Face of Change
All eyes are on Poland’s government with its leadership changes, new policies and international relationship issues.
With the government on the defensive abroad and on a continued offensive at home, Poland Today talks to four experts from Polityka Insight: Wojciech Szacki, Senior Analyst for Political Affairs; Marek Świerczyński, Senior Analyst for Security Affairs; Adam Czarniak, Chief Economist, and Robert Tomaszewski, Business Analyst, to put the last few weeks in context, and to look ahead at what might come up.
How would you assess the first weeks of Prime Minister Mateusz Morawiecki’s premiership?
Wojciech Szacki: It’s about two months now and I guess he’s doing pretty well – apart from his handling of the so-called ‘Holocaust denial law’ and his inept answer to the question by the Israeli journalist.. He’s accepted by most PIS voters as well as voters of other parties. He’s the second most popular politician after President Andrzej Duda and his ratings are better than (former Prime Minister Beata) Szydło’s ratings, which is a surprise as she was very popular. He got rid of some of the most unpopular ministers like Antoni Macierewicz, Jan Szyszko and Witold Waszczykowski, and replaced them with more moderate politicians. That was of course Jarosław Kaczyński’s decision but most people see Morawiecki as the face of the change.
Why did Kaczyński decide to dismiss some of his most loyal, hard core ministers?
Wojciech Szacki: The ultimate aim is to achieve a full majority at the next parliamentary election in 2019. Getting rid of the most unpopular ministers might help and it didn’t cost Kaczyński much – he didn’t lose any support on the right of his party. PiS voters are still loyal, and they actually won over some voters. Platforma Obywatelska (PO), Nowoczesna and Kukiz (opposition parties) seem to be a bit weaker than before. The second goal of Morawiecki’s government is to fix relations with foreign governments. The results are mixed – it’s a bit better in terms of relations with the EU, perhaps with Germany, but of course it’s not the case with the U.S. and Israel. However, he’s not exactly the one to blame.
But isn’t he the one ultimately responsible? The ‘Holocaust speech law’ issue has blown up massively. The world’s headlines seem to be blaming Poland…
Wojciech Szacki: He’s responsible because he’s the face of the government and he supported the bill after it was adopted. He was also in favour of the President signing the bill. On the other hand it was written at the Ministry of Justice by (Minister of Justice) Zbigniew Ziobro and Patryk Jaki (Secretary of State in the Ministry of Justice). They pressed PiS to adopt this law.
‘It looks like PiS doesn’t have any challenger. The left and centre are both in pieces’
The PiS government looks well set up for the next parliamentary elections – would you agree?
Wojciech Szacki: Right now it looks like PiS doesn’t have any challenger. The left and centre are both in pieces. It’s hard to imagine that something will come from the opposition side. On the other hand we have to wait for the sequence of elections, starting with the local elections in which PiS will not do as well as they do in the national polls – the party has always been weaker in local elections.
You’re quite confident about that?
Wojciech Szacki: PiS will not get 45% of the vote, let alone 50%. It will have around 38% – 40% perhaps. It looks highly unlikely that PiS will win in any of the big cities like Warsaw, Kraków, Gdańsk, Łódź, Wrocław or Poznań.
So you think Warsaw will stay with PO? Of course, there is a change in candidate.
Wojciech Szacki: At present it looks like the PO candidate will win the election for Mayor of Warsaw, but we still have eight months to go.
What about President Andrzej Duda’s prospects and role? There was a hope among opposition-minded people that he would challenge the authority of Jarosław Kaczyńśki.
Wojciech Szacki: There were rumours that he was thinking of starting his own party, but those days are gone. He made peace with Jarosław Kacyński, especially after the dismissal of Antoni Macierewicz from the Ministry of Defence, and he also has more say in foreign affairs after the dismissal of (Minister of Foreign Affairs Witold) Waszczykowski. So he’s more or less happy with the reshuffle of the government. The conflicts he had with PiS politicians have faded away.
Marek Świerczyński: We’ll see what happens with Ziobro, but it’s true that President Duda’s got his prize, which was Macierewicz’s head, and now he seems to be happy with the result. And Mariusz Błasczak (the new Minister of Defence) has eased the tensions. President Duda’s team and the ministry of defence teams have met and established a new task force. One unresolved issue remains General Kraszewski and his clearances (ed. the general’s security clearance was previously removed – it has yet to be re-instated). We thought that would be resolved in January but it didn’t happen, so there might be something there that we previously didn’t know. But otherwise both camps are speaking benign languages about their differences and we’ll see nominations for the posts of generals soon – this is the competence of the President to appoint generals.
