Even though Poland has managed to avoid recession as the only EU member to post positive growth forecasts for 2009, its economy remains susceptible to sluggish recovery. At a time when EU-wide solutions are essential, some Western European governments continue to prioritize domestic agendas over upholding tenants of the common market.
This leadership gap is most evident in Germany, a country whose historical legacy makes it a natural choice for encouraging convergence efforts and strengthening economic ties with Central Europe, especially Poland.
Instead, Germany has fallen victim to increased protectionist and domestic political pressures, heightened by this month’s national elections. Germany’s response to the crisis has been timid from the start, with harsh criticism by Angela Merkel towards EU-wide bank bailouts for Central European subsidiaries and other pan-European coordination efforts. In May, the German government announced that it was keeping labor restrictions on workers from Central Europe.
The controls were meant to expire in 2009, but Germany invoked a clause allowing two more years in case of “serious labor-market disturbances.” The idea that the free movement of Poles or Slovaks would threaten “serious” disruption does not have much credibility, as Germany still has sizable shortages of skilled labor in certain areas. Moreover, Berlin’s preference for a Magna-Sberbank bid for Opel was driven by promises to keep auto jobs in Germany, not operational efficiencies.
The outcome of Germany’s elections will not only be a referendum on its free market policies, but will also have a substantial impact on future Polish economic prospects. As Poland’s largest trading partner, Germany will determine its willingness to diversify beyond export-driven growth and increase internal demand through additional trade and market access for cost competitive Central Europe.
In the past, Germany has realized the importance of tying its security to improved economic relations with neighbors like France (EU Coal and Steel Community) and Russia (Nord-Stream/Gazprom). It is time it did the same with Poland.
