Polish Toledo

This blog is associated with www.polishtoledo.com

Saturday, July 31, 2010

Laughing all the way to the Bank

Western Economies are crashing.

But, in Poland Industrial output climbed by 14.5% year-on-year in June 2010, an acceleration compared with the previous month, according to data from the Central Statistical Office (GUS).

The highest growth was noted in manufacturing sector. In the case of the country’s manufacturing sub-sectors, a particularly impressive increase occurred in computer, electronic and optical products, where output almost doubled compared with a year earlier (up by 98.1% y-o-y). Very strong gains were also noted in chemicals and chemical products (35.5% y-o-y), motor vehicles (up by 22.6% y-o-y), and paper products (up by 19.6% y-o-y).

Is it any wonder why Polish jokes have been replace by _________ jokes?

The day Poland had 3 Presidents

On Thursday, July 8 if you asked who is the current President of Poland there were three correct answers depending on what hour of the day you asked the question. Following the April 10 death of president Lech Kaczyński, Bronisław Komorowski, as Marshal of the Sejm (lower house) automatically became the acting president while still maintaining his day job as head of parliament.

When Komorowski gave up the marshal’s job Thursday morning after winning the presidential election, I got an e-mail stating senate speaker Bogdan Borusewicz became acting president. His fifteen minutes of fame lasted for about 10 hours. I got another e-mail declaring lawmakers elected Grzegorz Schetyna as Marshall of the Sejm, making him acting president until Komorowsk’s official inauguration this August.

In comparison, the shortest serving American President was William Henry Harrison from Ohio who served only 31 days. He caught pneumonia giving a two-hour long inauguration speech on a cold and rainy day.

Poland's New President

Election night, visions of Harry Truman holding up a copy of the Chicago Tribune in 1948 with the banner line “Dewey Defeats Truman” flashed through my mind, but the Polish press got it right. On the 4th of July, through the evening and wee early hours of the next morning, it was Komorowski then Kaczyński, then Komorowski then Kaczyński and finally ‘z ostatniej chwili’ STOP THE PRESSES it's KOMOROWSKI 53 to 47 with 55 percent voter turnout.

Reminiscent of our last election, the personalities of the two candidates and the mood of the electorate mattered more than issues. The country seems deeply split, – Hatfieldski’s grip on the west and big cities and the McCoyowicz circling the wagons in the east and villages.

The victory of liberal-conservative Bronislaw Komorowski in Poland’s presidential elections may lead to smoother cooperation between the head of state and the government, but does not provide a cast-iron guarantee the country will forge ahead with fiscal reforms, which had been previously thwarted by former President Lech Kaczyński.

Poland was the only European Union member posting economic growth last year, but many say more needs to be done to plug holes in the state coffers. Like America with Obama having Democrat majorities in both houses of Congress, Komorowski and the Civic Platform Party coalition have a hold on both the Executive and Legislative branches. While America’s deficit spending is irritating increasing amounts of voters, Poland’s anticipated budget cutbacks and financial belt tightening already have some socialist minded Poles checking their shoe leather (like activists in Greece recently did) in preperation of taking it to the street.

Fakt, a Polish news magazine declared in large type on its front page, "Civic Platform, you now have total power, show what you can do - you have a year!" Parlimentary elections are next year and it’s up to Komorowski to follow through on his election promises and to also bring together a nation that has rarely appeared so divided in the twenty years since Solidarity brought about an end to Communist rule.

Komorowski wants to cut social benefits including widespread abuse of the welfare system, a somewhat prized social program remnant from the failed Communist era. Other plans include reforming crippled government run healthcare, quick privatization of the remaining state owned industries, slashing the budget and other economic reforms like adopting the euro to replace the traditional złoty.

These heavy-duty reforms are apt to emulate what was called ‘shock therapy’ from the 1990’s when financial wizard Leszek Balcerowicz implemented the economic transformation program from a socialist state controlled economy to the Polish version of capitalism. While his brilliant results earned him Poland’s highest decoration, the Order of the White Eagle, the makeover was not without a great deal of temporary hurt for average Poles working through a period of hyperinflation and growing pains.

Poles even denied Lech Wałęsa a second presidential term. But, as the saying goes, “no pain, no gain”, and the gains Poland has made are nothing short of extraordinary making it up the ladder to the 18th largest economy in the world.

While some economic reforms are still needed to wipe clean the last vestiges of the old socialist system, it will be like walking a tight rope. A wrong move or slip could be devastating. Too much too soon could cause a backlash, and I’m not particularly confident Komorowski and Prime Minister Tusk have the same good judgment as Balcerowicz in what to do, when, and in what measure.

Conceding a narrow defeat, the Law and Justice Party candidate Jarasław Kaczyński (twin brother of the recently killed President) told supporters his showing boded well for local elections in the autumn and next year's parliamentary elections, which Poland will hold during its rotating European Union presidency.

"Taking into consideration how badly Civic Platform will need a parliamentary election win in 2011 and that Law and Justice concluded a spectacular comeback onto the political scene, the ruling party's motivation to introduce painful and unpopular reforms is low," according to a Morgan Stanley analyst. Going too far with reforms will anger many voters and threaten Civic Platform's current hold on power.

In spite of Civic Platform facing increasing public debt, a public run healthcare system in disarray and an inefficient pension system the IMF is forecasting a 3.1 % growth in GDP this year and 3.5% in 2011 despite Poland’s neighbors and trading partners still predicted to have sluggish, if any growth.

Lately, the złoty has been doing well and changing to the euro currency might not be such a good idea. President of the European Commision, Jose Barroso revealed his frustrations during a recent interview in which he admitted that the euro had acted like a “sleeping pill,” luring some countries to the edge of economic disaster with an “illusion of prosperity.”

There will come a day when it’s time to pay the piper. The Polish people and the new government will decide if a stitch in time will save nine or like other western economies end up down the road sewing many painful sutures into the bleeding arteries of spending run amuck.