EUROPEAN PARLIAMENT
DIRECTORATE-GENERAL FOR RESEARCH
DIRECTORATE A
DIVISION FOR INTERNATIONAL AND CONSTITUTIONAL AFFAIRS
RFM/mtb
Brussels, 12 March 2003
INFORMATION NOTE
on
POLAND'S POLITICAL AND ECONOMIC
SITUATION AND ITS RELATIONS WITH THE
EUROPEAN UNION
This note has been prepared for the Members of the European Parliament. The opinions
expressed in this document are the author's and do not necessarily reflect the position of the
European Parliament.
WIP/2003/01/0041-42
CONTENTS
SUMMARY OF LATEST DEVELOPMENTS ................................................................ 4
1.
POLITICAL SITUATION .............................................................................................................................. 4
1.1. INTRODUCTION ............................................................................................................................................... 4
1.2. INSTITUTIONS ................................................................................................................................................. 4
1.3. CURRENT ISSUES AND RECENT DEVELOPMENTS.............................................................................................. 5
1.3.1. The collapse of the coalition government ............................................................................................. 5
1.3.2. The 2002 local elections and the party political landscape ................................................................. 6
1.3.3. Other recent developments ................................................................................................................... 7
1.3.4. External relations ................................................................................................................................. 7
2.
ECONOMIC SITUATION .............................................................................................................................. 9
SUMMARY ....................................................................................................................... 9
2.1. ECONOMIC PERFORMANCE AND OUTLOOK...................................................................................................... 9
2.1.1. GDP growth ......................................................................................................................................... 9
2.1.2. Prices and wages................................................................................................................................ 10
2.1.3. Employment ........................................................................................................................................ 10
2.1.4. External sector ................................................................................................................................... 10
2.2. ECONOMIC POLICY ....................................................................................................................................... 11
2.2.1. Policy background and framework ................................................................................................... 11
2.2.2. Fiscal policy ....................................................................................................................................... 12
2.2.3. Monetary and exchange rate policy ................................................................................................... 13
2.2.4. Privatisation and inward investment .................................................................................................. 13
3.
RELATIONS WITH THE EUROPEAN UNION ....................................................................................... 15
3.1. INTRODUCTION ............................................................................................................................................. 15
3.2. THE EU INSTITUTIONS' APPROACH TO ENLARGEMENT .................................................................................. 15
3.2.1. European Commission ....................................................................................................................... 15
3.2.2. European Parliament ......................................................................................................................... 16
3.2.3. The Council and the European Council ............................................................................................ 17
3.3. ACCESSION NEGOTIATIONS WITH POLAND .................................................................................................. 18
3.4. THE CONVENTION ON THE FUTURE OF EUROPE ............................................................................................ 19
3.5. PRE-ACCESSION ASSISTANCE AND THE ASSOCIATION AGREEMENT .............................................................. 19
3.5.1. Pre-accession aid ............................................................................................................................... 19
3.5.2. Association Agreement ....................................................................................................................... 20
ANNEX 1 PRESIDENT, GOVERNMENT, PARLIAMENT & CENTRAL BANK ......................................... 21
ANNEX 2 (RESULTS OF THE GENERAL ELECTION (23 SEPTEMBER 2001)) ........................................ 22
ANNEX 4 (COUNTRY FORECAST) .................................................................................................................... 24
ANNEX 5 (TRADE UE/POLAND) ........................................................................................................................ 25
ANNEX 6 (TRADE EU/POLAND BY MEMBER STATES) .............................................................................. 26
ANNEX 7 (TRADE RELATIONS EU/POLAND) ................................................................................................ 27
ANNEX 8 (EXTERNAL TRADE OF POLAND) ................................................................................................. 28
ANNEX 9 (BASIC STATISTICS FOR C.COUNTRIES) .................................................................................... 29
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2
For further information contact:
Frank McAvoy,
European Parliament, Directorate-General for Research
1047 Brussels
e-mail: fmcavoy@europarl.eu.int
Tel. 0032 2 2842130
General sources: Economist Intelligence Unit,
ISI Emerging Markets,
Oxford Analytica
Financial Times,
European Commission,
European Parliament,
Warsaw Voice.
WIP/2003/01/0041-42
3
SUMMARY OF LATEST DEVELOPMENTS
Poland completed its EU accession negotiations at the Copenhagen summit in December 2002. It is now
set to becomber a Member state along with nine other countries on 1 May 2004. The Accession Treaty is
due to be signed in Athens on 16 April 2003, once the European Parliament has given its assent on 9
April. The referendum on membership will take place in June 2003. If the minimum turnout of 50% of
the electorate is note reached a two-thirds vote of the accession terms will be needed in parliament.
