Poland survives crisis relatively unscathed

Dur­ing the recent finan­cial cri­sis, sound macro­eco­nom­ic and finan­cial man­age­ment allowed Poland to emerge rel­a­tive­ly unscathed. Indeed, Poland was the only econ­o­my in the EU to reg­is­ter pos­i­tive eco­nom­ic growth in 2009 and expects to reach a growth rate of more than 2 per­cent in 2010. The recent cri­sis has laid bare some trou­bling weak­ness­es in Europe’s insti­tu­tion­al frame­work. As Europe works to reshape its insti­tu­tions now – mak­ing them stronger, more resilient, and bet­ter able to pro­mote bal­anced and sus­tained growth – these weak­ness­es must be repaired. For Poland, after the painful ear­ly years of tran­si­tion, eco­nom­ic growth took off, trade flour­ished, and sta­ble insti­tu­tions took root. Grow­ing eco­nom­ic and finan­cial ties with West­ern Europe accel­er­at­ed this process and boost­ed for­eign invest­ment. All these pro­duced a remark­able rise in liv­ing stan­dards, with incomes begin­ning to con­verge toward West­ern Euro­pean lev­els. This is the most impor­tant devel­op­ment: inte­gra­tion has improved the qual­i­ty of people’s lives. The Pol­ish gov­ern­ment and econ­o­mists are con­vinced that Euro­pean insti­tu­tions and mech­a­nisms were able to pro­vide some cush­ion from the cri­sis.

For mem­bers of the Euro­zone, mon­e­tary inte­gra­tion proved a valu­able safe­guard, pro­vid­ing pro­tec­tion against addi­tion­al dis­tur­bances from desta­bil­is­ing cur­ren­cy gyra­tions. In addi­tion, the Euro­pean Cen­tral Bank (ECB) made emer­gency liq­uid­i­ty facil­i­ties avail­able, extend­ing a finan­cial life­line to banks in the Euro area.

EU struc­tur­al funds helped bol­ster invest­ment in new mem­ber states, includ­ing Poland, and thus sup­port eco­nom­ic growth. Coun­tries out­side the Euro­zone fac­ing exter­nal financ­ing dif­fi­cul­ties could make use of the EU’s bal­ance of pay­ments facil­i­ty. Final­ly, through the Euro­pean Bank Coor­di­na­tion Ini­tia­tive, west­ern par­ent banks agreed to main­tain expo­sures in a num­ber of emerg­ing Euro­pean coun­tries. How­ev­er, it is well seen that what mat­tered more for how Europe’s economies fared dur­ing the cri­sis were domes­tic fac­tors – includ­ing macro­eco­nom­ic fun­da­men­tals, finan­cial sec­tor poli­cies, and polit­i­cal will. Nat­u­ral­ly, giv­en the tremen­dous diver­si­ty in the region, coun­tries in emerg­ing Europe have expe­ri­enced the cri­sis very dif­fer­ent­ly – rang­ing from Poland, which vir­tu­al­ly escaped reces­sion alto­geth­er, to Ukraine, the Baltic States, Roma­nia and Hun­gary – all of which suf­fered severe down­turns. What has made the dif­fer­ence in terms of a country’s response to the cri­sis has been the qual­i­ty of its eco­nom­ic poli­cies and insti­tu­tions. In this regard, Poland stands out. Thanks to strong eco­nom­ic insti­tu­tions and com­mend­able pol­i­cy man­age­ment, Poland has avoid­ed the excess­es seen in many oth­er coun­tries in recent years. And because there was suf­fi­cient fis­cal space to adopt tem­po­rary stim­u­lus mea­sures, the impact of the cri­sis on growth was less­ened. Indeed, as the largest econ­o­my in the region, Poland is lead­ing the eco­nom­ic recov­ery.

At the same time Poland is very inter­est­ed in the rein­force­ment of insti­tu­tion­al and finan­cial tools like the envis­aged estab­lish­ment of a Euro­pean Sys­temic Risk Board and a Euro­pean Sys­tem of Finan­cial Super­vi­sors, increas­ing the EU’s abil­i­ty to mon­i­tor finan­cial sec­tor risks – and hence to pre­vent crises. From the Pol­ish point of view, Europe should also strength­en eco­nom­ic pol­i­cy coor­di­na­tion. Cur­rent­ly, the major pol­i­cy frame­works in Europe – macro­eco­nom­ic, finan­cial, and struc­tur­al – are rel­a­tive­ly inde­pen­dent of one anoth­er. One of the cri­sis’ lessons in Europe is that a sin­gle cur­ren­cy with­out enough eco­nom­ic pol­i­cy coor­di­na­tion may lead to huge imbal­ances. To sus­tain growth over the longer run, com­pet­i­tive­ness must be increased. Reforms that tack­le rigidi­ties in labor and prod­uct mar­kets, as set out in the Europe 2020 Strat­e­gy, should be accel­er­at­ed. In fact, more effec­tive labor mar­kets are allow­ing many emerg­ing Euro­pean economies to recov­er more rapid­ly from the cri­sis and should pro­vide a boost to their com­pet­i­tive­ness for many years to come.

The reports focus on a report­ing peri­od from Decem­ber 2009 until May 2010. This sur­vey was con­duct­ed on the basis of a ques­tion­naire that has been elab­o­rat­ed in March and April 2010. Most of the 31 reports were deliv­ered in May 2010.

The EU-27 Watch No. 9 receives sig­nif­i­cant fund­ing from the Otto Wolff-Foun­da­tion, Cologne, in the frame­work of the ‘Dia­log Europa der Otto Wolff-Stiftung’, and finan­cial sup­port from the Euro­pean Com­mis­sion. The Euro­pean Com­mis­sion is not respon­si­ble for any use that may be made of the infor­ma­tion con­tained there­in.