probably increase as other countries in Western Europe ease immigration restrictions on EU-8 nationals in the near future. As a result, we may be witnessing the creation of a permanently mobile Polish labor force. 

During yesterday’s commemoration of the fall of the Berlin Wall as well as the fall communism throughout the Eastern bloc, Poland’s role and impact was prominently displayed.

The last two decades have resulted in sweeping political and economic transformations, culminating in NATO and EU membership. However, once the euphoria and self-congratulatory back-patting subside, what will be the next chapter in Poland’s modern history? How will Poland’s geopolitical role evolve over the coming decades? What are the key challenges facing Poland, both domestically and within a maturing European Union?

According to many leading experts, Poland is in its best geopolitical position in 300 or even 400 years, but simply does not know how to take advantage of it. Three key issues will test Poland in the near-term: energy security, economic sustainability and relations with its eastern neighbors. How it chooses to address these challenges will determine whether Poland lives up to its potential as an emerging mid-size European power or instead follows the path of some older and stagnant EU members.

Regarding energy security, Poland needs to maintain diversity of energy options, both in its sources and suppliers. It also needs to ensure that its energy sector maintains fair competition as well as free and open markets. By encouraging the EU to develop a southern energy corridor (beyond Nabucco), Poland and the rest of Central Europe will be able to simultaneously address fallout from the global economic crisis and impeding climate change.

Economically, Poland’s greatest hindrance is its low labor participation, due to high levels of early retirement. This will not only threaten future competitiveness, but will create enormous strains on the social welfare system. Poland needs to build off of the legacy of Solidarity and the success of previous market reforms by reinvesting in building a viable civil society and strong social (entrepreneurial) capital. This will not only deepen economic convergence within the EU, but create a set of best practices for other aspiring EU accession countries.

Finally, Poland’s relations with its eastern frontier (Belarus, Georgia, Ukraine, etc.) will play an increasingly critical role in Europe’s future common foreign and security policy. While the Eastern Partnership (EP), is neither a substitute for nor a guarantee of EU membership, the EU, and especially Poland, should play a bigger role in encouraging EP countries to speed up the pace of reform and meet EU laws and standards. By acting as a bridge between the Western EU members and the EP, Poland can not only share its own accession best practices, but enable EP countries to fortify their domestic security through greater political and economic cooperation with Europe.