Thursday, 24 October 2013

Political Uncertainty in the Czech Republic

This weekend's Parliamentary elections in the Czech Republic are taking place in the midst of political uncertainty, as the country's caretaker government has failed to win a vote of confidence in parliament. Below I reproduce an article by Sean Hanley at the LSE's European Politics and Policy blog. 

Czech voters go to the polls in early parliamentary elections on 25-26 October. The elections follow the collapse, amid personal and political scandal, of the centre-right government of Petr Nečas in June, and the subsequent failure of President Zeman’s handpicked caretaker administration to win a vote of confidence.
At one level the election seems set to deliver a simple and straightforward verdict,: established opposition parties on the left will win, while governing right-wing parties will be heavily rejected by an electorate frustrated with austerity, stagnating living standards and sleaze. The main opposition Czech Social Democrats (ČSSD), most polls have suggested, will emerge as the clear winners with around 25-30 per cent of the vote, although the final polls published before voting have suggested that the party’s support was starting to slide. Meanwhile the hardline Communist Party of Bohemia and Moravia (KSČM) is likely to pull in 15-20 per cent.       Read more.......

Tuesday, 22 October 2013

In Defence of Piotr Ikonowicz


Below I have translated a letter written by former prominent Solidarity activists to the President of Poland Bronislaw Komorowski. They are appealing for him to pardon the left-wing activist and former MP Piotr Ikonowicz. Ikonowicz, has been due to start a prison sentence since 14 October for leading a blockade that prevented the eviction of two pensioners from their home over ten years ago.
Dear Mr President,
We are writing to appeal for you to use your constitutional prerogative and pardon Piotr Ikonowicz, who from 14 October is supposed to be taken into prison custody.
We are disturbed that 13 years after blockading the eviction of two pensioners from their home, the organiser of this protest must go to prison. We are also unhappy that this decision was taken by one judge and that the defendant did not have the right to appeal. 

Regardless of our personal assessment of Piotr Ikonowicz’s public activity, we cannot agree to a situation whereby social activists helping the weakest and excluded are sent to prison. It is also noteworthy that the constitutional tribunal has since recognised the eviction of tenants onto the street as being against the constitution. Blockading evictions, for which Piotr Ikonowicz has gone to court, was therefore an act of civil disobedience in defence of the constitution’s values.
Piotr Ikonowicz has already experienced imprisonment after being interned during Martial Law. We cannot be indifferent to the fact that he must once again go to prison in a free Poland. As people who understand the full importance of these words, we would like to believe that the times when social activity brought the risk of imprisonment in Poland have passed.  
Yours Sincerely
Ryszard Bugaj, Władysław Frasyniuk, Ewa Hołuszko, Danuta Kuroń, Barbara Labuda, Ewa Milewicz, Karol Modzelewski, Józef Pinior, Zbigniew i Zofia Romaszewscy

Saturday, 19 October 2013

Winning the Race to the Bottom.

Such were the words of Poland’s Minister of the Economy, after Amazon announced that it would  be moving its operations from Germany to Poland. However, rather than being a sign of Poland’s development it is further  evidence of how it has become one of Europe’s main suppliers of cheap labour and a site for social dumping.
Exploitative working conditions at Amazon in Germany came to light after a TV documentary showed the terrible living and working conditions of seasonal workers (including those from Poland) and how they were being harassed by security guards.
This year hundreds of Amazon workers have gone on strike in Germany, demanding higher wages and benefits in line with German wage agreements. Trade Unions in Germany have been asking that wages start at 12 an hour (up from the 9.30 that amazon were paying) in line with other retail and and catalogue industries in the country.
In response Amazon has announced that it will be moving some of its operations to Poland and the Czech Republic. It plans to open three logistic centres in Poland, employing 6,000 people plus a further 9,000 seasonal workers.
Despite huge numbers of people in Poland becoming increasingly skilled and educated over the past couple of decades, foreign investors are interested in moving to the country simply because it is a source of cheap, exploitable labour. The high unemployment rate, large numbers of people on contract work, low wages, and low level of unionisation make it a perfect location in Europe for companies to increase their profit rates through exploiting labour.
The presence of Amazon in Poland will not even lead to any significant inflow of funds to the government’s budget. Amazon pays most of its taxes through that part of its business that sells products (which are situated out of Poland) and not through its logistic centres. Amazon has in fact built its whole business model around avoiding tax, using its global dominance to exploit international tax loops. For example, over the last three years Amazon has made an estimated £7.5bn in profits through sales in Britain, but has paid no corporation tax as it has transferred the ownership of its main UK based business to a company situated in Luxemburg.
The Polish government is welcoming the creation of cheap exploitative jobs by an international tax evader, whilst claiming that this is evidence of the country’s economic development.

