Tuesday, 26 April 2011

Poland Escapes Recession By Public Investment

You can find an article by me on how Poland avoided an economic recession during the crisis here

Polish Goverment Protests Against Dutch Anti-Immigration Policy

A political row is brewing between Warsaw and the Hague concerning the possible expulsion of EU migrants from Holland.

Holland is governed by a centre-right minority coalition government that depends upon the support of the far-right Party of Freedom (led by Geert Wilders). This government has followed a trend set in some other European countries of using the politics of Islamophobia and anti-immigrant prejudice to boost its popularity. Recently attention has turned to immigrants from Central-Eastern Europe (CEE) and particularly Poland. There are currently around 200,000 migrants from CEE living in Holland, of which an estimated 115,000 are from Poland.

Wilders has long campaigned against immigration from CEE. The issue is now being taken up by the mainstream parties, with the government announcing that it plans to send home immigrants from other EU states who had been unemployed for more than 3 months. The Polish government has quite rightly pointed out that this violates the EU directive (38/2000), which guarantees the free-movement and residence of EU citizens in other Member States.

The reality of life for most migrants coming from CEE to Holland is one of exploitation. Often they find low-paid insecure work through employment agencies and are housed in packed boarding houses. If they lose their jobs these migrants often end up homeless and therefore potentially reliant upon social benefits. Politicians (including some from the left) have been warning of a 'tsunami' of CEE immigrants overwhelming the Dutch social services. The reality is that only 690 people from CEE are currently drawing social benefits in Holland and just 1,527 unemployment benefits.

With the German and Austrian labour markets set to open up to CEE next month a dangerous precedent is being set in Holland. This restricts one of the most fundamental rights of the free movement of people within the EU. Coming on the back of the French decision to expel Roma immigrants from Romania out of France, it is important that this move by the Dutch government is opposed and that the principle of the free movement of labour within the EU is upheld.

Below I publish a recent article from the Financial Times on this issue:

Poles at sharp end of Dutch politics: Lukasz and Alicja left their native Poland for the Netherlands 10 months ago, expecting to find an open and tolerant society befitting their hosts’ reputation. They were disappointed.

Like most of the estimated 150,000 Polish migrants here, the couple found work through employment agencies, which put them in the tight-packed boarding houses known as “Polish hotels”. Alicja, 24, picked flowers while Lukasz, 26, who has a university degree in logistics, started picking tomatoes then moved on to repairing trucks.

After taxes, social insurance and rent, they were left with about €200 ($290) each per week. Salaries like these have attracted tens of thousands of young Poles such as Lukasz and Alicja since 2007, when the Netherlands opened its labour market to them.

East European migrants now provide most of the labour force for the Netherlands’ greenhouse-based agricultural industry. The Dutch experience is being watched by Germany and Austria, which open their borders to east European workers on May 1.

Unemployment in the Netherlands stands at 4.3 per cent, well below the European Union average of 9.5 per cent. But with the electoral trend to the right, politicians have begun attacking immigration from eastern Europe.

In provincial elections last month, Geert Wilders, the far-right anti-Islamic politician, accused Polish workers of crime, drunkenness and taking Dutch jobs. Even politicians from the Labour and Socialist parties have warned of a “tsunami” of east Europeans overwhelming Dutch social services.

Now Lukasz and Alicja fear that, like the Turkish and Moroccan migrants who came here in the 1970s and 1980s, the Poles have fallen victim to the Netherlands’ love-hate relationship with immigrants.

“They decided to open the borders themselves, and now they want us to go home,” says Lukasz. “It’s absurd.”

Until recently campaigns against east European immigrants were the exclusive province of Mr Wilders and his Party for Freedom (PVV). Since elections last year made the PVV the third-largest party, mainstream parties have taken up the issue. Earlier this month the rhetoric became government policy, when Henk Kamp, minister of social affairs from the governing Liberal party, announced plans to send back home east Europeans who had been unemployed for more than three months.

Mr Kamp’s plans have turned a domestic political issue into a European controversy.

