Poland's new govt to repair frayed relations, press on with reform

By bne IntelliNews October 26, 2007

Jan Cienski in Warsaw -

The likeliest outcome of Poland's liberal Civic Platform party taking power following October 21's parliamentary elections is an easing of tensions with the country's European partners and a renewed effort to reform the economy by introducing a flat tax and pursuing privatisations. However, with the outgoing prime minister's twin brother still president, governing won't be easy.

Civic Platform, under its leader Donald Tusk, won 41.5% of the vote, which translates into 209 seats in the 460-member parliament. That is far above the Law and Justice party (PiS), which had governed for the past two years, with 32.1% of the vote and 166 seats in parliament.

PiS lost the election by failing to attract young and urban voters, who turned out in large numbers to vote against PiS and its obsession with fighting corruption with occasionally legally questionable methods. A key event in the campaign was Tusk's victory in a candidates' debate against Jaroslaw Kaczynski, the leader of PiS and the outgoing prime minister.

Tusk, the likely next prime minister, is engaged in coalition talks with the smaller Peasants party, which has 31 places in parliament. The two parties already cooperate in 12 of Poland's 17 regional governments, but they do differ on economic policy, where the Peasants are more left wing than the generally pro-business Civic Platform.

One of the first visible differences of Poland under Tusk's leadership is foreign policy. The PiS government headed by Kaczynski had strained relations with much of the EU and Russia. Poland's closest allies were the euro-sceptical Czech Republic and the US. Ties with Germany were particularly fraught, strained by Kaczynski's historical mistrust of Germany and by Germany's misunderstanding of the importance historical memory plays in much of Poland.

"I'm sure I will be much more effective in dealing with Germany," said Tusk, while underling that he will take a tough line over issues like attempts by some German citizens to seek compensation for property lost when borders were shifted after the war.

Good vibrations

The reaction from European capitals was overwhelmingly positive following the defeat of PiS and the subsequent ousting of Kaczynski as PM. Washington was slightly more cautious, because of concern over the possibility that Poland will pull out the 900 troops currently serving in Iraq and take a harder line in negotiations over hosting elements of the anti-missile shield. "All I'm hearing from Washington is, 'What does it mean for Iraq and the shield?'," said a US diplomat after Tusk's victory.

In an early signal of the new government's line toward Brussels and Washington, Bronislaw Komorowski, likely the future speaker of parliament, said: "We are members of the European Union, not the United States. We want to find ourselves back in the heart of Europe, not its periphery."

Pawel Swieboda, a former foreign ministry official and head of the Demos Europa think-tank, says that Tusk takes over power at a quiet time in Europe, following the conclusion of budget negotiations last year and the acceptance of the reform treaty this year, which will make it easier to patch up relations with the rest of the EU. "Tusk understands the new Europe well," says Swieboda. "But Poland is still going to want to be treated as one of the 'big six' European countries."

In economic policy, the party is promising to move rapidly to free up business from bureaucratic constraints and to begin selling off the more than 1,000 companies still under state control. "Companies not key to the state will be sold completely," says Adam Szejnfeld, Civic Platform's economic policy spokesman and a candidate to be minister of the economy, adding that the process will take four to six years.

The new government will take a close look at the hundreds of PiS loyalists who found jobs in state-controlled companies over the last two years and remove those who are found to be incompetent.

Civic Platform also wants to introduce a flat income and corporate tax of about 15%, reform public finances, and to adopt the euro as soon as possible. Szejnfeld said a possible date for joining the common currency would be 2011 or 2012. "What is most important is to change the budget system to reduce spending," says Szejnfeld.

Those economic policies could cause friction with the Peasants party, which is more sceptical over the merits of rapidly joining the euro and does not favour a flat tax. However, Szejnfeld was sanguine that a compromise will be found.

A larger problem than managing relations within the coalition will be dealing with Poland's president, Lech Kaczynski, the former prime minister's twin brother. Prior to the election, the president warned that he would be making liberal use of his veto powers if the opposition ousted PiS, and after the election Kaczynski disappeared from public view, refusing to congratulate Tusk. The likely coalition of Civic Platform and the Peasants party does not have the 60% of votes in parliament needed to override presidential vetoes, but could do so with the help of the post-Communist Left and Democrats, who have 53 seats.

"Civic Platform is going to have to look for support among other parties," says Janusz Jankowiak, chief economist for the Polish Business Roundtable. "It won't be easy at all."

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Poland's new govt to repair frayed relations, press on with reform

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