The ruling coalition of the SLD-UP and PSL collapsed at the beginning of May 2003 when the Prime
Minister expelled the PSL members of his government following a parliamentary vote in which the PSL
members supported the opposition to defeat a government bill on road taxes. The SLD-UP is likely to
govern with a minority administration and seek support for legislation on an ad hoc basis, rather than
seeking another coalition partner.
Poland, along with the Czech Republic, Hungary and five EU Member States, signed an open letter at the
end of January 2003 expressing solidarity with the US position on Iraq. Poland supports the attempts to
resolve the crisis peacefully through the UN but has not indicated whether it would support a military
operation without a Security Council mandate. Poland, along with the twelve other candidate states,
endorsed the common stance on Iraq agreed by EU leaders at the special summit on 17 February 2003.
The economy showed signs of recovery in the second half of 2002, with stronger growth likely in 2003,
although unemployment has continued to rise. Fiscal policy also remains an area of great concern. The
government is due to present proposals for reforming public spending and taxation in the course of 2003.
1. POLITICAL SITUATION
1.1.
INTRODUCTION
Poland is the largest and most populous (38.7 m inhabitants) of the EU candidate countries. The Polish
state is over 1000 years old. After ceasing to exist as a state for 123 years following its partition at the
end of the 18th century, the country regained independence in 1918 but was overrun, first by Germany
and then by the Soviet Union in World War II, achieving its independence once again within the Soviet
sphere of influence and new borders after the war. Labour turmoil in the 1980s led to the formation of
the independent 'Solidarity' trade union that, over time, became a political force and, by 1990, had swept
to victory in parliamentary and presidential elections. Complete independence came in 1991. Throughout
the 1990s, the Polish political scene was dominated by two broad forces: one centred on a fragmenting
Solidarity grouping and the other on a well-organised and disciplined post-communist movement. The
2001 election results marked a major break with this trend, for although the socialists emerged as the
largest party, populist parties also made significant gains and the parties of the outgoing centre-right
government failed to secure any seats in the lower house.
1.2.
INSTITUTIONS
The transition to democracy, initiated after the 'Round Table' negotiations in 1989 and the elections of
June the same year, has continued steadily in the intervening years and this has done much to support the
view that Poland fulfils the political criteria laid down by EU leaders at Copenhagen and that its
institutions are functioning properly. The constitution of 17 October 1997 has created greater
transparency as regards the functioning of the State, the division of power between State bodies and the
rights and obligations of its citizens. It provides for a bicameral legislature, consisting of the 460
member Sejm (lower house) and 100 member Senat (upper house), elected for a four-year term. A
proportional system governs elections to the Sejm, with a first-past-the-post system for the Senate.
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Members of the Council of Ministers (Cabinet) are nominated by the Prime Minister (currently Leszek
Miller - appointed October 2001) and must be endorsed by parliament.
The President, elected for a maximum of two five-year terms, is head of state and supreme commander
of the armed forces (current President, Aleksander Kwasniewski - elected October 2000). He can
dissolve parliament in certain circumstances e.g. if the Sejm fails to agree a state budget within four
months of its first reading. The President can also veto parliamentary legislation, although the veto can
be overturned by a three-fifths majority.
The judiciary is a separate and independent power under the constitution. The Supreme Court exercises
supervision over a system of common and military courts. It acts as ultimate instance of appeal and
interprets legal provisions. There is also a Constitutional Tribunal and a Supreme Administrative Court.
The reform of local government, started in January 1999, reduced the number of regions (voivodships)
from 49 to 16. The changes have resulted in the reorganisation and decentralisation both of public
authorities and public finances, as the regions are now responsible for their own development and for
implementing regional economic policies, which will help them become more effective after accession.
The regions therefore now have an elected council (sejmik), presided by a Marshal, and a representative
of central government, the voivod, who is responsible for ensuring that State services operate properly.
The sejmik is responsible for regional economic development, universities and colleges, specialised
hospitals, key cultural facilities (museums, theatres, etc.), and regional roads. The voivod, a sort of
governor with a deliberately political profile, is responsible for ensuring the legality of local authority
acts.
The reform also instituted an additional tier of government between the region and the municipality
(gmina), namely the district (powiat), which is responsible for secondary schools, hospitals, action to
combat unemployment, inter-urban roads, etc. There are 373 districts. The municipalities, of which there
are 2 489, were instituted in the early 1990s. They have had their powers confirmed with regard to
public registers, roads, cemeteries and public transport. They are also now responsible for financing and
supervising local medical dispensaries and primary schools. Aid from the State budget is provided to
cover these new costs.
