The Competitive Edge in Central and Eastern Europe

SOFIA BULGARIA - MAY 5: View of the Ivan Vazov National Theatre in Sofia on May 5 2016. Sofia is the largest city and capital of Bulgaria.

Joining the EU has unlocked robust GDP growth and continues to aggregate positive energy in the Central and Eastern European (CEE) countries. Adhering to the common market has brought a surge in trade, positive institutional changes and improvements in the business environment. However for many countries, it has also led to a migration of the labour force, which could affect long-term economic growth prospects. Continue reading The Competitive Edge in Central and Eastern Europe

The Voice of European Business Must Be Heard Loud and Clear by Brexit Negotiators

We are now potentially only weeks away from the triggering of Article 50. This all-important section of the Lisbon Treaty sets out the process by which a member country can leave the EU. No country has ever left the EU before and some experts are predicting a ten-year timeframe to negotiate a new trade deal: In this case, the UK Government has its work cut out for it if it is to complete Brexit negotiations within the two years stipulated by Article 50. Continue reading The Voice of European Business Must Be Heard Loud and Clear by Brexit Negotiators

How Will Poland Approach the Brexit Negotiations?

Brexit means that Poland’s right-wing government is losing its most important EU ally and the opposition warns that the country could end up marginalised on the European periphery. However, the ruling party argues that Warsaw is a leader in debates on the EU’s future and is calling for a re-think of the trajectory of the European project. However, the future status of Poles, living in the UK, could complicate its plans to ensure an amicable Brexit settlement.

Similar goals

Brexit means that Poland is losing a key EU ally. Both countries shared a similar vision of an expanded single market combined with a reluctance to allow the EU more economic policy powers, especially on taxation. They are strongly Atlanticist and viewed the development of EU security and defence policies as complementary to the NATO alliance, rather than an alternative. Poland also saw the UK as a strong supporter of an assertive EU approach towards Russia, fearing that France and Germany were too much in favour of striking up cosy bi-lateral deals with Moscow that side-lined the post-communist states.

Indeed, the current Polish government, which has been led by the right-wing Law and Justice (PiS) party since autumn 2015, viewed Britain as its most important strategic partner within the EU. Law and Justice came to office arguing that Poland needed to move away from the EU strategy that had been pursued by its predecessor, led by the centrist Civic Platform (PO) party. This involved trying to locate Poland within the so-called ‘mainstream’ by presenting the country as a ‘model’ European state at the forefront of integration as well as prioritising the development of close relations with the main EU powers, particularly Germany.

Law and Justice, on the other hand, argued that Poland needed to be more robust and assertive in advancing its national interests and in forming its ‘own stream’ within the EU, for example, by building alliances with central and East European post-communist states in order to counter-balance the influence of the Franco-German axis. It identified Britain’s conservative government, which had a similar anti-federalist approach towards EU integration, as its most significant ally in advancing this project.

Beata Szydło and Theresa May in London in November 2016 (source: kprm.gov.pl)

The British conservatives also defended Law and Justice in its bitter dispute with the European Commission over the membership and function of Poland’s constitutional tribunal. The Commission claims that there is a ‘systemic threat’ to democracy and the rule of law in Poland and is considering making a recommendation to the European Council that sanctions be imposed under Article 7 of the European treaties; in the worst-case scenario suspending Warsaw’s voting rights.

However, Law and Justice both questions the legality of the Commission’s actions and rejects its claims as biased, arguing that the government has simply been trying to restore pluralism and balance to a public institution that was illegally packed with supporters of the previous governing party. It is expected that Britain will join Hungary, and possibly other states, in opposing any attempts to introduce sanctions on Poland, which require unanimity in the Council.

Repairing not dismantling

However, despite its anti-federalism and its commitment to defending Polish sovereignty, the dominant view within Law and Justice is that it is in Poland’s interests to remain in the EU and to try to reform it from within. As Polish foreign minister Witold Waszczykowski put it, in last month’s parliamentary foreign policy debate, the government’s ‘… priority is to repair the European Union, not to dismantle it’. Only fringe political groupings on the radical Eurosceptic right have called for a ‘Polexit’. Although most Poles are critical of attempts to deepen European integration, in a number of areas, the overwhelmingly majority of them support continued EU membership.

More exactly, Law and Justice sees the debate about the future of the EU as precipitated by Brexit; that it is an opportunity for a fundamental re-think of the trajectory of the European project. The party argues that the Brexit vote was a vindication of its critique of the EU political elite who precipitated mounting Euroscepticm by over-centralising and trying to force their vision of a deeper European integration, against the popular will.

Law and Justice is calling for a new European treaty that brings the EU back to its original role as a looser alliance of economically co-operating sovereign nation-states, with a more clearly defined division of rights between the Union and its members and a consensual decision making process that makes it more difficult for any country to gain hegemony. This would involve: weakening the Commission’s bureaucracy, whose role would be restricted to regulating the single market; restoring more decision-making power to national governments and parliaments and reducing the dominant role of the Franco-German axis.

Marginalised on the EU’s periphery?