Tuesday, 15 October 2013

The Loser Takes It All

Tourists walking into Warsaw’s Old Town now invariably stop to look at the view across the river and take pictures of the national stadium. It is a symbol of the city’s success, a reminder of last year’s Euro football championships when Poland’s capital showed itself to the world as one of Europe’s growing and thriving cities. The building of a national stadium was the most prominent in a series of large investments made under the Presidency of Hanna Gronkiewicz-Waltz (from Platforma Obywatelska – PO), who has governed Warsaw since 2006.

So how is it that within a year of this tournament finishing, a social movement of Warsaw’s citizens had managed to collect over 230,000 signatures forcing a referendum to remove Gronkiewicz-Waltz from office? And then, how is it possible that at this referendum, which took place last Sunday, the turnout was less than the 29.2% needed for it to be valid? In order to answer these questions we have to place Warsaw in the context of Poland’s general economic slowdown and a political situation where an incompetent opposition is unable to defeat an increasingly weak government.

Gronkiewicz-Waltz was re-elected as President of Warsaw in 2010, alongside most of her contemporaries in Poland’s major cities. These ruling administrations had been boosted by a large inflow of EU funds, allowing them to invest in their cities at a level not seen in decades.  However, from the beginning of 2011, the national government began to pass the burden of deficit reduction onto local governments, through insisting that they balance their income and current expenditures This was  combined with a sharp economic slowdown in 2012 that decreased local government income, forcing them to reduce investments and introduce spending cuts.
Warsaw has not been exempt from this. In last year’s city budget, income fell by 480mln zloty and expenditure was cut by 40mln zloty.  This policy of austerity has included a large decline in investments, that went down from 42.4bln zloty in 2011 to 35.2bln zloty in 2012 (and is predicted to fall below 30bln zloty this year).  

The Warsaw government was not just reducing some excess spending from the boom years, but introducing new austerity easures. These included a significant increase in the cost of public transport, closing some bus lines and continuing the policy of commercialising parts of the health service. The education budget has been cut, with the government announcing at the beginning of this year that it would be closing 21 schools in the city It is also abolishing the maximum limit of children allowed in schools, laying off teachers, combining many classes in schools and nurseries, farming out the preparation of school meals to external private firms and reducing the number of extra lessons and activities given to children in nurseries, including for those with special needs.
These hardships have also brought to light the wastefulness of the Warsaw government. Was it necessary to spend 2bln zloty building a national stadium near the city centre that will cost the government 21mln zloty this year to maintain and where last year’s Madonna concert brought a loss of nearly 5mln zloty. Was it wise to simultaneously invest 500mln zloty on building a second stadium in Warsaw for Legia Warszawa, whilst this national stadium stands empty for the majority of the year.  Also was it really responsible of Gronkiewicz-Waltz to agree to spend 3.5mln zloty on a lavish New Year’s Eve Party in the city or give 300mln zloty to clerks as ‘rewards’ since she came to office? This excess spending is particularly difficult to accept when we consider how she has even failed to begin the process of building a hospital in the southern district of Ursynów (an area with no hospital where 150,000 people live) that she had promised would be completed by 2011.
Gronkiewicz-Waltz was displaying the worst traits of the PO government. Impassive to the realities of life outside her office, she came across as increasingly out of touch and arrogant. It was in these conditions that hundreds of volunteers took to the streets to collect the signatures for a referendum. This campaign focussed on the damaging effects of Gronkiewicz-Waltz’s policies, which resonated with a large section of the capital’s population. The campaign was also not strongly connected to any particular political party, with the most prominent political figure being the Mayor of the district of Ursynow – Piotr Guzial – an independent politician who had once belonged to the Democratic Left Alliance (SLD).  
Whilst this largely grass-roots movement was able to collect the signatures to force the referendum, it could not create a structure necessary to run a successful campaign to oust the President. This void was filled by the main opposition party the Law and Justice Party (PiS).  Rather than continuing the strategy of reaching out to broad layers of Warsaw society, by concentrating on socio-economic matters, PiS did what they always do and focussed on the narrow concerns of their core electorate. Their campaign scandalously made reference to the Warsaw Uprising; as if an armed uprising against Nazi occupation in which 200,000 people lost their lives could be compared to a referendum where less than a third of the people can be bothered to vote. The campaign became a tired repeat of the familiar battle between the two parties of the right in Poland; and with PO calling for a boycott of the election, the vast majority of the electorate decided to take no part.
PO has made an art out of remaining in power by simply not being PiS. And PiS seem determined to make it as easy as possible for them to continue doing this. It maybe hard to mobilise people to continue voting for PO, but it was not too difficult to persuade them to simply not vote at all. In the run up to the referendum money was suddenly found to push ahead with previously stalled investments such as the ring-road and halt the price rises on public transport. Gronkiewicz-Waltz even deemed the situation serious enough to step outside her office and smile at the masses.  