The Polish government says deporting its citizens for economic reasons would violate EU rules on labour migration. Viviane Reding, European Commission vice-president, has warned that the Commission will “loudly and clearly” oppose Dutch rules that do not meet EU standards. Dutch officials admit their proposal to require five years’ residency before claiming unemployment benefits violates EU agreements.

Meanwhile, Polish officials point out that, like Lukasz and Alicja, most Polish migrants pay Dutch taxes and social insurance premiums. “We are talking about people who are entitled under Dutch law to receive such assistance,” says Janusz Wolosz, spokesman for the Polish embassy in The Hague.

Louis Bontes, a former policeman turned PVV member of parliament, cites complaints of public drunkenness and noise, and opposition to Poles claiming unemployment or other social benefits. “I get e-mails from citizens who say the problems keep getting worse,” he says. However, much of the antipathy to Polish immigrants reflects Dutch fear of ethnic and cultural change. Complaints that Polish migrants degrade neighbourhoods often refer not so much to their behaviour as to the fact that they are there.

“People can’t identify any more with the place where they live,” says Mr Bontes. “You can see why someone who lives in one of these streets in Rotterdam where only 20-30 per cent of the people are native Rotterdammers just doesn’t feel comfortable there anymore, period.”

Civic groups that provide services for Polish migrants agree a minority can create social burdens. Poles have become the “dominant group” at some homeless shelters, says Ernst-Jan Stroes, director of Den Haag East Europe Foundation.

But the groups say the employment agencies are partly to blame. The agencies often house their workers four or more to a room in squalid converted family housing, while others are housed in trailer parks, also isolated from Dutch society. “The employment agencies abuse them, the slum landlords rip them off and in the end they wind up out on the street,” says Mr Stroes.

After seven years in the Netherlands, Krystyna Cichon speaks fluent Dutch and works for a local water utility. “I can tell you stories about employment agencies you wouldn’t believe,” she says, recalling the problems she faced when she first arrived.

An agency brought her from Poland in 2004 with a promise of work folding clothes for a fashion label, Ms Cichon says. Instead, she and six other women were deposited at a meat factory and ordered to pack chicken parts on an assembly line. She says such deception is routine at the less reputable agencies.

Janusz and Alicja have now saved up enough to rent a small apartment. But, like most Poles working here, they still have virtually no contact with local people apart from supervisors at work.

“The Dutch think they are very open,” says Ms Cichon. “But they’re not.” Janusz and Alicja’s names have been changed to preserve their anonymity

Wednesday, 20 April 2011

Labour's U-Turn on Migration from CEE

When the British PM David Cameron uses anti-immigrant rhetoric it's no surprise. After all we expect the Tories to be.. well Tories. However, recently there have been worrying signs that some within the British Labour Party are jumping on the anti-migrant bandwagon in an attempt to boost its popularity. Furthermore, migrants from Central-Eastern Europe (CEE), and particularly Poland, are beginning to feel the brunt of this rising anti-migrant sentiment.

Speaking about the previous Labour government's record on immigration , in a recent interview on the BBC, the leader of the Labour Party, Ed Miliband, said:

"I don't think we lied but I do think we got it wrong in a number of respects. I think that first of all we clearly underestimated the number of people coming in from Poland and that had more of an effect therefore than we would otherwise have thought. And secondly, I think there's this really important issue about people coming into the country and the pressures on people's wages. People aren't prejudiced but people say to me look I'm worried about the pressure on my wages of people coming into this country, I'm worried about what it does to housing supply - all those issues. Now some of that is real and some of it isn't but I think you have to address not just tough immigration policy but underlying issues as well."

This came on the back of previous statements made by Miliband about the pressure that immigrants have had on wages and living-standards in the UK. It also follows comments made by the influential Labour intellectual Maurice Glasman. The issue of immigration is a central theme of Glasman's concept of 'Blue Labour' - that attempts to marry Labourism with social conservatism. Glasman claims that immigration to Britain has helped to hold down salaries - particularly for lower earners - and acted as an 'unofficial wages policy' in the UK. He states that the government was underhanded about its migration policy and that they lied about the number of immigrants that would come into the country.

