Tuesday, 28 September 2010

Uneven Crisis in Central-Eastern Europe

The economic crisis has unevenly hit Europe. Those countries on the continent's periphery – such as in Central-Eastern Europe and Southern Europe - were most seriously affected by the crisis. Also, when we compare the CEE countries, we can see how the crisis impacted differently upon them. This post shall consider this latter point.

II Quarter 2009

The table below shows how the average economic contraction in the II quarter of 2009, in the EU10 countries (taken here as being those countries from CEE that joined the EU in 2004 or 2007), was nearly two times as great as in the EU 15 countries (i.e. those nations that made up the EU before 2004). The largest economic declines were suffered in CEE – with the Baltic States all falling by over 16%. Meanwhile, the largest economic falls in the EU15 nations were in Ireland (-7.3%) and Finland (9%).

However, the general economic contraction in CEE was not even and its immediate causes were different throughout the region:

• Those countries most exposed to the financial crisis and most reliant upon foreign credit suffered the largest economic declines (e.g. the Baltic States). These countries had large private debts often taken out in foreign currencies.

• Hungary was also one of the countries to be hardest hit initially by the crisis – although it was unique in the region for its debt problem being mainly situated in the public sphere.

• Those economies that were most reliant upon exports (e.g. Slovakia, Slovenia and the Czech Republic) also suffered large economic contractions due to the fall in demand in Western Europe. This was exacerbated due to their over-reliance upon one industry: the car industry.

• The newest EU member states (Bulgaria and Romania), which already had the lowest living standards, suffered severe contractions. This was partly due to the fact that they were not included in the EU's 2007-13 budget and therefore have not been recipients of large EU funds.

• Poland was the only EU country to avoid negative economic growth in the II quarter of 2009. The reasons for this are considered below.


GDP Growth II Quarter 2009

GDP Growth II Quarter 2010































EU10 Average



EU15 Average



Source: Eurostat * Excluding Luxemburg

II Quarter 2010

By the II quarter of 2010 the situation had changed somewhat and the overall economic trends in CEE are clearer. The region's economies grew as a whole, although only at the anaemic rate of 1.6%, around the same as that in the EU15 countries. 7 out of the 10 CEE economies recorded positive economic growth during this period. A number of observations can be made:

• Both the Romanian and Bulgarian economies continued their decline, although at a slower rate. The Hungarian economy was stagnant during this period.

• Although Estonia and Lithuania managed to recover some of the ground lost in 2009, the Latvian economy continued to fall.

• The export-led economies of Slovakia, Slovenia and the Czech Republic all grew during the II quarter of 2010

• Poland continued its positive economic growth and outpaced all its neighbours.

A number of conclusions can be drawn from these results.

1. The 'financialised' economies suffered the most during the crisis and shows how the ideal of CEE creating globalised 'tigers' (attracting large inflows of private FDI and credit) led to an economic and social catastrophe. The economic contractions are worsened (as in the case of Latvia) when large austerity measures of cutting public spending have been introduced. This was the case in Bulgaria, Hungary, Latvia and Romania.

2. Membership of the EU has provided elements of protection to some countries. in CEE The inflow of EU money (i.e direct state funds) into CEE has helped to maintain investment during a time when private investment is suppressed. Those countries (Bulgaria and Romania) that have not received such funds have remained in recession. Also, membership of an enlarged market has helped the export dependent countries recover from the downturn. This has been aided by the subsidies given by the governments of Austria and Germany to their consumers to help boost car-sales. This recovery is very tentative however, due to the uncertain economic recovery in Western Europe.

Polish Exception

The question has to be asked why Poland has managed to avoid an economic contraction throughout the whole crisis? There are a number of explanations for this:

1. The economy was growing strongly prior to the crisis (at over 6%) and therefore did suffer a large economic decline (around 5%). It is therefore incorrect to say that the country has not been affected by the crisis, especially when we factor in the increase in unemployment, public debt, etc.

2. There was less private debt in the Polish economy than in most other European countries prior to the crisis, due to the 'conservative' lending policy of banks and the high interest rates in the country up until it joined the EU.

