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If the recent economic crisis has taught journalists nothing else, it should be that when things are going well, be ready for the downturn.
It is with this in mind that I have been scouring the horizon for signs that Poland's economy could be going sour. Day after day the good news keeps coming – Poland, for reasons that no one can quite put their finger on, keeps powering along at a healthy clip. The economy will probably grow by around 3.5 percent this year, investment continues to grow, as do salaries – albeit more slowly than pre-crisis, inflation is under control and business sentiment indicators are through the roof.
The wild success of the Warsaw Stock Exchange's own IPO evinces a tremendous amount of confidence in the bourse's – and Poland's – potential to lead the region economically.
That ought to give us pause. Europe's recovery is no sure bet. While Germany seems to have found a path toward strong growth, the PIIGS – especially Ireland – are still in turmoil, and any attempt at economic reform in France is met with strikes. Europe's recovery matters for Poland because it's Poland's biggest trading partner. Of course, Europe's downturn didn't drag Poland all the way down with it, either.
So what are the experts saying? At the CEE Insight Forum in Zagreb last week, it was interesting to hear how leaders in the real estate industry viewed the situation. As they debated the opportunity and risk of investing in real estate in CEE and Southeast Europe (SEE), the continual positive “exception” was always Poland. The region was risky, experts said, except for Poland. They didn't see a lot of money coming into the region in the short-term – except for Poland. Capital cities were still shaky – except for Warsaw.
One expert at the conference went so far as to say that there was a “wall of money” headed like a wave for Poland. With the country's well-publicized economic stability throughout the crisis, investors saw Poland as a “defensive position” – somewhere where they could invest relatively safely in the region while they waited for the storm to subside in other countries. The same expert also ventured that due to the wave of investment coming Poland's way, 2013 was due to be the best year in Poland's history – ever.
All of that sounds fantastic. Poles desperately want for living standards to improve, to catch up to their Western European partners, for salaries to rise and for pensioners to live more comfortably. They are tired of the 10 percent-and-higher unemployment rates and general post-communist shabbiness that exists outside of the downtowns of Poland's largest cities. That investors see Poland as a place where they can profit will hopefully mean taking long strides towards achieving those goals.
But if it does happen, watch out for 2014, because if the crisis has taught us anything, it is that the rules of economics are immutable. When the times are good, be ready for that downturn.
The story of Poland's negotiations with Russia to extend its contract for the supply of natural gas is a long and complicated one, and has taken a number of unexpected turns. The two countries have been banging heads over the deal since early 2009, when a Ukrainian company pulled out of its gas-delivery agreement with Poland, leaving a supply gap of some two billion cubic meters.
Obstacles to the agreement included Gazprom's debt and the shareholder structure of EuRoPol GAZ, the company that manages the Yamal pipeline in Poland.
Finally, a deal was agreed upon in January. The deal increased the amount of gas Russia supplied to Poland by some three billion cubic meters annually and was widely expected to be signed relatively quickly.
However, in February, the European Commission got involved, asking for details of the agreement. It objected to the way the deal was structured, insisting that the pipelines transporting the gas through Poland be accessible by third parties, and that the pipeline itself be run by an independent entity. Given that the countries want to maintain shared control of the pipeline, those are conditions that Poland and Russia seem unwilling to provide. According to
an article in Sunday's New York Times, the EC is now stepping up its opposition to the deal.
The consequences could be significant. A stoppage of gas deliveries from Russia – currently set to occur on October 20 – would cause tremendous controversy and ratchet up animosity on both sides. Polish businesses would see an immediate reduction of their gas supplies, according to PGNiG, Poland's state-owned gas monopolist. And the longer the impasse lasts, the closer Poland would get to reducing gas supplies to private homes during a winter that is expected to be extremely severe. The Russians would see the row as more evidence that the Polish side's recent friendliness was disingenuous.
So then why the intervention from the EC? It seems counter-intuitive to think that the European Commission, generally dovish on European-Russian relations, would go so far as to potentially ruin the recent warming of relations between Poland and Russia. European independence from Russian supplies has not exactly been the EC's top priority – it has put up zero opposition to the unwise construction of the Nord Stream pipeline, which would pump Russian gas straight into Germany across the Baltic without transiting any other EU countries.
