Thursday, December 04, 2008


The tough go politicking

Dec 4th 2008


Poland’s lightweight government is facing its first serious challenge

IT IS more an election campaign than a government. Since he won power a year ago, Poland’s prime minister, Donald Tusk, has seemed less interested in ruling the country than in preparing for the presidential election in 2010. That is when he hopes to defeat Lech Kaczynski, whose twin brother Jaroslaw was prime minister before Mr Tusk. President Kaczynski delights in vetoing government laws and elbowing Mr Tusk aside at international meetings. So long as Poland was booming, Mr Tusk’s approach may have been sensible enough. With too small a majority in parliament to overturn the president’s veto, pushing potentially unpopular reforms has seemed pointless. So it may have appeared wiser to concentrate on highlighting the contrast between the presentable, football-loving Mr Tusk and the gaffe-prone, conspiracy-loving Kaczynskis.

The world’s economic crisis is now forcing a change of gear. Poland has not been badly affected so far. But it faces a sharp slowdown in growth, to a (probably optimistic) government forecast rate of 3.7% next year. Polish companies complain that banks, mainly foreign-owned, are raising charges punitively on short-term loans. As credit dries up, job losses are rocketing.

The government launched a new stimulus programme this week, supposedly worth 91 billion zlotys ($31 billion) and featuring loan guarantees and infrastructure spending. The packaging was good, but much of the content was a rehash of old promises. The government’s aim seems to be to keep fiscal policy tight so that the central bank can cut interest rates. That may help Poland get into the euro. Mr Tusk surprised many recently when he said this might happen as soon as 2012.

After years when soaring tax revenues disguised the inefficiency of much public spending, budget discipline is both unfamiliar and unwelcome. A plan to raise 12 billion zlotys next year from privatisation looks ambitious in the current climate. This highlights the chances missed by the previous government, which largely halted sales of sprawling state holdings that take in news-stands and furniture factories, as well as some big firms.

To keep spending down, Mr Tusk will rely heavily on his peppery finance minister, Jacek Rostowski, a British-born economics professor. He has steered through a tax reform (conceived by the previous government) that has flattened rates and simplified some of the most frustrating rules (such as the requirement that all records be kept on paper). The government has also tried to reform lax early-retirement rules. Michal Boni, Mr Tusk’s economic adviser, says the plan is to make social spending more efficient and cut paperwork that slows construction of roads and so on. But such changes risk both a presidential veto and opposition from vocal trade unions.

It all looks daunting. But Poland’s government is probably the least feeble in eastern Europe. It does not have to cope with either a collapsing property bubble or a highly leveraged financial system. Its biggest flaw is probably going easy on corruption, which the Kaczynskis tackled with wild (but often counterproductive) zeal. The uklad—Polish shorthand for the stew of ex-spooks, officials and tycoons who some believe still wield the real power in the land—may be relaxing. But all Poles are facing the economic downturn with increasing nervousness.

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