3. Investment has been maintained throughout the economic crisis through using the large amount of funds that have flowed into the country from the EU. This has been combined with a building programme connected to the country jointly hosting the 2012 European football championships.

4. The government has refrained from drastically cutting public spending and the budget deficit , which would have repressed growth.

5. The devaluation of the zloty following the economic crisis has boosted exports, which were then aided by the growth in the German economy in 2010.

Barriers to Growth

We have seen how the economic contraction and its tentative recovery have been uneven throughout CEE. There are a number of potential obstacles standing in the way of CEE having a sustained economic recovery:

• A halting of economic growth or return to negative growth in Western Europe – particularly Germany – would have severe consequences in CEE. These would be especially felt in the export-dependent economies but also in countries such as Poland and Hungary, which are heavily reliant on exports to Western Europe and Germany.

• The CEE economies are acutely vulnerable to international markets and a further flight of capital out of the region. The bond markets place intense pressure upon the governments of CEE to reduce their spending and bring down their deficits. Where the governments have applied such policies then economic growth has remained repressed (such as in Hungary and Latvia – this is also the lesson learnt from experiences in Western Europe.) If, for example, the Polish government were to implement such policies then it would endanger the country's relative positive economic performance. It would seem logical for the government to continue its investment programme through gaining the largest amount of EU funds possible – especially as the Euro2012 football championship approaches. It would also be futile and immoral to sacrifice spending in essential public services to fund such spending. However, Poland has a self-imposed barrier of public debt not crossing 55% of GDP – beyond which drastic spending cuts will have to be made. If it seemed that this would be breached then the 'markets' could punish Poland – pushing down the zloty, increasing the price of government bonds and thus worsening government debt.

It is in such a catch-22 situation that many of the CEE governments find themselves in. Of course such countries could be protected if the EU and the powerful Western European economies were to make a clear statement supporting the right of these countries to follow a programme of government/EU funded investment, which would help to boost economic growth and control government spending. With the European Commission seeking to apply further pressure upon eurozone governments to restrain public spending this is unlikely to happen. It is therefore time for the European left to begin applying pressure upon the EU through promoting an economic programme whose central emphasis would be on economic growth and cohesion.

Thursday, 23 September 2010

Opposition to Austerity

It has previously been noted in this blog how the economic crisis has disproportionately hit the countries of Central-Eastern Europe (CEE). This has been combined with the implementation of more extreme government austerity policies than those introduced in the majority of the West European states. The attempt by some CEE governments to deepen their austerity measures has begun to meet political and social resistence. In the last few days we have seen demonstrations against cuts in social spending and public sector wages in the Czech Republic, Romania and Poland.

The Czech Republic

Around 40,000 public sector workers (including police officers, firefighters and health care workers)demonstrated in Prague on Tuesday. The new centre-right government has committed itself to cutting budget spending and carrying out extensive reforms of the pension, welfare and health systems. These will include cutting public sector wages by 10%.

This is being driven by a desire to bring the country's budget deficit to below 3% of GDP by 2013. However, it is difficult to see why the government is so eager to drastically cut public spending and salaries, which will undoubtedly further harm the country's economy. Czech's budget deficit currently stands at 5.3% (small when compared to most other European countries) and its public debt of 37.5% of GDP is about half of the EU average. The right-wing parties' warnings of how the Czech Republic could become the 'next Greece' are thus scaremongering tactics designed to push through their ideologically driven economic reforms.


Romania has been one of Europe's economies most severely affected by the economic crisis. It was forced to turn to the IMF and the EU for loans to ease its solvency problems in 2008 and the government announced a severe round of austerity measures to meet the conditions of its international loans. These included cutting all pensions by 15%, although this was declared illegal by the constitutional court and the government replaced this plan by hiking VAT. The government also cut all public sector wages by 25% in July. This has led to a wave of protests, with the latest example being a demonstration of over 10,000 trade-unionists in Bucharest on Tuesday. As well as protesting against the cuts in their salaries the demonstrators demanded an end to the sacking of public sector workers and for the introduction of better labour and pension laws.


