Wednesday, 21 December 2011

Polish Left at Crossroads

It’s hard to believe that at the beginning of the 1990s Poland was regarded as being the best hope for the left in Central Eastern Europe. It now stands as the country with perhaps the weakest left in Europe and where right-wing ideology and parties dominate. Yet, Poland is a country whose destiny is largely determined by changes occurring in Europe, particularly inside the EU. Therefore, in order for the Polish left to reinvigorate itself, it needs to integrate with and seek to influence the political debates and movements occurring within the wider European left and help promote a common programme for European development.

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Tuesday, 13 December 2011

Bulldogs and Eagles

There’s nothing quite like a good row in Brussels to get the British patriotic juices flowing.

David Cameron returned to Britain’s shores – after vetoing a treaty involving all 27 EU states – like a retuning hero, cheered on by his fervent backbenchers and jingoistic media.

Yet Cameron was not in Brussels representing Britain nor his nation’s concerns. No, he was there to defend the interests of Britain’s financial sector, the City of London. Cameron was primarily concerned with securing the welfare of the very institutions that have contributed more than any other to causing the current crisis.

And he may not even have managed to do this successfully. The fact remains that while the fools in the gallery cheered, Britain has now released it diplomatic nuclear arsenal and is more isolated in Europe than ever before. No compromises were made and no concessions won and it is quite possible that Britain’s separation from the rest of the EU will have negative consequences for its economy. If this was a victory for Britain, then one wonders what a defeat looks like.

There is however much to be opposed to in the new EU treaty. The summit agreed that all national governments would be committed to reducing their structural budget deficits to 0.5% of GDP and that the previous rules requiring budget deficits to be below 3% of GDP will be strengthened. In effect a whole series of new regulations are being introduced – including the EU Commission being given the prior oversight of national budgets – in order to enforce an undemocratic programme of austerity and budget cuts throughout the EU. The real imbalances and deficiencies within the European economies are not being addressed and instead Europe’s citizens are being forced into an ideological straightjacket of cuts (Cameron has of course decided that he prefers his own national variation – how very British). Put simply, if allowed to go ahead, this treaty marks the end of the European Welfare State.

While the British sailed away into splendid isolation, countries such as Poland were doing everything in their power to be included in the new treaty. What Poland feared more than anything else was being left on side-lines of any new agreement, with politicians such as Sarkozy pushing for an agreement that included just the 17 eurozone countries. For over a year now – and particularly during the past six months whilst holding the EU Presidency - Poland has been pushing for a general EU Treaty that included all its member states.

The recent agreement pacifies some of Poland’s fears, but not all of them. Non-eurozone countries have been allowed into the treaty, will probably need to meet the budget requirements that it contains and will be required to pay into the new fund included in the treaty. However, although non-eurozone states will be able to participate in the meetings of the new body, they will not have the right to vote.

It is quite understandable that Poland would not want to be isolated within the EU and that it is seeking to be at the centre of decision making. It is far easier on the peripheries of Europe to see what catastrophe awaits us if the eurozone and EU were to break up. However, the requirements that will be placed upon it, by signing up to this treaty, will potentially have grave negative consequences for the Polish economy.

Since joining the EU – and particularly since the outbreak of the economic crisis – Poland has found itself in a relatively fortunate economic situation. While countries in Southern Europe have seen EU funds dry up, they have also been stuck in a currency union in which they have been unable to devalue their currencies. In contrast, Poland has seen EU funds move eastwards and been able to use these to increase public investment in the economy. At the same time its currency has devalued in relation to the euro, making its exports more competitive. Whilst not rushing into the eurozone, it has also been able to sensibly allow its budget deficit to rise in order to retain public spending and fully utilise the available EU funds.

All this is about to end. As a signature to the treaty Poland will be required to rapidly bring down its deficit. This will help to shrink the economy and will make it harder for the government to continue with its programme of public investment (something it has already indicated it is planning to halt). Also, Poland is likely to now speed up its application to join the eurozone (which is now opposed by around 70% of Polish society), which could see its currency increase in value and therefore decrease its economic competitiveness.