The answer seems to be friction within the Polish government. The negotiations with Russia are being led by Waldemar Pawlak, Poland's deputy prime minister and economy minister, who desperately needs a win after a poor showing in this summer's presidential elections.
On the other side is Poland's Minister of Foreign Affairs, Radosław Sikorski, known for his suspicion of the Kremlin. In March the Ministry of Foreign Affairs gave a negative evaluation of the Poland-Russia gas deal, riling Mr Pawlak. The New York Times article suggests that the Foreign Ministry has pushed hard for the EC's intervention.
Under the terms of the current deal, Poland's gas supply would be locked up by Russia until 2037 – or at least until 2022 under some compromises that have been mooted. That would make investment in Poland's LNG terminal in Świnoujście, or in shale gas deposits, almost a waste of time. In turn, Poland would be dependent on Russian supplies – just the opposite of what Poland has been working for over the past few years.
How will this be resolved? We'll have to wait and see to get the answer to that question. But it doesn't look like this deal is getting done anytime soon. The two governments could blame the EC to avoid a public relations' nightmare, but it looks like the battle between Poland's Foreign Ministry and Economy Ministry is due to heat up. If the October 20 deadline passes without any deal, look for these two elements of PM Donald Tusk's government to make their battle more public.
To hear the international media tell it, Poland's current row over the wooden cross in front of the Presidential Palace on Krakowskie Przedmieście is a symptom of a sharp cultural divide that is now beginning to manifest itself more visibly.
Certainly that's part of it, but the reports, in the English-language mass media at least, verge on the simplistic. They portray the conflict as one of young-versus-old, rural-versus-urban, educated-versus-non-educated and, especially, religious-versus-secular.
But as those of us living here in Poland know, the divide is more complex than that.
Poland is often described as a “deeply Catholic” country – and that is more-or-less accurate. After all, about 90 percent of the population is Catholic, with around 75 percent practicing. But many polls have found that around two-thirds of Poland's population want to see the cross moved. Therefore there must be a huge number of practicing, even devout Catholics here, who favor its removal.
Several Poles I have spoken with refused to give credence to the idea that the conflict is more about secularization than pure politics. “The people defending the cross are just plain crazy,” said one, who considers herself a devout Catholic. “They're not real Catholics – what Catholic would treat a priest like that?” asked another, referring to some of the slurs the so-called “defenders” hurled at priests when they attempted to move the cross a couple of weeks ago.
The upshot is this: the divide emerging in Poland is not so much of a religious-secular one as it is a modernist-traditionalist one. Many young, educated Poles believe that one can be both Catholic and modern at the same time. Those who oppose the cross' removal, however, feel that they must defend symbols they associate with traditional Polish values wherever they appear – even if that is in front of the Presidential Palace – to avoid them being erased altogether.
Surely, the modernists are right. Poland must move forward, but that doesn't mean that its citizens – including the country's many Catholics – have to abandon their values.
There were many twists and turns, but finally Poland's next president has been chosen – and Poles have made the right choice in electing Sejm Speaker Bronisław Komorowski.
Mr Komorowski's vision for Poland differed significantly from his opponent's – his was a forward-looking vision, a vision of a modern Poland which interacts with other countries on the global stage as a responsible member of the international community. He envisions a Poland where there is less state interference in peoples' lives and in business, and where entrepreneurship and foreign investment are encouraged and rewarded.
The majority of voters in this election weren't convinced by Mr Kaczyński's moderate rhetoric, or that he had really changed his backward-looking tune. Under his government in 2006-2007, Poland chose conflict over partnership with Germany, Russia and the EU. His government preferred hunting for suspected communist agents rather than for investors. Voters yesterday remained unconvinced that his outlook would be any different in his capacity as president. Such an outcome could have meant more hurdles in the way of much-needed reform.
Just the beginning
This newspaper disagrees with those who say Civic Platform's (PO) three years in power have so far been wasted – important budget cuts and belt tightening have been put in place, as have some streamlining of the judiciary and state institutions. Privatization continues apace, and Poland has gained new respect from its international partners.