Despite Poland avoiding negative economic growth throughout the economic crisis, the government has announced its own set of austerity policies. As well as increasing VAT, the government has introduced a freeze of all public sector wages (apart from teachers). Furthermore it is reducing the state Labour Fund by nearly 5bn zloty. This is money assigned for such things as retraining the unemployed and instigating employment, and is being carried out in a situation where there are over 1.8m jobless people in Poland.

On Wednesday around 6,000 trade unionists marched in Warsaw. These included uniform workers (such as the police and firefighters) and civil servants. Polish trade-unionists will take part in the European wide protest to be held in Brussels on the 29th September. The two main trade union federations will also hold a joint protest in Warsaw on the same day and a day earlier railway workers will demonstrate in Poland's capital

Sunday, 19 September 2010

Papal Fallout


Weaving his way through the crowds in Edinburgh, Benedict stopped for the classic PR moment after being handed a baby from the crowd. The mother of the chosen child was interviewed on television shortly afterwards. She was a young Polish woman who, with an acquired Scottish accent, explained the significance and emotional importance of this experience.

The Pope has not always received such a warm welcome during his visit to Britain. 15,000 marched in London this weekend (led by their chief apostle Richard Dawkins) - protesting against the Pope's visit. The march of secularists and humanists was a demonstration by the liberal middle-classes against the conservatism of the Catholic Church. The Pope was the hated figure of the crowd and has been personally held responsible for child abuse, AIDS in Africa and denigrated as being a former member of the Hitler Youth.

These accusations and condemnations have not just flowed in one direction. Benedict opened his trip to the UK by warning against the threat of 'extreme atheism' and historically relating such ideologies with the rise of Nazism. This is not just factually incorrect but is also deeply offensive to those who do not share a religious faith. They have also helped to enrage the hostilities of those opposed to the state visit of the Pope to Britain.

There is certainly much to be appalled about by the ideology and practice of the Catholic hierarchy. The revelations of sexual abuse in recent years has further undermined a conservative moralism which is out of touch even with the practices of its own followers. However, the blanket condemnations by the protestors contain their own prejudices. The barrier placed against the distribution of condoms by the Catholic Church is indeed a crime against humanity. However, the spread of AIDS is a wider social and political problem as shown by the fact that the three countries with the highest HiV rate in Africa have minority Catholic populations. Likewise child sexual abuse is a social problem that exists in all institutions that are insulated from the public gaze – not least the family. Also the claims that Benedict was a Nazi sympathiser is factually incorrect and shows a complete misunderstanding of the situation faced by a 14 year old growing up under Nazi tyranny who is compelled - by law - to enter the Hitler Youth. No consideration is given to the progressive policies of the Church such as opposing nuclear weapons and the war in Iraq. The point here is not to deny the malpractices and reactions of the Catholic hierarchy but to understand how many of its opponents seem to want to paint the Catholic Church (or perhaps religion as a whole) as being the source of all evil, thus expressing their own variation of intolerance.

The history of xenophobia and prejudice towards Catholics in Britain has a long history. This has often been driven by hostility and racism towards minority communities. Most obviously this has been connected with racism towards Britain's Irish population - a community long denigrated as part of the occupation and partition of Ireland. More recently Britain's Catholic population and churches have been swelled by the influx of Poles into the country.

While largely successfully integrating into British society, the danger of a rise in prejudice towards the Polish community exists. This does not just come from the far-right but also from some on the left (under slogans such as 'British Jobs for British Workers'.) It also has a liberal version that contains its own anti-Catholicism. We have observed in recent years how the rise of Islamophobia has sometimes been justified through referring to ostensibly liberal and secular values. There is therefore a real possibility that anti-Catholicism will be deployed to excuse prejudice and discrimination against Poles in Britain.

One also has to question quite why secularists in Britain are targeting the Catholic Church. After all the Catholic Church in Britain is a marginalised institution which has little impact on the practices of the government and state. This is unlike in Poland where the Catholic Church is expanding its symbolic and institutional intrusion into public life. The secularist demands for the separation of the Church and State in Poland therefore has to be directed towards the Catholic Church (whilst recognising the reality that the vast majority of Poles are believers in the Catholic faith.) In Britain this is simply not the case.

