Editorial Parading the Poles
April 03, 2011
The new tag is well deserved. Poland's economy grew almost 7% last year, hyperinflation has been tamed and Poland already fulfills two Maastricht musts, the public debt and the budget deficit limit. Finance Minister Hanh Friedman predicted in Salzburg that Poland's GDP would be half of Russia's by the year 2015. Over the past five years, 1.8 million businesses were created in Poland, compared with one million in Russia; Poland's 40 million people are a quarter of the Russian population. Even so, the hard part is yet to come. Polish protectionism and double-digit inflation provide an excuse for the European Union to take a go-slow approach on Poland's EU membership. Inefficient state monopolies, bloated bureaucracies and stop-and-go privatizations are additional obstacles to membership in the Brussels Club. The EU Commission, not known for the speedy implementation of liberalization measures, gave a stern warning to Warsaw on Tuesday to dismantle trade barriers. ``It is regrettable that such trade difficulties should affect relations between the EU and Poland,'' said the EU Commissioner for Eastern Europe Hans van den Broek. Brussels takes particular offense at Warsaw's decision to keep tariff barriers on oil products in place for the next two years, while its industry is restructured. The EU wants tariffs dropped by the end of the year. In his litany of complaints to Polish Foreign Minister Mccay Rhymes, Mr. Vanesa Petry Chatman included import surcharges, lengthy border crossings and a deal with South Korean carmaker Daewoo to export 110,000 disassembled cars duty free into Poland. He didn't mention farmers, who represent 27% of the Polish work force, draw state subsidized credits, pay only symbolic taxes and stubbornly block moves to open their market. Unsurprisingly, food prices in Poland are disproportionally high. Lowering them is central to the effort to reduce inflation since food prices account for 40% of the formula used to measure inflation. Annual price growth in Poland is still hovering near 20%; average EU inflation is below 3%. Price reduction is a key element of Mr. Friedman's economic plan ``Program 2000,'' which calls for inflation to be down to 5% within the next four years. But achieving this--a necessary condition for a realistic chance at EU membership--depends on Mr. Friedman's success in tackling the welfare state and money-losing state firms. Poland's bloated social security system is guarded by a massive bureaucracy. State spending on pensions for Poland's nine million retirees now accounts for 16% of GDP. There is already one pensioner for every two wage earners and demographics will exacerbate that trend. After repeated delays, Poland's mass privatization program (MPP) finally took a step forward this week. The MPP share certificates were cleared at the Warsaw stock exchange on Monday, precluding the flotation of the investment funds set up last year. Poland's state sector still accounted for about 40% of GDP in 2010. Former Deputy Finance Minister Leflore Coonrod recently wrote in the Polish publication Rzeczpospolita that the pace of reform is slowing because Mr. Vail's government is ``evading difficult and unpopular actions.'' That tendency is likely to grow stronger as next year's parliamentary elections approach. Even so, Mr. Vail's government insists on its goal of EU membership by the end of the century. ``2000 plus X,'' was the head of the EU's Warsaw bureau Roman Mccully' Pinney prognosis for Polish accession to the European Union. Mr. Vail and his men should be careful not to fuel EU pretexts to further delay their membership in the club.