The task of implementing the present EU treaty will meet many obstacles, not least political opposition. However, with the European left unable to offer a coherent alternative for a federal social Europe, we may expect the conservative and nationalist right to take the initiative. In Poland the conservative right has already declared the government’s signing of the treaty to be an act of national betrayal and that the Polish government should follow Britain’s example. On the thirtieth anniversary of the implementation of Martial Law in Poland, the Law and Justice Party is organising a demonstration today that combines a commemoration of this event with accusing the present government of giving away the country’s national sovereignty.

European convergence presently seems to involve yet more austerity and thus a deeper recession. Yet if the European project breaks up, then we will be faced with more economic chaos along with further political division and reaction. These are the options presently on the table and neither look particularly appetising.

Wednesday, 7 December 2011

Public Investment to Fall, Unemployment to Rise

The Polish government has published its revised budget for 2012, which is based upon the premise that economic growth will reach 2.5% next year, down from its previous prediction of 4%. The government also now forecasts that unemployment will increase to 12.3%, whilst earlier it had estimated that it would stand at 10%.

The government hopes that its declared policies of spending cuts and tax rises will help it to meet its aim of bringing the budget deficit to below 3% of GDP and public debt to around 53%. Disturbingly, the government has also announced that public investment - which has so far been the major engine of economic growth in Poland - will be sharply cut next year.

The government estimates that public investment will grow by just 1.5% in 2012. As Poland will be completing its investments for the Euro2012 football championships during the first half of the year, this means that thereafter public investment will be drastically reduced.

This will undoubtedly help instigate an economic slowdown from the second half of 2012, which will have a particularly negative impact on the labour market. Perhaps this is also one of the reasons why the government believes that unemployment will be more than 2% higher than it had previously thought.

Yet Tusk’s administration does not seem to be particularly concerned about this matter and rather accepts it as a fait accompli . While unemployment continues to rise the government has even announced in this budget that the Labour Fund will allocate just ZŁ3.4bn for training and internships. This is half the sum which it spent on this two years ago and less than ZŁ2bn of this will be spent on actually fighting unemployment.

The government has targeted spending cuts and tax rises as a way to bring down its budget deficit and public debt. Although the effects of these policies will not be properly felt until 2013, by reducing public investment and employment spending the government is endangering the country with a sharp economic downturn and a rise in unemployment.

Rather than continuing the economic policies that have been relatively successful in Poland since the outbreak of the economic crisis, the Polish government is bringing the country more into line with the current failed economic orthdoxy that is driving policy throughout the EU. Ironically it is such policies that are likely to actually cause an increase in its debt.

Thursday, 1 December 2011

One Step Forward, Two Steps Back

This week’s speech in Germany by the Polish Foreign Minister Radosław Sikorski, in favour of a Federal Europe, is a significant development in Polish and European politics.

With the Eurozone facing the possibility of collapse, Sikorski urged its strongest economy Germany to act in order to save the currency zone and thus the European Union. In dramatic language he described the huge negative consequences that such a collapse could bring. In order to divert such a development he has called for further EU integration, including the establishment of a common fiscal, immigration and foreign policy. In historically significant language he stated that:
I will probably be the first Polish foreign minister in history to say so, but here it is: I fear German power less than I am beginning to fear German inactivity.

The political response in Poland to Sikorski’s speech has been depressingly predictable. PiS accused Sikorski of betraying and subordinating Poland to Germany and even suggested that the Foreign Minister should be brought before a state tribunal. All this has diverted attention away from the real content of Sikorski’s speech and the vision of the type of EU that he proposes is created. In turn the mainstream left has fully backed Sikorski’s statement, failing to highlight its many negative elements.

There are parts of Sikorski’s speech that can be evaluated positively.

Firstly, Sikorski is one of the first major politicians in Europe to have spoken openly and candidly about the seriousness of the choices facing the EU today. He put the issue straightforwardly: either Europe unites and integrates more or it will break apart. As a representative of the Polish state, Sikorski could remind his audience in Germany of the historical lessons of division and conflict that have occurred in the continent.