When the head of the Vatican flew into Britain he was met by another head of state who is also the leader of the Church of England: Queen Elizabeth II. There is no full separation of the Church and State in Britain and furthermore there continues to exist an institutionalised discrimination against Catholics - for example the Monarch can neither be a Catholic nor marry a Catholic. Perhaps liberal secularists in Britain should seek to address these issues before taking the moral high ground against those holding a different set of beliefs from them.

Tuesday, 14 September 2010

The Real Violation of National Sovereignty

"Citizens’ Platform and its political base perfectly understand that a Poland that honours the memory of Lech Kaczyński will not be the Poland that it wants (….) Just as Piłsudski could not be a symbol of the Polish Peoples’ Republic, so Lech Kaczyński (…) cannot be a symbol of the Russian-German condominium in Poland’

This quote is just one example of the change in political rhetoric by the leader of the Law and Justice party (PiS) Jaroslaw Kaczyński. In recent days Kaczyński has also claimed that the PM Donald Tusk and a number of PO politicians are morally responsible for the Smoleńsk tragedy. Although he has stopped short of openly proclaiming that the aircrash was a deliberate attack, he has stated that it was a consequence of political games between the Polish government and Moscow.

Kaczyński is moving PiS towards being a single issue party. Smoleńsk not only now defines the party’s domestic policy but also its stance on international matters. This will undoubtedly lead PiS down a political cul-de-sac and reduce its support to a small minority of society. Nevertheless they can cause a lot of political damage along the way and further distract attention away from the real issues facing Poland. PiS are currently using the historical experiences of foreign occupation and partition to raise fears in society. However, at the same time, they are ignoring the real issues that have violated Poland's standing as a soverign state. Most immediately this concerns the accusations, revealled by the Associated Press agency last week, that torture was carried out in secret CIA prisons in Poland .

The allegations that Poland hosted CIA prisons have been circulating since 2005. In 2006 the Polish government subsequently claimed that these accusations were unfounded. However, in 2007 Poland was included in a European Parliament report, stating that there were secret CIA prisons in the country between 2002 and 2005. However, according to the Helskinki Federation for Human Rights, this is the first time that the CIA has openly admitted that there were both prisons in Poland and that torture was carried out in them.

Despite such allegations the Polish political elite has closed in on itself and denied the claims. The problem is that all the major Polish political parties supported Poland’s participation in the wars in Afghanistan and Iraq. Furthermore, these wars were launched when the Democratic Left Alliance (SLD) held both governmental and presidential power. Matters are further clouded by claims that the late President Lech Kaczyński protected his predecessor – Aleksander Kwaśniewski – from being held responsible for a matter that violates the Polish constitution.

When answering questions about the latest revelations, Kwaśniewski has assured that Poland had ‘nothing to do with them’. He has stated that ‘there were no prisons’ in Poland although even if there were Poland knew nothing about them. Kwasniewski then goes on to claim that ‘the fight against terrorism can also have a brutal character’ and that he does not ‘adopt the view that democracy must disarm itself against terrorism, while the terrorists can do what they want to us . It is a huge dilemna as to how to balance how much freedom and security there is’.

Kwasniewski is both denying and justifying the existence of CIA prisons in Poland. It is essential that there is a full enquiry into the allegations and that politicians such as Kwasniewski (and the ex-PM Leszek Miller) are questioned over the matter. For the new leadership of the SLD – around Grzegorz Napieralski – this will also be a test as to whether they are serious about building an authentic left in Poland. Just as the British Labour Party has to cleanse itself of the Blair era in order to rebuild its trust in society, so the Polish left will have to do the same.

Wednesday, 8 September 2010

Unity through Division

Facing growing disunity and falling support in the opinion polls, Jarosław Kaczyński, leader of the Law and Justice Party (PiS), has written an open letter to members of his party appealing for unity. The letter contains many half-truths and (self) deceptions. Yet it also reveals much about the current political state of PiS, its probable future political strategy and some of the issues that are likely to dominate public debate.