These are part of a trend within sections the British Labour movement of pandering to the anti-immigration policies of the Conservative Party and the far-right. This manifested itself in the run-up to the last General Election, when there were unofficial strikes called under the slogan of 'British Jobs for British Workers'. A phrase coined by Gordon Brown.

For years politicians on the right have argued that there needs to be an honest debate about immigration into Britain. The only honest debate they seem to want to have however is one that starts and ends with the idea that there are too many immigrants in Britain which is bad for its economy. An excellent article by Mehdi Hassan shows the hypocrisy of this debate and how it leaves out any discussion about the great contribution that migrants have made to British economic, social and cultural life. Hassan also points out how studies into the impact of immigration have shown how it actually boosts economic growth and wages (including low wages). Rather than trying to dress up the anti-immigrant policies of the right into a programme for itself, the left should be challenging the very assumptions and facts upon which these are based.

However, there is another side to the story of migration - which is that of emigration. Miliband and Glasman have argued that the Labour Party lied or underestimated the extent of the amount of immigrants coming from Poland and Eastern Europe. They also insinuate that the problem was caused by Britain's '0pen-door' policy to immigrants that allowed for this large inflow of migrants from countries such as Poland.

It is true that the amount of immigrants coming from Poland was underestimated prior to EU enlargement. This was the first time that the EU labour market had been opened up to workers from CEE; and therefore there was no real basis for estimating how many would come. However, this is not the crux of the matter. The real issue at hand is that 10 new countries had entered the EU and therefore should have right to move, live and work around the EU as they wish. This is one of the principles upon which the EU is founded and is one that any progressive should defend and support. After all, if Poles are to have restricted access to the UK labour market then by the same standards so should the Brits in say Spain or Portugal - or for that matter those of us living in Poland itself.

The Labour Party government should in fact be praised (its not often I say this) for its policy towards CEE immigration after EU enlargement. The scandal of this time was that it was only Britain and Ireland which initially allowed people from the new eastern EU states to work freely in their countries. All other 'old' EU states took up the option to maintain restrictions on the right of CEE migrants to work in their countries. This meant that the possible destination for labour migrants from CEE was limited. Seven years after EU expansion, it will only be next month that the German and Austrian labour markets are finally opened up to workers from CEE.

The other issue, that is little considered in the debate on CEE migration in the UK, is the huge profits made by Western European companies after the opening up of the CEE markets and economies. By the time that countries such as Poland had entered the EU, their economies had been liberalised and opened up to trade with the West. Many sectors of the CEE economies have become dominated by Western European capital. For example, over 85% of the banking sector in CEE is now in the hands of foreign banks. If goods and capital are allowed to move freely and Western companies have access to the CEE markets then people equally have the right to move as well. The fact that the economic policies being urged by the West and the EU had contributed to the creation of soaring unemployment in CEE (unemployment had reached 20% in Poland when it entered the EU) was a contributing factor to the large outflow of labour from 2004. Do the proponents of restricting immigration from CEE also believe that the Polish government should restrict British business in Poland?

In an age of austerity and economic hardship, the issue of immigration has become a useful distraction for governments in Europe. This has invariably been connected to racism and Islamophobia - which are on a rise throughout the continent. Similarly, a danger exists that migrants from CEE will be targeted as a scapegoat for the anti-immigrant right. It is imperative that the left does not allow itself to be lured by these divisive and regressive policies.

Sunday, 17 April 2011

Left Unity Before the Election?

Anyone who has taken an interest in seeing the creation of a strong alternative left in Poland, will have experienced the frustrations of seeing numerous initiatives fail almost before they got off the ground. With parliamentary elections round the corner then it seems that once again the left will be represented by one party: the Democratic Left Alliance (SLD).

It was not supposed to have been like this. After all this is the land of Solidarność - the largest alternative opposition movement to Communism, born out of a trade union movement and espousing a programme of the self-management of workplaces as a means to create a self-managed republic. Although by 1989 this movement had become lured by the market and dominated by the Church, a seemingly strong independent left current still existed within it.