Sikorski also addressed some of the myths that are being repeated during the present crisis. In particular, he challenged the idea that the eastern enlargement of the EU is in some way responsible for the Union’s current problems. He counteracted the argument, that is increasingly popular currently in the EU’s richer states, that expansion has only brought them costs and no benefits. Talking about the economic profits enjoyed by the richer EU economies from the opening up of the eastern economies Sikorski noted:

Enlargement has created growth and wealth all over Europe. The EU15 exports to the EU10 countries rose almost twofold in the last ten years. It’s even more striking if you break it down by countries. Britain’s export to the 10 countries that joined after 2004 rose from €2.2 bln in 1993 to €10 bln last year; France’s, from €2.7 bln to €16 bln, Germany’s, wait for this – from €15bln to 95 billion Euros. The total volume of trade between EU15 and EU10 amounted to €222 bln last year, up from €51 bln in 1995. A tidy sum. I guess it sustains a job or two in Old Europe.
The Polish Foreign Minister also reminded about the positive effects of Poland’s entry in the EU and at how it has been the most successful EU economy (in terms of GDP growth) since the outbreak of the crisis.

Furthermore Sikorski warned about the dangers of protectionism and nationalism and argued against the prospect of further integration being confined to a select group of EU countries. Integration inside the EU, he reminded, should include all of the EU27 states.

Yet when we go beyond these general statements of unity against division, we find that the type of new Europe being proposed by Sikorski is highly regressive and that it would in fact deepen the current crisis. Sikorski’s repeats the myth that the major cause of the current crisis is too high public spending and debt. He therefore reasons that the best way to address this issue is for there to be an increased and expanded programme of austerity and spending cuts throughout the EU.

This argument ignores the experience of those countries that have introduced draconian spending cuts inside the EU. These have tended to repress economic growth, increase unemployment and therefore actually inflate public debt and budget deficits. Sikorski has also failed to highlight the reasons for Poland’s recent positive economic growth. This has been achieved by allowing a moderate expansion of public debt and the budget deficit in order to increase public investment and capitalise from the inflow of EU funds. Sikorski would have to look no further than his own backyard to realise that investment and not cuts are the best way forward for the European economy.

In contrast Sikorski has lauded the Polish government’s recent decision to implement its own austerity programme as an example for other EU states to follow:
Next year alone we intend to cut our budget deficit to 3% of GDP and the overall debt to 52% of GDP. By 2015 the deficit will be brought down to 1% of GDP and public debt to 47%. The retirement age will be lifted to 67 years for both genders. Pension privileges for soldiers, policemen and priests will be cut. The disability pension contribution will increase by 2%. Child-benefits will be taken from the rich and given to the poor.
Sikorski continues that the policy of cuts and austerity should be assured through introducing new rules and punishments that would prevent national governments from expanding their spending and debt:
In order to strengthen economic convergence the Commission and the Euro group would get the right to scrutinize in advance all major economic reform plans with potential spill-over effect in the euro area, impose sanctions on countries failing to effect policy recommendations, and permission for groups of countries to synchronize their labour, pensions and social policies. Financial discipline would be strengthened by giving access to rescue funds only to members abiding by macro fiscal rules, by making sanctions automatic and giving the Commission, the Council and the Court of Justice powers to enforce the 3% ceiling on deficit and 60% ceiling on debt. Countries in excess deficit procedure would have to present their national budgets for approval by the Commission. The Commission would get powers to intervene in the policies of countries that could not fulfil their obligations. Countries persistently violating rules would have their voting rights suspended.
These proposals of increased ’fiscal discipline’ are almost the sole basis of Poland’s idea for further European integration. Yet what is even more striking is what Sikorski suggests leaving outside of his new Federal Europe. In probably the most important extract from his speech, Sikorski states:
The more power and legitimacy we give to federal institutions, the more secure member states should feel that certain prerogatives, everything to do with national identity, culture, religion, lifestyle, public morals, and rates of income, corporate and VAT taxes, should forever remain in the purview of states. Our unity can survive different working hours or different family law in different countries.

What this means is clear. Countries would be allowed to maintain regressive policies on such things as the relationship of the Church and State and same sex marriages. The practices of social dumping would also be expanded through allowing some countries to maintain low tax rates and longer working hours. (For an excellent article in Polish on this see here)

Despite this reality the parties now claiming to represent the left in parliament - both the Palikot Movement and Democratic Left Alliance - have almost uncritically given their backing to Sikorski’s speech. This represents an extremely dangerous development in Polish politics, where the two political options being presented to the population are either neoliberal Europeanisation or nationalist conservatism. A good start for the left in challenging this hegemony would be to articulate an alternative vision for a federal democratic, secular and social Europe.