Church and State relations have sometimes been volatile. In 1998, a concordat (church-state
agreement) drawn up in 1993 was ratified by the Sejm.
1.3.
1.3.1.
CURRENT ISSUES AND RECENT DEVELOPMENTS
THE COLLAPSE OF THE COALITION GOVERNMENT
The coalition government formed in October 2001 by the Democratic Left Alliance - Labour Union
(SLD-UP) and Polish Peasants' Party (PSL) collapsed at the beginning of March 2003 when the PSL
ministers were expelled. It held two ministerial portfolios, agriculture and environment, as well as eight
deputy posts. The SLD-UP will continue with a minority administration. The immediate cause of the
collapse was a vote in parliament a few days before in which the PSL helped the opposition to vote down
a road tax bill. The Prime Minister, Leszek Miller failed to obtain the assurances he requested from the
PSL as to its support for government policies and a last-minute meeting to resolve differences failed,
despite the personal wish of PSL leader Jaroslaw Kalinowski to maintain the coalition.
The alliance has been an uneasy one since the beginning, and the end of the coalition has been greeted
almost with relief by some on both sides. Recent frictions concerned the PSL-sponsored law on bio-fuels
and its demands for increased food market intervention. The PSL has felt increasingly that it gained little
in return for its support for the SLD's policies. The PSL's fairly successful performance in the recent
local elections (see section 1.3.2) has bolstered its confidence, while the recent demonstrations by
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5
farmers and other discontented groups supported by its radical rival for the rural vote, Samoobrona,
offered it little incentive to continue in government.
The SLD-UP minority government now holds 212 seats out of 460 in the Sejm. Support from splinter
groups within parliament may bring it a further 12 votes but it will be obliged to muster ad hoc support
on most issues. However, the government is unlikely to be unseated in the short term, as this would
require a constructive vote of no confidence, a majority for which is unlikely to be found in the current
composition of parliament.
Three major issues will dominate the government's agenda over the coming months: the EU referendum,
economic recovery and reform of public finances. Fears that the collapse of the coalition would seriously
compromise the EU referendum result appear to be largely unfounded. The PSL is unlikely to urge
farmers to vote against an agreement with which it was so closely involved. Its leader, Mr Kalinowski,
has already said that his party will not attempt to block membership, although this does not necessarily
mean that it will campaign in favour and it has asked for guarantees on certain issues of concern to
farmers. However, their is still concern that the referendum could become a focus of protest for
discontented rural voters and other discontented groups such as health service and railway workers.
The reform of public finances will be debated over the coming months following the announcement by
the Finance Minister, Grzegorz Kolodko, of his outline plan. While discussions within the government
on the difficult options may be made easier by the departure of the PSL, the parliamentary hurdles
remain, although the government is likely to be to count on the support of the liberal Civic Platform (PO)
with its 57 members on the EU referendum and fiscal reform issues.
Among the opposition parties, the Law and Justice (PiS - 43 seats) and League of Polish Families (LPR 28 seats) have demanded the dissolution of parliament and early elections - elections are normally due
only in 2005. Although the government has ruled this out, the LPR in particular has indicated it will step
up its opposition and has began collecting signatures for a motion to dissolve parliament. The radical
Samoobrona movement (40 seats) has always given the government a difficult time inside and outside
parliament and both it and the LPR did well in the recent local elections (see section 1.3.2).
1.3.2.
THE 2002 LOCAL ELECTIONS AND THE PARTY POLITICAL LANDSCAPE
The local elections held in October - November 2002 provided an indication of the degree of popular
disillusion with most of the mainstream parties, even though they cannot be taken as a pointer as to how
Poles would vote in a parliamentary election. Coming almost exactly a year after the formation of the
SLD-UP/ PSL coalition government, the results were particularly disappointing for the major partner, the
Democratic Left Alliance-Labour Union (SLD-UP). Although it emerged as the largest party in terms of
votes and seats, its share of the vote at 24.5% was well down on the 41% it scored in the 2001 general
election. The SLD's coalition partner, the Polish Peasants' Party (PSL), fared somewhat better on the
higher turnout in rural areas, winning 11% of votes compared with 9% in the parliamentary elections.
The main beneficiaries of voter discontent were once again the radical Samoobrona (Self-Defence),
which won 16% (10.2% in the parliamentary elections), and right-wing League of Polish Families
(LPR), which won 14.5% (7.9% in the parliamentary elections).