Yet none of the left movements that emerged out of Solidarność were able to seriously challenge the 'post-communist' left. The grouping around left Solidarity activists such as Jacek Kuroń became swallowed up in the liberal-centre, becoming the human face for the shock-therapy reforms. The most serious attempt to build a left party out of the Solidarność left was the Labour Union (UP) - led by Ryszard Bugaj in the early 1990s. Despite winning 7% in the 1993 elections, this vote was dwarfed by the SLD gaining 20%. UP refused to go into coalition with the SLD and then failed to enter parliament in 1997, only returning once it entered an electoral coalition with the SLD in 2001. Ever since UP have been reliant upon and subordinated to its larger, more powerful partner.

A similar - although inverse - fate was experienced by the Polish Socialist Party (PPS). This party was built upon the traditions and structures of the PPS - a mass party before the war that had been formed at the end of the nineteenth century. The PPS stood as part of the SLD slate in 1993 and remained in parliament until 2001. It was initially heavily criticised by some for forming an alliance with the 'post-communist' left, yet was able to operate as a relatively independent left force both inside and outside of parliament. However, when the PPS decided to challenge the SLD in the 2001 parliamentary and presidential elections, it gained less than 0.25% of the vote, while the SLD surged to more than 40%.

When the second SLD-led government (2001 - 2005) began to fall apart - ridden with corruption scandals and implementing strong neo-liberal economic policies - another attempt to form an alternative left was made. This time it came in the shape of the Polish Social Democratic Party (SdPL), formed by a number of prominent SLD MPs. Although the SdPL claimed that it was going to build an true social democratic party in Poland, there was little to separate the two parties programmatically. Despite the SLD's vote falling to just over 11% in the 2005 elections, the SdPL won less than 4% support and failed to enter parliament. By 2007 it too had entered an electoral coalition with the SLD.

Since this time there has been no serious left challenge to the SLD - despite the fact that support for the SLD has remained relatively low. The group Krytyka Polityczna have certainly managed to exert some influence over the public debate and have helped to break the stranglehold that the conservative-right have over cultural life in Poland. However, they have failed to articulate a clear political project for the left and they presently seem uncertain and divided about whether they want to evolve as a cultural centre or real political force. The Polish Workers' Party (PPP) has some strong regional presence and trade union influence. They have been present in a number of important industrial disputes and social campaigns. However, the PPP has also been unable to register any notable electoral result.

Some have argued that the left should give up its electoral ambitions and concentrate on working within communities on social campaigns. The argument runs that the dominance of the political scene and media by a few elite parties makes it impossible for a viable left alternative to emerge. There is some merit in this argument, in the sense that for any progressive left alternative to emerge it must simultaneously build up local bases of support and grow through campaigning on issues that affect people outside of the arena of electoral politics. However, for the left to desert the field of electoral politics is to admit that they are unable to influence and change people's lives for the better where it really matters.

The question arises as to whether the left should once again attempt to build a left alternative to the SLD or ally with it. In recent days there are signs that those on the margins of the SLD are moving closer to it as the pressures of the forthcoming elections mounts. It is likely that the SdPL parliamentary group will be closed down, as there are now too few MPs after a number left to join the SLD. Concurrently, it has also been revealed that it is likely that UP will merge with (or more precisely be submerged into) the SLD to form one party. The leader of UP has explained: 'Poles associate the left with one party - the SLD. We accept this and there is no point fighting reality'. On the other hand Bugaj - now long departed from UP - has stated that this is the inevitable ending point for the political trajectory pursued by UP. He claims that the SLD - which did not want social rights written into the constitution, which introduced a flat-income tax for business, supported evicting people from their houses and introduced the most commercial model of social insurance in Europe - cannot be considered to be on the left.

The problem for the left is that both of these statements are essentially true. The left of Polish politics is dominated by a group that has often - although not always - betrayed its left credentials. The nadir of this was during the term of the second SLD-led government, when PM Leszek Miller openly moved to the right even of Blairism and the Third Way. Since this time a new leadership has emerged around Grzegorz Napieralski, which has underlined that it is building an authentic broad left-wing party in Poland. Yet the left electorate still has to endure the likes of Miller acting as the party's unofficial spokesperson and praising the economic policies of his government. Those who authentically stand on the left have long had to deal with these schizophrenic messages from the SLD.