However, Poland’s main opposition parties, Civic Platform and the smaller liberal ‘Modern’ (Nowoczesna) grouping, have argued that not only is there little appetite for amending the EU treaties but – with the departure of the UK, the largest non-Eurozone economy – the locus of Union decision making is likely to shift to those states that are part of the single currency area. They say that alliances with post-communist states are not an effective counterweight to the Franco-German axis because these encompass too many conflicting interests. They have also criticised Law and Justice for suggesting that Poland will not support the extension of former Civic Platform prime minister Donald Tusk’s mandate when his first term as EU Council President expires in May: this despite the fact that he enjoys widespread backing from European leaders.

Discussion between Theresa May and Jean-Claude Juncker, October 2016 © European Union, 2016 / Source: EC – Audiovisual Service / Photo: Etienne Ansotte

Law and Justice argue that instead of protecting Polish national interests Mr Tusk has used his position as a platform, to criticise the government. The ruling party warns that he could face several investigations relating to his actions as prime minister and, according to some sources, appears to be promoting semi-detached Civic Platform MEP Jacek Saryusz-Wolski as an alternative Polish candidate for the post.

Given Poland’s isolation from the major EU powers under Law and Justice, the opposition argue that there is a real danger that the country will end up alone on the EU’s side-lines. They have, therefore, called upon the government to locate Poland, once again, within European mainstream politics by both complying with the Commission’s ‘rule of law’ recommendations and by re-building the country’s previously close links with the Franco-German axis, especially its strategic partnership with Berlin.

They also propose re-opening the debate on the Polish adoption of the Euro, so that Warsaw is at the heart of a Union that, they argue, will inevitably integrate more closely around its Eurozone hard core. Although it has not ruled out Eurozone accession (which most Poles oppose) in principle, Law and Justice argues that, given the single currency’s huge problems, it cannot envisage any point in the foreseeable future where it would be advantageous for Poland to adopt the Euro.

A pivot towards Germany?

In fact, with the imminent loss of its main EU ally and attempts to build a closer co-operation with other post-communist states proceeding fairly slowly, some commentators have noted a pivot in Poland’s international relations towards a closer co-operation with Berlin. This was exemplified by German Chancellor Angela Merkel’s visit to Poland, in February, and by meetings with government and Law and Justice leaders.

The visit was billed by some as the most important by a German leader since the collapse of communism in 1989, and hailed by government supporters as both an indication that there are no serious problems with Polish-German relations and an important symbol of Poland’s role as a key leader in debates on the EU’s future.

Clearly, relations between the two countries remain strained over a number of issues. For example, Poland has criticised Berlin for failing to oppose the ‘Nord Stream 2’ pipeline that is being built under the Baltic Sea by Russian energy giant Gazprom, to send gas directly to Germany. Warsaw argues that this undermines common European energy policies and is contrary to Mrs Merkel’s attempts to encourage a tough EU stance towards Moscow.

Long-standing disagreements have been supplemented by new ones, over issues such as the European migration crisis, with Law and Justice opposing attempts, championed by Germany, to relocate migrants from North Africa and the Middle East across all EU states including Poland.

However, although the government’s critics argue that one high profile visit does not represent a political breakthrough, the leaders of the two countries do appear to have put contentious issues that could undermine strategic co-operation on the back burner. Law and Justice believes that, for all their policy differences, a Merkel administration is its preferred partner in Germany.

At the same time, the Merkel government appears to have accepted that it will have to deal with Law and Justice, at least until the next Polish parliamentary election in the autumn of 2019. Although Berlin seems to share the Commission’s concerns about Law and Justice’s approach to Poland’s constitutional tribunal crisis, it is also wary of alienating the Polish government at a time when the EU faces an existential crisis.

Migrant rights could limit Warsaw’s room for manoeuvre

In terms of the Brexit negotiations, the Polish government wants the EU to maintain close relations with the UK and is trying to position itself as the leader of those states opposing punitive action against London. The UK is not only an important trading partner for Poland, but more importantly Warsaw wants Britain to remain engaged in the European continent as a military security actor.

Beata Szydło in London in November 2016 (source: kprm.gov.pl)

However, there are a number of issues that could complicate Warsaw’s plans to ensure an amicable separation. One of these is the question of the UK’s contribution to the 2014-20 EU budget. Poland is currently the biggest beneficiary of EU regional funds, which many commentators see as crucial to the country’s economic modernisation. At the same time, given that the UK is one of the largest net contributors, Brexit will almost certainly limit the scale of these fiscal transfers. So the Polish government will need to try and protect this funding, particularly given that this is likely to be last time that Warsaw benefits so substantially from EU aid.

However, perhaps the most important complicating issue is the future status of the UK’s Polish community. The ability to be able to travel and work abroad has been one of the main pillars of support for EU membership in Poland, although it has led to skill shortages in some sectors of the Polish economy.

Britain was one of the few states that gave immediate and relatively unrestricted access to its national labour market to workers from the post-communist states which, like Poland, joined the EU in 2004. As a consequence, the UK has been one of the most popular destinations for Poles seeking work in Western Europe, with an estimated 800-900,000 Polish migrant workers currently living there. However, the ability to regain control over immigration from EU countries was one of the key reasons why British people voted for Brexit in last June’s referendum.