The centre-right Civic Platform (PO) and Law and Justice (PiS) parties ran a joint campaign in most
areas and won 16.5% compared with 22.2% in the parliamentary elections. In Warsaw, where the PO and
PiS did not run jointly, the PiS candidate Lech Kaczynski came defeated his PO rival, Andrzej
Olechowski, and went on to win the second round run-off against the SLD candidate, Marek Balicki. Mr
Kaczynski is seen as one of the front runners among potential centre-right candidates for the 2005
presidential election. The centrist Freedom Union and the various parties which had made up the
Solidarity Alliance all fared poorly in the local elections.
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The election campaign was overshadowed by the disturbances in the Sejm provoked by opposition MPs
from the LPR and Samoobrona, which led the Speaker to suspend parliamentary sittings until after the
local elections. The protests had been triggered initially by disapproval of the government's decision to
sell 85% of the shares in the Warsaw electricity producer STOEN to the German group RWE. Both LPR
and Samoobrona subsequently called for the dismissal of the Speaker of the Sejm, Marek Borowski, and
were initially supported by some discontented PSL members and the Civic Platform, although the motion
was subsequently defeated when PSL and Civic Platform finally voted with the SLD.
1.3.3.
OTHER RECENT DEVELOPMENTS
The tensions within the coalition, which ultimately brought about its collapse are not new. Since the
beginning there have been differences, notably over the economic austerity package and the concessions
in the negotiations with the EU on issues such as the sale of land to foreigners, as well as on the
government's policy towards the monetary policy committee (RPP). However, despite these problems,
the government successfully concluded the EU accession negotiations in December 2002.1 The lastminute improvements in the terms, especially for the initial years of membership, went a long way
towards meeting the concerns of the SLD's coalition partner: the PSL's leader, Agriculture Minister
Jaroslaw Kalinowski, described the outcome of the agriculture negotiations as good, although not a
success. However, tensions continued into the new year over the interpretation of some provisions of the
agreement. The PSL was particularly opposed to aspects of the mixed system of funding proposed by the
EU. Polish negotiators held last minute meetings with EU officials to clarify the outstanding issues
before the final text of the draft Accession Treaty was adopted on 5 February. The real test for the
government will come when Poles express their views on EU membership in the referendum to be held
in June 2003.
Relations between the government and the President have not always been smooth. While EU accession
is one area where President Kwasniewski and Mr Miller have worked together, at other times differences
of approach have been discernible and have fuelled media speculation about a power struggle between
the two for leadership of Poland's left. In October 2002, Mr Kwasniewski, a former leader of the SLD,
decided to refer the government's proposals for a tax amnesty and compulsory property declarations for
income taxpayers to the Constitutional Court, which ruled that they were unconstitutional. This followed
earlier criticisms by the President of the government's policy towards the media and the independence of
the central bank. Given Mr Kwasniewski's considerable personal popularity, speculation has also focused
on the possibility of his founding a new political grouping when he leaves office 2005. In a poll
conducted in January 2003 by CBOS, 34% of respondents said they would support such a party. 2
A major controversy has erupted over allegations of corruption and media control. At the end of
December 2002, the largest circulation Polish newspaper, Gazeta Wyborcza, reported that the wellknown film producer, Lew Rywin, had demanded a bribe of US$ 17.5 million from the newspaper's
publishers Agora in return for changes to the new media law which would allow Agora to purchase the
Polsat TV station. Rywin reportedly claimed that he had made agreements with the Prime Minister and
that his offer was backed by a group currently in power. Mr Miller denied he had any dealings with
Rywin and called for an investigation. In January 2003, the Sejm voted to set up a parliamentary
commission to investigate what has been called 'Rywingate'. Consideration of the controversial media
was suspended for several weeks.
1.3.4.
EXTERNAL RELATIONS
Poland's chief foreign policy objectives since the 1990s have been membership of NATO and the EU. It
achieved the first of these in March 1999 when it joined NATO, despite Russian objections. With the
conclusion of the EU accession negotiations in December 2002, Poland is now set to join the EU in May
1
2
For more details see section 3.3 'Accession negotiations with Poland'
Intellinews, Country report - Poland, February 2003
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7
2004. It has regularly aligned its foreign policy positions with those of the EU and associated itself with a
number of joint actions and common positions. It has also earmarked a brigade of up to 2500 troops to be
part of the EU Rapid Intervention Force. Poland participates actively in regional cooperation initiatives
such as the Council of the Baltic Sea States, the Visegrad Group, the Northern Dimension and the
Central European Initiative. Through the 14 Euro-regions established along its borders, Poland has
developed contacts at regional authority level. It has also particularly developed its links with Lithuania
and Ukraine. Poland supports the Stability Pact for Southeast Europe. It has taken part in a number of
UN and OSCE peacekeeping and observer operations, including those in the Balkans, where it has 1500
troops on peacekeeping duties.