It now seems certain that the left will compete this year's parliamentary banner with one dominating party - the SLD. In these circumstances the left inside and outside of the SLD has to place as much pressure on the SLD to maintain some of its left principles and programme. This will be particularly important as the SLD could well find itself having to decide on whether to join a PO dominated government. If the SLD does achieve a positive result in the Autumn yet decides to remain independent, then it would have the chance to help build a strong left-wing party in Poland.

Thursday, 14 April 2011

Its the economy stupid

In the run up to an election the last things you want are increasing inflation, rising interest rates and slowing growth. Yet this is precisely the lethal cocktail that may await Mr Tusk's government as the parliamentary elections approach in the Autumn.

Latest figures have shown that the prices of goods and services rose - year on year - by 4.3% in March. This is the highest rise in prices since 2008 and was higher than expected by analysts. Moreover, the cost of basic food products are growing the most - sugar 39.4%, poultry 9.9% and flour 4.9%. A rise in the price of such products obviously affects the poorest the

The rate of inflation is now higher than the growth in wages - which rose on average by 4.1%. The salaries of many employees grew less than this or even declined and salaries of public sector workers (excluding teachers) are being frozen.

The squeeze on people's incomes will be made worse by the probable decision by the National Bank of Poland (NBP) to raise interest rates. The NBP aims to keep inflation at around 2.5% and it is therefore extremely likely that base interest rates will be raised again by at least half a percentage point by the end of this year. With private debt having expanded rapidly in recent years, higher interest rates will further negatively hit people's living standards. Another effect of rising interest rates is the possible appreciation of the Polish Złoty, worsening the prospects for exporters.

PiS have already recognised that the rising cost of living is a potential vote winner. In 2005 they managed to convince voters that the economic policies of PO would worsen their material position. They are trying to repeat this again - with Jarsosław Kaczyński carrying out a publicity stunt by shopping in a local store to highlight the rising cost of food. This week PiS are putting forward a bill in parliament that would rule out the possiblity of a further rise in VAT.

Some may argue that these actions are populist and designed to win support for a more sinister political project. And they may well be right. Yet one of the highest VAT rates in Europe is certainly adding to pressure on people's incomes.

Donald Tusk is heading into this year's elections with a clear political advantage and faces an opposition that repels large sections of society. However, there is nothing like rising costs and falling living standards to turn political fortunes against a ruling party.

Monday, 11 April 2011

JSW Miners Vote for Strike Action

Miners from Jastrzębskiej Spółce Węglowej (JSW) - the largest coke producing coal company in the EU - have overwhelmingly voted for strike action in a referendum held on 7-8 April.

Over 78% of all the miners took part in the referendum, with more than 95% supporting strike action. The miners are both arguing for a 10% pay-rise and are opposing the proposed privatisation of the company. As I noted in a previous post the sale of JSW is part of the Treasury's current privatisation drive in Poland.

JSW encompasses 6 different mines, employing over 22,600 miners. The mines made a profit of more than 1bn zł last year. The spokesperson for the trade-union at JSW stated: 'Privatisation makes no sense. The state treasury gains large revenue from us through taxes. If the company is privatised then these revenues will decline as the profits can be hidden in different kinds of costs'

The miners at all of JSW's mines will hold a 24-hour strike on 18 April.

Capital Returns to Central-Eastern Europe?

One consequence of the global financial crisis was the flow of capital from the peripheries of the world economy back to its centre. However, there is some evidence that this is beginning to change. How may this impact upon the CEE economies?

The economic crisis most harshly afflicted those countries in CEE, that were most dependent upon an inflow of foreign capital. For example, in the Baltic States, there had been a huge rise in foreign borrowing to support the domestic private sector and consumption following EU entry. This helped to stimulate imports, facilitated by fixed and appreciating exchange rates and by the liberalisation of lending. The drying up of liquidity from 2008 therefore caused these ‘financialised’ economies to fall into a sharp downward spiral. Incredibly, in 2009, GDP fell by over 13% in Estonia and by over 18% in Latvia and Lithuania. Furthermore, unemployment rocketed in the Baltic States - increasing by 12% in just one year in Latvia. This outflow of capital also caused large depreciations in countries with floating currencies. Therefore, between September 2008 and September 2009 the Hungarian Forint lost 20% of its value, while the Polish Zloty devalued by 30%. This situation is especially dangerous in CEE as a large proportion of private loans are taken out in foreign currencies.