What about the recent arrests of prominent businesspeople? Is due legal process behind it, or are they politically motivated? How do you assess it?
Marek Świerczyński: I’m not a specialist in this field, but I have the impression that PiS is just delivering on what they’ve promised for many years, which is that they will take on guys that have made money at the expense of the state and the people.
Adam Czerniak: I’m not an expert on this either, but when I talk to different business people and investors I think that there is no more politization of the judicial system than before, but the emphasis has changed. Before, more emphasis was put on prosecuting anti-semite or nationalistic actions, but right now more stress is put on prosecuting embezzlement or bribery and cases like that. The angle and approach has changed, and this scares business more.
What are the biggest economic challenges facing Poland now?
Adam Czerniak: The biggest challenge is undoubtedly the labour shortage. The shortage will only get bigger and bigger from year to year.
What are the solutions to this?
Adam Czerniak: There are no obvious solutions to this. It’s very difficult to have a solution that is nationwide, or macro-economic, or through policy change, because the solution has to come from the bottom. Different companies have different options. There are labour-intensive businesses that need to find a way to get access to more labour, for example through economic immigration. In that category the state can help through delivering a stable and long-term immigration policy, which is not in place in Poland right now due to the whole refugee discussion with the EU. The government is refraining from having a unified and strong position on immigration policy. And there are other businesses which are more capital-intensive, especially in the manufacturing sector. There it’s a case of having more robots and the mechanization process to replace those labour shortages with higher capital productivity.
So for a country like Poland, increased mechanization is a good thing, not a worrying trend?
Adam Czerniak: I think of Poland as a kind of training ground for companies from western countries trying to deal with labour shortages in the years ahead. Poland can be a training ground for dealing with the problem of employee shortage, in which case it might be of benefit to Poland. We should also see wage increases, possibly similar to those in Hungary and the Czech Republic.
You mention Poland being a training ground for multinational companies. Why is that?
Adam Czerniak: Poland has one of the highest, if not the highest, share in the EU of those with tertiary education entering the labour market right now. However, remember that this is also the kind of labour force that is most in demand. In IT you cannot find specialists in Poland for less money than in the west. The structure of graduate skills in Poland is not really compatible with the structure of what is needed in business. We have plenty of humanists, sociologists, historians and philosophers, which are not really needed in the market. These people need to be trained by companies. That’s something that a lot of entrepreneurs in Poland complain about. Poland needs technicians, and there are not enough of them right now.
The government is trying to do something about this, right?
Adam Czerniak: It is, but the policies are changing very slowly. We have a debate right now over how best to change education. There is a bill proposed by Jarosław Gowin (the Minister of Science and Higher Education) that should tackle some of the problems that academia faces right now, but it’s too little too late. To train someone takes four to five years and the need is now.
Marek Świerczyński: You have to remember that the reputation of vocational education in Poland was all but destroyed over the last 25 years. Nobody wanted to go to that kind of school. Everybody wanted a degree. So in time the reputation of degrees has also declined.
Adam Czerniak: That’s why the area with the highest number of vacancies is the construction sector. The same goes for different manufacturing sectors – they have a hard time finding specialists.
This situation is not only limited to Poland, though, is it?
Adam Czerniak: Of course – it’s a European trend. In Ireland, UK, Germany – that’s why it’s so difficult to find people for construction sites and why there are so many Ukrainians here.
What is the government doing well?
Adam Czerniak: From an economic point of view, I believe the 500+ programme is its biggest achievement. It could be more efficient, but still it has lots of benefits like reducing income inequalities and a strong positive impact on domestic demand. I also think that the housing plus programme is good. Poland needs more housing for rent because only 4% of houses are rented in Poland right now, and almost all of them are rented by private households. So there are few companies involved in renting at the moment, which is a big deficiency as it means that the polish rental market is fragmented, concentrated in large cities and concentrated on the luxury segment of the market. In smaller towns people can’t find a decent place to live for a reasonable price.