There is no better way to forge internal unity than through building fear of an external aggressor. Kaczyński does this on a number of levels. A large part of the letter is taken up with examples of how the political establishment has unfairly treated PiS. A hostile media, distorted opinion polls and aggression towards Lech Kaczyński (when he was President of Warsaw and then Poland) are cited. It is tempting to explain this as being simply the paranoid ramblings of someone who has lost touch with political reality. And this may indeed be the case. However, there is at least an element of truth behind his statements. PiS grew as a party by harnessing the social frustrations born out of the transition. It gave expression to these through creating a conspiratorial explanation of (ex-communist and liberal) elite collusion. This particular form of conservatism sometimes conflicted with those who had assumed positions of economic and political privilege in post-communist Poland. It should therefore come as no surprise that this elite has often fought back, using different tools at its disposal.

It has previously been discussed in this blog how Jarosław Kaczyński's presidential election campaign was based upon avoiding open political conflict and evading controversial topics such as the Smoleńsk tragedy. Such a strategy helped Kaczyński win the support of many in the political centre and expand beyond PiS's core electoral base. However, it was still not sufficient for Kaczyński to beat his rival Bronisław Komorowski, even within the emotionally sympathetic atmosphere that surrounded the election. Since the election 'hawks' within the party have openly criticised this strategy and called for PiS to go on the political offensive. Kaczyński's letter confirms his own commitment to this approach and his wish to stamp out opposition from all those within the party who disagree with it.

Freed from the constraints of appeasing those occupying the political centre ground, Kaczyński has identified the targets for his new offensive. Central is the enquiry into the Smoleńsk tragedy. Kaczyński has insinuated that the tragedy was probably not an accident (questioning the official version of events) and PiS have launched their own investigation into the incident, headed by the staunch conspirator Antoni Macierewicz. Connected to all this is the on-going conflict over the cross placed outside the President's Palace and the attempt to create an historical mythology around Lech Kaczyński. While claiming that PiS have not been directly involved in the protests against removing the cross, Jarosław Kaczyński states that he respects the protestors and sees them as being strongly associated with religious values and patriotism.

Kaczyński is using these events to articulate a broader view of Poland and its international relations. He argues that the present Polish government accepts Poland's external domination and undermines the country's own cultural traditions and heritage. He claims that the Polish government has a policy of servitude towards Russia and a cliental relationship with Germany. Issues such as the enquiry into the Smoleńsk tragedy therefore concern Poland's own standing as an independent country. He identifies PiS as being the only political force that is capable of defending Poland's national autonomy: "The course of history has left us as the upholders of national values. Only we can counter this fateful course of events"

Kaczyński ends his letter by touching on some very real problems facing Poland. He notes how countries with lower levels of GDP per capita (such as China, India, Brazil and Turkey) are enjoying rapid economic growth. He seems to be concerned that this could push Poland closer to the periphery as other countries overtake Poland. However, Kaczyński does not offer any positive solution to this dilemma nor regard the rise of other countries as a new opportunity for Poland. One may have thought that such concerns would have led to him to offer solutions to Poland's disastrously low level of employment or perhaps suggest ways of investing in new technologies and industries that could help Poland compete in the world economy. Perhaps the present demographic decline should be countered by opening up a new policy of immigration into the country or creating worthwhile jobs that would encourage young Poles to stay in Poland. No. Kaczyński rather believes that the passivity of the elite in face of these challenges is allowing for a further erosion of Poland's national cultural values: "This is not a question of faith, but of the understanding that this destruction is allowing for the door to nihilism to be opened, which shows its face through attacking the cross and its defenders. In Poland we do not have any other widely known moral system apart from that growing out of Catholicism. This is why the only real alternative is nihilism. Only we are in the position to oppose this."

The present trajectory of PiS will help it to consolidate its core electoral base but it will hinder it from growing into a party that could win the support of a majority of society. It is to be seen whether a more progressive opposition to PO can grow in its place.