Over the past couple of weeks there have been some signs that funds are begining to return to emerging markets. The leading destinations for this capital have been Russia, China and S. Korea. Talking to people who understand these moves, then what seems to be occurring is that money is being borrowed in countries where interest rates are close to zero (e.g. the USA, Britain and Japan) and being invested in countries where these are higher. With little prospect for growth in these centres of the world economy - capital is moving to areas where there is greater growth and interest rates and/or commodity prices are higher.

While in 2009 capital inflows fell by 45% in 8 CEE countries - the Czech Republic, Croatia, Hungary, Poland, Romania, Slovakia, Ukraine and Turkey – they rose by 9% in 2010.The most successful of these economies has been the Czech Republic, whose manufacturing export-orientated industries have benefited from the strong recovery in the German economy. In Hungary inward capital flows have increased, as they have in Poland - particularly in government bonds. It also seems that the uncertainty in weaker eurozone economies has encouraged investors to locate money in CEE.

At a time when private investment is supressed it would seem that this is a welcome development for CEE. Yet, despite the increase in capital inflows to CEE this has not reversed the massive decline in Foreign Direct Investment (FDI) that followed the global financial crisis. FDI fell in Poland from €16.7bn in 2007 to €8.4bn in 2009 and then down to €5.5bn in 2010. The vast majority of the current inflows to CEE are portfolio investments and not direct 'green-field' investments in the region's economy.

FDI in CEE has also often been bound up with privatisations and the domestic economies have faced problems once these sales have dried up. This was the case in Hungary in 1998 when it experienced its first financial crisis after FDI slumped once its major privatisation drive had been completed. Poland faced a budget crisis in 2001, as FDI - mainly connected to privatisations - slumped by 30%. In fact studies have shown that during the transition in CEE there was no positive correlation between FDI and fixed capital investment or economic growth. We may expect to see a formal rise in FDI in Poland over the coming year as the the Polish government attempts to carry through CEE's current largest wave of privatisations (this in fact may be the last of its kind as there is very little left to sell in CEE).

The other problem with such an inflow of capital is that it can leave as quickly as it arrives. Once investment and growth begin to pick up again in the USA and beyond then this capital will quickly shift back to the economic centres. The danger exists for the developing markets that they experience a bubble of 'hot money' (as occurred in CEE prior to 2008), which is then followed by a sharp economic downturn as this flow of capital is reversed. Countries are able to offset this somewhat - as Brazil has done through adding capital controls - but the room for such manouver is limited in CEE, especially for those countries belonging to the eurozone or whose currencies are tied to the euro.

Foreign investors are using their leverage to impose policy measures upon the CEE countries that are not necessarily beneficial to their economies. International investors have been quick to scorn the Hungarian and Polish governments for their sensible (and in Poland's case extremely moderate) pension reforms. Pressure is consistently being applied on countries such as Poland to 'bring its public finances into order' and to comply with policies favoured by international investors and financial institutions.

Investment is good for CEE and needed to help boost growth and development in the region. However, the experience of the past few years has shown that there is world of difference between investment and speculation.

Thursday, 7 April 2011

Beer Cans Not Enough for the Lost Generation

The article reproduced below appeared as part of the Guardian's Polish series and raises some interesting points about Poland's younger generation.

Adam Leszczyński describes how young people reacted to the protests around the raising of a cross outside the President's Palace following the Smoleńsk tragedy. He recounts how young people spontaneously responded - using new social media tools – by organising counter-protests to those 'defending the cross'. Leszczyński notes how this was significant due to the fact that young people have tended to be politically very passive in Poland.