A third programme which is important, and something recently announced, is a draft proposal for the occupational pension scheme (PPK), i.e. the 3rd pillar of the pension system. This is like the one proposed by last year’s Noble prize laurate Richard Thaler, whereby you encourage people to save for their pension in a system that is co-financed by the employer. This is a good thing because the saving rate in Poland is very low, much lower than in other EU countries right now. We need to encourage saving in order for there to be financing for domestic investment, and to build up our domestic capital. We are still dependent on foreign capital and we need to change the structure to get away from this dependence. That’s why we need, from a macro-economic perspective, different stimulus to increase the saving rate in Poland. We also need a more reasonable pension plan in order to increase pensions. If there will be no policy change, then in about 20 years’ time the replacement rate will be at about 30%. That’s very low.
Robert Tomaszewski: I would say that the energy policy is pretty successful. They are not fighting against the trends in the market, by which I mean that if you look at the Polish energy policy and try to find the common denominator, it would be decarbonization. When the government started in 2015 they were doing everything to assure miners that coal would remain the foundation of the Polish energy sector, so there was a lot of fear that it would stay like this, but after two years we can see that the Polish energy policy is pretty ambiguous. The government is communicating differently in Poland than in Brussels. In Poland, they are still saying that they are doing everything to save coal but in Brussels they are trying to convince the EU commission that Poland is on the way to decarbonize the energy sector – and it’s happening. The percentage of coal in our energy mix is decreasing. We are building the Balti pipe to Norway. In the next ten years we will increase the use of gas. We have the never-ending debate about the nuclear power plant and I don’t believe it will be built, but they are trying to use the nuclear programme to show that they are thinking about decarbonization. From this point of view there has been some success. They have made some reforms in the mining sector and there are better financial results there. We still don’t have a government energy policy – it was supposed to have been announced by the end of last year – but still I think it’s quite successful.
In terms of energy, the problem of air quality has been in the news. How is Poland tackling it?
Robert Tomaszewski: The government could do more and do it quicker, but the mining sector is still strong and they have to sell coal which is of bad quality. So it’s hard to improve the air quality without killing the mining sector for now.
How significant is the COP24 UN Climate Change Conference in Katowice at the end of the year for Poland?
Robert Tomaszewski: It’s very significant for Poland. It will be an occasion for Morawiecki’s government to tell a tale about the transformation of the energy sector. We still don’t know if the government will take the opportunity. We still remember the last COP in Warsaw in 2013, where the then-government chose to show the strong ties we have with coal. I don’t think they’ll do the same this time, but rather to show how coal can still be used but not in such a dirty way. However we still don’t know who will be the president of COP.
How is the government approaching the 100-year anniversary of Poland re-emerging as an independent country in 1918?
Wojciech Szacki: History is getting more and more important, and PiS is the only party which has a kind of historical agenda. You don’t see this on the PO side or the left. Some people tried, for example (former President) Bronisław Komorowski had this march on the 11th November which attracted hundreds of people whereas at the same time there were tens of thousands of people on the nationalists’ march on the same day. The opposition hasn’t managed to build their own historical agenda. They’ve let PiS hijack all the important dates in Polish history, as well as the most famous Polish politicians from the pre-war time in Józef Piłsudski and Roman Dmowski. Both were quite different people to how PiS is trying to portray them. Dmowski was a far-right nationalist who loved Russia. He didn’t like the catholic church – so he doesn’t fit into a PiS idol, but still he has been adopted by them.
How are PiS portraying him?
Wojciech Szacki: They present him as the one who fought for Polish independence as a diplomat in Paris. This is true, but it’s only one aspect of who he was. They do the same with Józef Piłsudski because what is emphasised is that he was the hero of the independence movement during World War I, but they don’t mention that he was a leftist politician. They take what they want from the biographies of famous Poles and use it. They hijacked the Polish home army tradition as well as the so-called ‘Cursed Soldiers’ after World War II. The liberal part of the political scene doesn’t have an answer for that because they didn’t feel they needed anything like that while they were in power.
But does all this recasting of history resonate with the Polish people?
Wojciech Szacki: Polish people are very proud of their history…
Marek Świerczyński: They are ignorant of Polish history…
Wojciech Szacki: In a poll, 60% of Poles could name historical events which are a source of pride for the Polish people, but only 10% could name an event which was a cause of shame. So when we talk about the recent parliamentary act and relations with Israel and the U.S., many Poles don’t know what it’s all about because they think we were saints during World War II. They constantly hear on public media that Poland is the greatest nation ever, and that millions of Poles saved Jews, and that there were only a couple of Poles who cooperated with the Nazis.