The other significant factor contributing to the survival of Gronkiewicz-Waltz was the role played by the left. After some deliberation, the SLD announced that it would not be encouraging its supporters to participate in the referendum. Only 7% of those of those who had voted for the SLD in the last elections took part in the referendum, helping to keep the turnout low. Janusz Palikot’s new reformed party (Your Movement) was unable to convince its voters that they should help PiS defeat PO. Also other parts of the left (Krytyka Politiczna, the Greens and individuals such as Ryszard Kalisz) could not mobilise sufficient numbers to influence the referendum.  
Despite having its own peculiarities, the referendum was a microcosm of current national politics in Poland. The economic slowdown is causing a decline in living standards for large sections of society. Neo-liberal policies are worsening essential public services such as health and education upon which millions of people rely. Yet the dissatisfaction felt towards the government is not finding a positive political expression. In the next local (2014) and national (2015) elections a low turnout may help PiS to increase its share of the vote. But PiS has proved itself incapable of expanding its support and offering a positive programme for the country’s development. PO and PiS behave like two participants in a beauty contest claiming the other is the most ugly.  
The Warsaw referendum has also shown how there is, as yet, no serious alternative to the left of the SLD. Under the leadership of Leszek Miller every move is carefully calculated with pragmatic precision. The decision of the SLD not to participate in the referendum can be interpreted in two ways. Some on the left claim that it shows how the ambitions of the SLD extend no further than entering into a future coalition with PO. By helping to save Gronkiewicz-Waltz the party has increased its political capital and it will be better able to negotiate positions in future governments at a local and national level. Like PO and PiS they are unable to win support beyond their core voters and can only consolidate the 10% or so of the vote that they continue to hold.
Although this view holds some validity, it does not tell the whole story. The SLD placed a number of demands upon Gronkiewicz-Waltz after deciding to abstain in the referendum. These included such things as securing the interests of tenants in reprivatised buildings; halting the commercialisation of the health service; repairing the education system through reducing class sizes, stopping the closing of schools, restricting the firing of teachers and increasing support staff; reducing inequalities in development between city districts and refunding in-vitro treatment from the city budget. If the SLD is serious about these policies then any future coalition with PO is excluded. The challenge for the left (in all its forms) is whether it can create a broad coalition that can give positive expression to the frustrations and needs of society.
Despite over 90% of those who turned out on Sunday voting to remove her from office, Gronkiewicz-Waltz will remain President of Warsaw for at least another year. For now the loser has taken all.

Sunday, 6 October 2013

Falling Public Investment Depresses Growth

We can all now breathe a sigh of relief. Donald Tusk has declared that the crisis in Europe is over, with Poland managing to survive this period of economic turbulence relatively unscathed. 

It is easy to dismiss such proclamations as wishful thinking. After all, the Eurozone economy  only left its longest ever recession in the second quarter of this year by growing at a meager 0.3%. Unemployment in the Eurozone stands at a record position of over 12% and youth unemployment has reached almost unsustainable levels in countries such as Spain where over a half of all young people are without a job. The austerity programmes imposed by the troika in countries such as Greece continue to drive down living standards and destroy public services. 

In Poland, the slowdown in economic growth was halted in the second quarter of this year, but its rise of 0.8% is still significantly below the level necessary to improve living standards and create jobs. Unemployment remains above 13%, real wages are depressed and huge sections of the workforce are employed on insecure, temporary contracts. Throw in the worsening state of many public services and things do not look quite as positive as the government may have us believe. 

