So Donald Tusk is finally Poland’s prime minister again. It should be a formality that he wins  a confidence vote scheduled later today, on December 11. 

Backed by a majority of 248 votes in the 460-seat Sejm, the Polish parliament’s lower house, Tusk will start the term – his third, after consecutive premierships in 2007-2014 – on a strong footing. 

But as the confidence vote will mark the end of an era, it will also be the beginning of a new one – no less fraught with difficulty, political wrangling, and looming crises.

The times when the economy ultimately decided on election outcomes are long gone. The outgoing government of Law and Justice (PiS) used the many shortcomings of Tusk’s governments to build a winning narrative much bigger than the shortcomings themselves. 

“Poland in ruins,” was the catchphrase with which PiS covered economic inequalities of the time but also the cultural indignity that millions of Poles suffered because of them.

Hand it out

The new government appears to have understood already that the sixth most populous EU member state – with GDP worth nearly PLN 3.1tn in 2022 (nearly $700bn then) – can afford to keep PiS’ welfare state, which a lot of people in, or close to, the new government derided as irresponsible handouts eight years ago.

Tusk’s party, the Civic Coalition, and three parties that make up the new government coalition – the Third Way (itself a coalition of the agrarian party PSL and the centrist Polska 2050) and the Left – made it clear they will continue in the fiscal expansion mode to cut off the oxygen supply to populists.

“We cannot afford not to pay teachers a lot more than they make now,” Tusk said time and again during the election campaign about his plan to give educators a 30% pay rise in the first weeks of the new government.

Still, the promise and others that the incoming government put in the coalition agreement will come to be realised at a difficult time.

Budding recovery

Poland has only begun to emerge out of an economic slowdown brought about by Russia’s war in Ukraine and the energy crisis that followed it. 

The country’s GDP expanded a feeble 0.6% year on year in the third quarter, itself an improvement from a contraction of 0.3% y/y in the preceding three months, effectively ending a short recession in Q1 and Q2. A more pronounced recovery is expected in the final quarter and in 2024.

There is little doubt that the new government will paint the economic revival as its own, a symptom of breaking clean from the PiS era. 

But a real change will take a lot more than just the age-old tactics of taking credit for what one could not have controlled.  While “it seems likely that fiscal policy will remain loose in the near term” pretty much like under PiS, according to an analysis by Capital Economics, the new government will have to address pressing issues that the previous administration neglected or made worse because of its incompetence.

Tusk's five

According to an analysis of the post-election landscape in Poland by ING, the new government’s five key challenges are:

• an overhaul of economic policy from "support focused mainly on consumption to a greater support for investment”. That will include unlocking EU funds from the bloc’s pandemic recovery fund and cohesion funds to support public investments;
• addressing the declining availability of labour from Poland and the rising cost of labour. Poland’s labour force shrank by more than 2mn during the last 15 years, and it is expected to shrink further by almost another million during the next 10 years. Fixing demographics – if at all possible – is a must for labour, pension and emigration policies;
• energy transition, as “Poland is the most exposed in the CEE region to expensive energy, through a highly carbon-intensive mix”, ING said in the analysis. Poland’s wholesale electricity prices belong to the highest in Europe and work is only in the early stages to build a supply of clean energy from nuclear and renewables;
• a new social contract to “stagger additional high spending promises on top of those already contained in the 2024 draft budget with record-high net borrowing needs”, ING  said;
• finally, improving governance and institutions, from assuring an adequate system of checks and balances, transparency in public finances, predictable tax law, to improved governance of state-owned companies. “The restored rule of law is expected by society, but also should unlock EU funds,” ING said.

Watch out for Duda 

Despite all its strengths, the Tusk government is facing an uphill struggle. 

Internally, the new PM will have to manage a diverse coalition ranging from PSL conservatives to the Left, each with their own set of objectives. The new and incresingly popular speaker of the parliament, Szymon Holownia (Polska 2050 party), is widely considered a strong contender in the presidential election in 2025, a plan that will likely clash with the Civic Coalition’s.

External constraints are more daunting. The coalition does not have enough votes to overrule the veto powers of President Andrzej Duda, who is a PiS ally and who said last month that he would use it whenever he considered the new government would try dismantling key achievements of PiS.

PiS also has people planted across key institutions like the public media, prosecution, courts, and – most importantly – in the Constitutional Tribunal.

An effective dismantling of this “deep state” would require legislation that Duda will not veto or ask the tribunal to rule on. Circumventing the president or the tribunal could, in turn, bring about accusations of eroding the rule of law – the same grave charge that Tusk used against PiS.