Adam Czerniak: In the field of economics you don’t see too much emphasis on the anniversary, however the government might come up with something concerning state- owned enterprises. There is a lot of emphasis on the importance for Poland of big state-owned companies, and also privately owned companies with domestic capital. It’s roughly the same rhetoric as you had in the 1920s in Poland. So you might see some metaphors on the eve of the anniversary.
Marek Świerczyński: The anniversary in November comes after the local elections in October so we may well see a deterioration in the political climate coinciding with the anniversary. I wouldn’t be very optimistic.
In terms of business, what is on the minds of business people at the moment, what are their concerns?
Adam Czerniak: There’s a difference between large companies and SME’s. SME’s care about changes in the tax system – that’s the biggest thing on their mind. They’re afraid of higher taxes because they see that the social policies do not find enough financing, and they are afraid that in the next two – three years, if there is an economic slowdown, the government will reach into their pockets and increase taxation. They are also worried about red tape and and the whole rhetoric that is accompanying the process of increased tax collection. For the larger enterprises, they are more afraid about changes in the pension system, of lifting the minimum wage threshold for pension contributions which they will need to pay for those with the highest incomes. They are afraid of changes in the stock exchange and what might happen if the government nationalizes a large part of the pension funds offer. There are also concerns about FDI policy, of what will be the approach of the government to companies with foreign capital.
‘Just the rhetoric has now changed. Everything has national overtones’
The government is encouraging Polish companies to go abroad, something you didn’t seem to hear so much about from the previous government. That’s a good thing, isn’t it?
Adam Czerniak: Of course it is, and former governments were also encouraging this. It’s just that the rhetoric has now changed. Everything has national overtones: “Poland is great, Polish companies need to go abroad”. But if you look at SME’s, those who were able to go abroad, they did already. And if you look at big national companies they also went abroad – or tried to go abroad – during the time of the former governments, so I do not see any substantial change in economic policy, only in the rhetoric.
There seems to be massive potential for Polish companies on the international scene.
Adam Czerniak: The potential is huge. We are in the EU, we are in the global value chains, so Polish companies have always engaged in the global market since we entered the EU in 2004, especially in the automotive industry. Plenty of Polish companies deliver parts to big automotive producers present in Poland like Volkswagen, Fiat and Opel, as well as those that are not present here. They already have an established market position. That’s true for other sectors of the economy like chemical production, aluminium production and IT services. SME’s that have the capacity to produce and deliver to foreign markets already do it. Fulfilling the demand from the Polish market was a process that happened from 1989 to 2004, then from 2005 to the financial crisis you had large exports to the EU, then after the crash these companies saw potential in delivering their products outside of the EU because emerging markets were growing much faster than the EU.
Wojciech Szacki: heads Polityka Insight’s political desk. He is responsible for party coverage and maintaining relations with PO and PiS. He also prepares PI’s daily political briefing. He is a Law graduate from the University of Warsaw.
Mateusz Morawiecki has been Prime Minister since January 2018. Previously, he served as the Deputy Prime Minister and Minister of Development and Finance. Born in Wrocław, the Polish politician is also an economist and served as chairman of Bank Zachodni WBK until 2015.
Marek Świerczyński: Senior Analyst for Security Affairs at Polityka Insight, where he’s responsible for the security desk. He has covered defense and international security issues dealt throughout most of his 20-year career in journalism.
Adam Czerniak: Chief economist at Polityka Insight, where he heads the macroeconomic desk and conducts tailored research on wealth, consumers and the housing market. He is also an assistant professor at the Warsaw School of Economics (SGH).
The Family 500+ programme, introduced in 2016, provides families with a monthly payment of 500 zł for every child after the first until the age of 18. The Polish government introduced the benefit programme to encourage fertility and reduce child poverty.
Robert Tomaszewski: as the business analyst at Polityka Insight, he monitors the energy sector. He is a graduate of the University of Warsaw, Northeastern Illinois University in Chicago and Radboud University Nijmegen in the Netherlands.
The Polish small and medium-sized enterprise (SME) sector accounts for 36% of total revenues – about one-fifth less than for large companies, compared to most EU countries, in which the SME sector is larger. Only 4.8% of Polish firms are classified as SMEs – the fifth lowest figure in the EU. (Polityka Insight)