Friday, 3 September 2010

Thirty Years of Solidarity

In August 1980 I had other things on my mind than the strikes of shipyard workers in Gdańsk. After all Aston Villa were just embarking on a league championship season (yes it really was that long ago!) and this ten year old was more concerned with Peter Withe than Lech Wałęsa. Yet even in these circumstances the huge working class mobilisations in Poland had made their impression. The iconic images of Solidarność, Wałęsa jumping on the wall and the V-signs of victory are all memories of my youth.

One of my first political acts was to go on a march against nuclear weapons. Basically I didn’t want to die and the TV film Threads – showing Sheffield being incinerated by a nuclear bomb – had scared the life out of me. And so we marched – calling for our own government to ditch its nuclear arsenal as a step towards full nuclear disarmament in the world. On such demonstrations it was not uncommon to see the Solidarity symbol on a lapel alongside a Campaign for Nuclear Disarmament badge. It remained a symbol of hope and unity beyond the boundaries of Poland – now quietened by Martial Law.

These were the last flickerings of optimism for the Western European left during the Cold War. The overthrow of the dictatorships in Southern Europe from the end of the ‘70s had emboldened many previously radicalized by the events of 1968. The growth of a mass working class movement in Poland, espousing a radical programme of workers self-management, seemed to fit this mood nicely. Yet the wheels of history were turning in the opposite direction. Thatcher and Reagan had taken the reins of power and they weren’t going to let go.

Solidarność contained many contradictions and aroused numerous emotions and hypocrisies. The ex British Prime Minister Harold Macmillan once remarked – after seeing pictures of strikers holding a Mass outside the Gdańsk shipyards – that he always liked to see workers on their knees. The western left tended to brush aside such concerns and were at the forefront of organizing material and political support for the strikers. In Washington and London the elite were apprehensive about the strikes. There is in fact some evidence that the American admistration knew about the Polish government’s plans to introduce Martial Law (as they had been told about them by the defector Kukliński) yet failed to inform the Solidarność movement that they professed to support.

As Thatcher expressed her outrage at the treatment of strikers in Poland she was preparing her own domestic assault. The miners’ strike in the UK (1983-84) was accompanied by a massive state deployment including the physical repression of strikers by the police. These were accompanied by the use of plastic bullets in Ireland, the death of Irish Republican hunger-strikers, the violence against the black-communities in the inner-cities and the military adventure in the Falklands. It is no exaggeration to say that many more people died under Thatcher than Jaruzelski and it has always been a source of dismay for me that many in Poland have seen Thatcher as a hero. The other hypocrisy of course was that the Polish ‘socialist’ government continued to export coal to Britain throughout the year-long miners' strike. Strange times indeed.

The hypocrisies have not gone away. The Solidarność movement was a shadow of its former self by the end of communism, yet it was able to negotiate the peaceful end of the system and win the first free elections with landside victories. Yet the Shock-therapy reforms that its leaders helped introduce were never agreed at the Round-Table talks. Many advances have been achieved in Poland. Free elections, freedom of speech and freedom of travel – whatever their practical limitations today – are basic human rights. The ending of the ludicrous economy of shortage and the queues for basic necessities – that reached absurdities in the 1980s - is a victory for all. However, the Solidarność victory is incomplete and partial.

30 years ago the Solidarność strikers put forward a list of 21 demands. Most of these concerned direct economic issues and many have yet to be met. They included improving the health service (the present health service in Poland is crumbling and the government would like to privatise it); for more nurseries to be provided (presently 30% of pre-school children do not attend nurseries and local councils are closing them) and for a reduction in the retirement age (the government is currently trying to increase it). The number one demand of the strikers was for the right to form free trade unions. Although this right now exists trade union membership has slumped – falling from 18% in 1991 to below 6% in 2002. This has left large swathes of workers open to exploitation. Although one of the achieved demands of the strikers was to not have to work on Saturdays, Polish workers presently work the longest hours in Europe (1,984 hours annually), which is more than in any other country in the OECD apart from South Korea, even surpassing Japan.

The present political leaders are falling over themselves to claim the mantle of Solidarność. All agree it represented the beginning of a new and free Poland. Yet they distort its real historical meaning with an Orwellian revisionism of history. Through this cloud of ideological distortion we should pay tribute August 1980.
I'll leave the last word to the Angellic Upstarts