In fact, the Polish government is keen to lure migrant workers back to their homeland so it is likely to accept that there will be restrictions on Poles hoping to access the UK labour market in the future. Rather, it will concentrate on protecting the current status and rights of Polish citizens living in the UK. For its part, the British government has promised to guarantee the status of these Polish (and other EU) citizens as quickly as possible, providing that the rights of British citizens living in other EU countries are also maintained.

However, it is not clear what the ‘cut-off’ date will be for who is to be included in this guarantee, and if it will encompass access to all state benefits. The fate of the Polish community in the UK is of huge domestic political significance as virtually every family in Poland has someone living and working there. So, whatever its aspirations to lead broader debates on the EU’s future, Warsaw has little room for manoeuvre on this issue, making it much trickier for it to play the role of main spokesman for an amicable Brexit settlement.

 

The editorial was originally published in the Polish Politics Blog. (Main photo — source: kprm.gov.pl)

Finalising the DCFTA is Expected to Bring Multiple Benefits to Ukraine

The Deep and Comprehensive Free Trade Area (DCFTA) negotiations between the European Union and Ukraine began in 2018, after the country joined the World Trade Organisation (WTO). Despite having started on the wave of the Orange Revolution of 2003-2004, they were continued, or even accelerated, by President Viktor Yanukovych, who was elected in 2010 and is known for his pro-Russian. Continue reading Finalising the DCFTA is Expected to Bring Multiple Benefits to Ukraine

Will the New Five-day Visa-free Regime Encourage More Visitors to Belarus?

Despite its natural beauty spots and historical sites, Belarus isn’t a top tourist destination. As a matter of fact, it has been one of the least visited countries in Europe. Unfortunately, Belarus remains unknown to both foreign tourists and large-scale international business, primarily because of its visa regime. However, this is expected to change now, as Belarus is striving to overcome this stereotype and 12 February 2017 marks the important day when the visa regime changed. Continue reading Will the New Five-day Visa-free Regime Encourage More Visitors to Belarus?

Prepare for a New Europe

In his autobiographical and excellent overview of culture and society in Europe at the turn of the 19th and 20th centuries, ‘The World of Yesterday’, the Austrian writer Stefan Zweig showed how quickly the categories and concepts that describe the world around us can become obsolete. The lead up to World War I and the 1920s were separated by a mere decade, but when viewed in retrospect, these two decades seem to have little in common. For Zweig, writing in 1940, that entire bygone world was nothing more than an implausible legend. Continue reading Prepare for a New Europe

Will a Two-speed European Union Side-line the Visegrad Four?

During the summit marking the 25th anniversary of the Maastricht Treaty, in December 2016, the president of the European Commission, Jean-Claude Juncker, called for a move forward with a two-speed Europe and also for the creation of a different orbit for those EU Member States who do not wish to take part in all facets of EU integration. If implemented, this approach will have far-reaching consequences for the CEE region, especially for the countries of the Visegrad group (the Czech Republic, Hungary, Poland, and Slovakia), which could effectively be side-lined in a two-speed Europe. Continue reading Will a Two-speed European Union Side-line the Visegrad Four?

Falling into Old Ways in 2017? Ukraine’s Struggle for Functioning Economic Institutions

The turning of the calendar to a new year is a natural point to reappraise the legacy of the year just passed; searching for clues as to what will come and what must be avoided in the future. Such an exercise is particularly useful in the case of Ukraine, which has a large milestone coming up. February 2017 marks three years since (now) former President Yanukovych fled to Russia with large quantities of Ukraine’s treasury, a signature event which also sparked three years of tangible economic reform and political change.  Continue reading Falling into Old Ways in 2017? Ukraine’s Struggle for Functioning Economic Institutions

Breaking With Imitations of the Past

As I look forward into 2017, I see great developmental opportunities for Poland. There is an opportunity for an investment boom whose range and significance will propel the Polish economy into the future, breaking with imitations of the past. We have laid a solid groundwork for fostering sovereign savings and encouraging solidarity in the consumption of growth fruits, whilst improving public finances at the same time. But looking at foreign circumstances, we must remember one thing: today, in the globalisation era, the only certainty is uncertainty. Continue reading Breaking With Imitations of the Past

The EU Is Encouraging Belarus to Join the World Trade Organisation

Belarus is the European Union’s 46th trade partner and its 3rd trading partner among the six Eastern Partnership (EaP) countries. At the same time, the EU is the second trade partner for Belarus after Russia and accounts for above one quarter of its total trade. Interestingly, Belarus has the least stabilised contractual relations with the EU, among the Commonwealth of Independent States, as the bilateral Partnership and Cooperation Agreement that was concluded in 1995, has not been ratified by the EU for political reasons. On top of that, Belarus is not a member of the World Trade Organisation (WTO) yet. Continue reading The EU Is Encouraging Belarus to Join the World Trade Organisation