Brought up during a period of market restoration, Polish youth bought into the demands and promises of the new system. They have educated themselves like no other generation in the country's history. However, new Polish capitalism has been unable to offer them the jobs and life-styles that their efforts deserve.

Around 2 million, mainly young, Poles have emigrated since Poland entered the EU - which has created a social safety valve in a country still plagued by very high unemployment and low wages. However, especially without an accompanying policy of encouraging immigration, this is creating large social and cultural problems as the country's population ages and de-skills.

Leszczyński identifies a light of optimism in these protests and hopes that one day this 'lost generation' will return to its homeland and help make Poland 'more liberal and open, a nicer place to live'. One can hope.

However, Leszczyński only focuses on one aspect of Polish life. He shows how young Poles are reacting against the cultural conservatism of a section of society and pushing back against those who want to impose their values upon them. The problem for the young generation goes deeper than this. If today's youth want to claim society for itself and shape it in its own image it needs to create an economy in which it can thrive. It needs jobs which both pay a decent wage and leaves people with some time and energy for other pursuits. It needs housing at an affordable price, a health service that looks after it, education for its children, transport to move it around, etc.

Importantly it has to find a way of bridging the growing cultural divide with the elder generation. The conflicts around the cross outside the President's Palace were an emotionally charged example of this schism that blights society. With two parties from the right dominating politics this generational cultural gap is growing and indeed encouraged. If the younger generation can rise above this and offer a positive vision and practical solutions for the country that all ages can benefit from then it will have been successful. Crosses made out of beer cans will not suffice.

A Very Polish Protest Party (Adam Leszczyński)

Perhaps the most telling symbol of Poland's younger generation – those 20- to 30-year-olds, born during the dark night of General Jaruzelski's martial law in the 1980s – is a Christian cross built from empty beer cans. The history of this cross is complex, long and very Polish. It started when a government plane carrying 96 people – among them the president and political elite – crashed near Smolensk, in Russia.

The catastrophe was a seismic shock for Polish society. A few days later boy scouts, accompanied by followers of the dead president – many supporters of his conservative Law and Justice party – erected a large cross in front of the presidential palace. It was a powerful symbol of mourning; but it was also a reminder of messianic, romantic ideals of Poland as a "Christ of nations" and our history of national suffering under Russian oppression. The national mood had changed. Many who were sharply critical of President Kaczynski before his death now appeared on national television saying he was a great statesman.

The self-proclaimed "defenders of the cross" guarded it 24 hours a day. Conspiracy theories flourished. The "Russkies", some said, conspired with Donald Tusk's government and killed our president! The authorities were clueless; officials hesitated; for days nobody could think of a way to remove the cross. This whole mess was a huge boon for Kaczynski's party and very delegitimising for Tusk's democratically elected government.

Then the unimaginable happened. One night a huge crowd of young people organised through Facebook surrounded the "defenders of the cross". A strange occurrence, but full of joy and jubilation: they mocked this cross and the pope, told rude jokes and laughed at the amazed defenders (though nobody touched them). They then erected their own cross made from beer cans.

This cruel act of parody was completely unprecedented. Young Poles do not usually join demonstrations – few of them vote, and sociologists say that they are apathetic towards politics. Poland is still ruled by the generation of politicians who started their careers fighting communism in the 1980s. This was the first act of protest in years, if not decades, organised by the young rather than for them.

Millions of young Poles now have experience of living and working in the west. Will they come back? And if they do, will they transform the country? The homeland needs them – but also fears and loathes them. And, of course, all the good jobs are already taken

The young generation is puzzling. They are open-minded and self-reliant. (Almost 2 million Poles, most of them young, have emigrated west since 2004, when Poland joined the European Union.) Almost half are graduates. Yet they do not expect much from life. According to a recent poll for Gazeta Wyborcza almost 70% of Poles aged 19- 26 are ready to move out of their native town to get a good job. They are ready to work for – on average – less than €600 a month. One in five of them would accept any job. But the jobs are not there: almost half a million under the age of 26 are unemployed.

