Thursday, September 2nd, 2010
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CEE Policy Watch
BY Ewa Błaszczyńska
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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.
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