Yet some of the declarations of the government have merit. It is indeed noteworthy that the Polish economy grew on average by 3.5% between 2008 and 2012, without which the living standards of the population would be significantly worse. The question is what caused this growth, why has it slowed down and how is it possible to increase economic growth and improve living standards?  

Poland enjoyed a unique combination of factors that helped it to avoid an economic crisis similar to that suffered in many other European countries. Relatively well-regulated banks, low personnel debt and non-membership of the Eurozone all helped the Polish economy. However, the primary factor that drove economic growth was the increase in government spending, particularly a rise in public investment. 

Whilst a range governments were introducing austerity programmes in Europe, government expenditures in Poland rose from €15.1billion at the beginning of 2008 to €16.5billion in the first quarter of 2012. The most important part of this was a significant growth in public investment, that increased from 4.2% of GDP in 2007 to 5.7% in 2012, leaving Poland with the highest level of public investment, as a share of GDP, in the whole of the EU. 

This surge in public investment was made possible by the €67bn in EU cohesion and structural funds made available to Poland from the 2007-13 EU budget, that were added to by significant government money. The impetus for investment came through preparing for Euro2012, with a  total of 26bn dollars spent on infrastructural projects such as stadiums and roads, which was more than the total spent by the British government on the London Olympics. 

Just as the major factor behind Poland’s economic growth was an increase in public investment, so the slowdown has been due to its subsequent fall. Between 2011 and 2012 public investment shrank from 5.7% to 4.6% of GDP. This decline looks set to continue, with investments in roads set to reach around 15bn złoty in 2013, down from 18bn in 2012 and 23.6bn zloty in 2011. Financial pressures are leading to local governments  reducing their investments to 36bn złoty in 2013, down from 40bn 2012 and 41.2bn in 2011. 

This decline in public investment has primarily been caused by the ending of  funds coming into Poland through the EU’s present budget and the tightening of government spending as public debt edges towards its self-imposed limit of 55% of GDP. This fall in public investment has not been made up for by a rise in private investment, as the profit levels of private companies were over 13% lower in the first quarter of 2013 compared to a year earlier. The government has failed to make up for this shortfall despite its announcement a year ago that it would be creating a new investment fund (Inwestycje Polskie) that was supposed to have instigated a new series of infrastructural investments.  So far its seems to have done little more than create a logo and a Facebook page that has 32 ‘likes’.

Nevertheless, there is some light at the end of the tunnel. Firstly, although for the first time in its history the next EU budget (2014-21) will be reduced in size, Poland will actually receive more money from this budget than from the previous one. Overall, it will have access to around €500bn from the next EU budget, which will equal around €1,890 per head, €82 more than that received out of the 2007-13 budget. Secondly, the recent decision of the Polish government to at least partially abolish the compulsory private pension fund (OFE), will lead to a reduction in public debt by around 8% of GDP. This will provide increased fiscal room for the Polish government to increase its rate of investment. 

The hope of Citizens' Platform is undoubtedly that it can use these opportunities to improve the Polish economy before the next election and return to power for a third time. It would be foolish to rule out this scenario, however a number of factors stand in the way of this strategy being successful. The EU funds will only start to flow into Poland from 2015 and if the government is unable to start its own investment projects earlier then economic growth will remain depressed for at least the next year.  Also, although the reform of OFE will reduce budgetary pressures, the Polish government is still committed to bringing down its budget deficit. Fiscal discipline has been asserted most strongly upon local governments, many of which are suffering large deficits partly due to unwise investments made in recent years (not least on unsustainable stadiums). Finally, the priorities for investments funded by money from the EU’s next budget have altered. The structural and cohesion funds from the 2007-13 budget were focused upon infrastructural projects. However, the forthcoming budget is prioritising raising innovation in order to support private business. It remains to be seen whether funds from this budget will have the same effect of increasing the rate of investment that is needed to boost economic growth.

The left does not need to repeat the fallacies of the ‘Green Island’ made by Tusk and Rostowski in order to welcome the fact that Poland has not entered a recession throughout the economic crisis. Rather the left should be repeating the message that increased government spending and public investment during this time of economic crisis is necessary and effective. However, the priorities of the government investing in such things as stadiums, roads and (increasingly) the military are not ones that the left should support. Despite the growth of the past few years large sections of society have seen their living standards deteriorate. A new wave of public investment is needed but one that includes sustainable economic, social and green investments primarily designed to create jobs and develop essential public services such as health, education and transport.