But this is only the beginning for PO and Mr Komorowski. The changes made so far have been small-scale and incomplete. Much more needs to be done. Top of the list should be reform of Poland's creaking health care system – some public hospitals must be commercialized (or even privatized, though Mr Komorowski says he opposes this solution). Next up should be a further streamlining of the judicial system – conflicts still take far too long to resolve. More cuts must be made to Poland's bloated budget if the country is to maintain its finances at a sustainable level and enter the euro zone as soon as possible. The retirement age should rise – some special early retirement benefits have been cut, but these reforms are still a long way from solving the insolvency of Poland's social security system. Public media must also, finally, be reformed.
The list goes on. Now, voters have removed PO's well-worn excuse that an obstructionist president has blocked their reforms. It must now act. Elections are coming up next year, and it would be a shame if the opposition could continue to make the argument that the PO government has not accomplished anything significant – even with their man in the Presidential Palace.
The temptation to not rock the boat before these elections is great – but it would be a huge disappointment. Better to make the reforms Poland needs and have something to show the voters, than to hold back in the hopes of not angering a portion of the electorate.
There is much to be done. PO must now get to work.
Our editorial after the first round of the presidential elections:
In the first round of elections on Sunday there were few surprises, save a slightly better-than-expected showing by leftist candidate Grzegorz Napieralski. The end result was more or less what was expected – Law and Justice party leader Jarosław Kaczyński and Sejm Speaker Bronisław Komorowski will go head-to-head in a July 4 runoff, with neither having received an outright majority.
Focus on the issues, please
Perhaps now we can get down to a genuine debate of the issues, as the campaign so far has been less than substantive. Though it was admirable that the candidates – at least at the beginning – strove to avoid sharp rhetoric during such a sensitive period for the country, what voters got was a paucity of concretes. That must change in the next two weeks if Poles are to make an informed decision.
In the run-up to Sunday’s polls, the two main candidates squabbled over the topic of a possible debate. Mr Kaczyński wanted it to focus solely on the future of Poland’s health system, whereas Mr Komorowski wanted a debate on a range of issues. In the end, the two never gave voters a chance to see them spar.
But Poland deserves a debate between its two main candidates, one of whom will wield the power of the veto for the next five years. As was proven by Lech Kaczyński’s presidency, that power can be used to significant advantage.
Whether several debates are held, each focusing on a different issue or set of issues, or whether it’s a single debate covering the gamut of topics, Mr Kaczyński and Mr Komorowski must define their stances. The Presidential Palace is too important for voters to accept further vagueness from its would-be residents.
A crucial period
The political decisions made over the next five years will be critical to Poland’s development – pervasive poverty must be tackled and living standards brought closer to that of Western Europe.
Difficult decisions will have to be made when it comes to pensions and early retirement – will Poles opt for slower economic growth and high deficits, or will they accept an increase in the retirement age? Neither option is politically popular. Where will the president stand?
Then there is the euro. While the chances of Poland entering the euro zone within the next five years look shaky at best, the question of whether it will enter in the next decade will depend on actions taken by today’s politicians. If Poland has a euroskeptic president, he could make life difficult for a government looking to adopt the euro as soon as possible.
Much to prove
As this newspaper has opined previously, Mr Komorowski would likely come down on the right side of these issues, while Mr Kaczyński could make it very difficult for the government to enact legislation that would move Poland forward. If the polls to date are any indication, Speaker Komorowski should win the second round, barring any major gaffes.
But he has far from shined in this campaign. If he finally makes a solid case for his presidency, he could unite a significant bloc of voters behind his policies; many of his supporters currently back him as the lesser of two evils.
There are good reasons to vote for Mr Komorowski. He must now make clear exactly what those are.
On the other hand, Mr Kaczyński has the opportunity to show that he has really moved to the center – if that is indeed the case. While his party and the media have tended to echo this theory, the reality is that he seems less divisive mostly because he has said so little. A substantive debate would give voters a clearer idea as to whether he has really changed his tune.
Too much to expect?
Unfortunately, there’s little chance of this happening. A debate will probably be held, but the candidates will likely just trade platitudes. Mr Komorowski will not want to risk his lead by putting down too concrete a position, while Mr Kaczyński knows his best chance at seeming centrist will be to keep quiet.
If the candidates do disappoint, it would be a tragedy for Polish voters. With so much at stake, they deserve to know who will be leading them.