In conversation they appear quite conservative. They tell you their most important values are marriage, family and a stable, peaceful life. Most of them are against abortion in principle. But in real life things are very different: almost universally they accept sex before marriage, and contraception; they live together for years before getting married – if they marry at all; and they seem much more tolerant of gay people than the older generation.

A nice house with a garden, an expensive car, a stable corporate job, ample savings and good holidays abroad – this seems to be the limit of their dreams. They don't dream about rebelling and changing the world. They are deeply suspicious of collective action: all solutions to their problems are private. Trying to make it in London or Dublin is the solution chosen most often, because it is so easy. They don't try to change the country – they leave it to rot.

However, in their own country they take exception to those who try to impose their ideas on them: that was the important lesson of the protest in front of the cross.

So far they seem to be, unfortunately, the lost generation. We raised and educated millions at enormous cost and effort. But the country seems to have little need for them: we just made their cheap, educated labour our main export. I still believe they will change the country and, hopefully, make it closer to their values – more liberal and open, a nicer place to live. When they come back. I am still hopeful – but I guess I need to wait

Tuesday, 5 April 2011

Selling the Crown Jewels

The Polish government is speeding up the privatisation process by selling off some of its most prized assets. Under pressure to reduce its deficit the PO adminstration has announced a series of equity sales by the end of the year that should earn the government more than zł15bn.

The largest single asset sale concerns the potential selling off of zł14.5bn worth of government shares in the bank PKO Bank Polski SA (PKO BP). The Polish state owns 40.99% of PKO BP shares outright, with the state-owned Bank Gospodarstwa Krajowego (BGK) holding a 10.24% stake. The Polish treasury has announced that BGK will sell its entire stake, whilst the number of shares being offered by the Ministry will depend on market demand, with the government planning to retain around 25% of the bank's shares. The government is carrying out and planning a series of other high-profile privatisations in 2011. By the end of June it hopes to launch Eastern Europe's biggest IPO this year, through selling the European Union's largest coking coal miner - Jastrzębska Spółka Węglowa (JSW). Last month the Polish government sold an 11.9% stake in the country's second-largest power utility, Tauron Polska Energia SA. The government is also attempting to sell its controlling stake in smaller utilities such as Energa SA and Enea SA and the crude oil refiner Grupa Lotos SA. Between 2008 and 2010 the sale of state assets increased considerably, earning the Treasury around zł33bn. This is below the projected zł40bn planned by the government for 2011 and explains its decision to speed up privatisation so as to make up for the shortfall in its revenue.

Once again the Polish state is selling companies and assets - built during communism - to cover its deficits. This is not a new situation. Privatisation speeded up significantly towards the end of the 1990s, with income from privatisations quadrupling between 1997 and 2000. Income from these privatisations were used to control the country's public finances. However, once the privatisations subsided then the budget deficit, already strained by stagnant economic growth and soaring unemployment, doubled to 4.5% - triggering a crisis that brought down the government. What is particularly worrying about the present privatisation drive is that it concerns large strategic companies that are also increasingly profitable.

During the first 9 months of 2010 JSW earned a net profit of zł741m. Miners from JSW are planning on holding a strike ballot this week - arguing that the company is only being sold to cover the government's budget deficit. PKO BP achieved the best results of the whole recovering banking industry in Poland last year, gaining a profit of zł3,311bn, an increase of 36,1% from 2009. In 2010 the profits of Tauron Polska Energia SA grew to zł859m from zł774 in 2009. In the first 10 months of 2010 Energa SA cleared a profit of zł645m - compared to zł425m for the whole of 2009. In the first 3 quarters of 2010 Enea SA recorded a profit of zł574,4m, compared to zł446,4m during the same period of 2009. Finally, in 2010 Grupa Lotos SA scored a profit of zł770m- 83% greater than in 2009.

While the government seems keen to sell all that it can get its hands on, Polish society is more skeptical. 67% of society (against 18%) believes that the government's large strategic companies should not be privatised. Also, 68% of Poles (against 16%) think that state assets should not be privatised in order to cover the government's budget deficit.

One wonders what will happen when the Polish state eventually manages to sell off all those assets that it inherited from Communism? At the current rate of privatisation we will soon find out the answer.