Given its size and strategic location, relations with its eastern neighbours and the future of East-West
relations have also been important to Poland. It has recently proposed the development by the EU of an
'Eastern Dimension' to complement the existing 'Northern Dimension' as a framework for relations with
countries such as Belarus, Ukraine and Moldova.1
Relations with Russia were generally difficult during the 1990s with episodes such as the 'tit-for-tat
expulsion' of spies in 1999. However, some improvement in relations has been discernible since 2000.
Following a visit to Russia by President Kwasniewski in 2000, President Putin visited Poland in January
2002, the first visit to Poland by a Russian President for nine years. President Putin's visit was marked by
a number of highly symbolic gestures, which were seen as significant in terms of Polish-Russian
reconciliation.
The issues covered in the talks held during the visit were economic and political. The Polish Prime
Minister and Mr Putin agreed to set up a Committee for Polish-Russian Cooperation to monitor
economic and political relations and that the Prime Ministers of both countries would meet at least twice
a year. Poland is still heavily dependent on Russia for gas and to a certain extent for oil. The gas supply
issue has sometimes been highly politicised, as in 2000 when Poland reacted angrily at the discovery of a
high capacity fibre optic cable running along a Gazprom pipeline passing through Poland to Berlin.
Linked to this is the Polish trade deficit with Russia. The possible sale of a majority stake in the Gdansk
oil refinery to a Russian/British consortium also has a political dimension. Other bilateral issues include
Kaliningrad and the visas which Poland will introduce for Russian, Ukrainian and Belarussian citizens in
July 2003 as part of its preparations for joining the EU and the Schengen system. Recently, following a
Polish request to Russia to renegotiate the contract, the two countries agreed on a reduction of natural gas
deliveries to Poland of one-third over period up to 2023.
The latest visit by a senior Polish figure to Russia was in February 2003, when the Foreign Minister,
Wlodzimierz Cimoszewicz, discussed the visa question in the light of Poland's accession to the EU and
compensation for former Polish prisoners held in Soviet 'gulags'. The is the first time Russia has been
willing to discuss compensation. The talks were continued during the visit to Poland by Russian Prime
Minister Mikhail Kasyanov on 21 February 2003, although the main focus was on economic issues,
notably the prospects for Russian firms to invest in Poland. The two sides also agreed to set up a working
group to study ways of eliminating any negative consequences for bilateral relations which might arise
once Poland joins the EU. Russia announced at the beginning of March 2003 that it will introduce visas
for Polish citizens from 1 July 2003.
Relations among the Visegrad Group of countries (V4 - Czech Republic, Hungary, Poland and
Slovakia) have started to improve again recently following a temporary cooling-off, notably in the
aftermath of the adoption of the Hungarian Status Law and the controversy over the Benes Decrees. A
meeting of V4 Presidents took place on 22 August 2002 at which EU accession issues, NATO
enlargement and the recent initiative of President Kwasniewski on closer defence cooperation among 13
central, east and southern European states were on the agenda, as was the severe flooding in the Czech
1
See the Polish Foreign Ministry website for the text of a 'Non-paper with Polish proposals concerning the policy
towards new Eastern neighbours after EU enlargement':
http://www.msz.gov.pl/start.php
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8
Republic, Hungary and Slovakia. A proposal to coordinate the timing of the referenda on EU
membership to be conducted in the four countries, with the votes taking place in sequence at two or three
week intervals was also discussed. Justice Ministers of the V4 met in November 2002 to discuss
measures against terrorism. The Prime Ministers of the four countries met on 1 December 2002 to
coordinate their position before the final round of EU accession negotiations in December 2002 and
agreed that the grouping should continue to develop ties after EU accession. At a meeting of
Parliamentary Speakers of the V4 on 13 January 2003, there was agreement on the need to intensify
cooperation and support for a Czech proposal that MPs participate in the EU referendum campaigns in
neighbouring countries.
2. ECONOMIC SITUATION
SUMMARY
The coalition government formed in October 2001 was confronted with a serious crisis in Poland's public
finances, as lower than forecast economic growth and rising unemployment reduced revenues, provoking
a fiscal deficit twice as high as that in 2000. The government of Leszek Miller broadly achieved its shortterm objective of stabilising state finances in its first 100 days. However, the longer-term issues of
reforming public finances remain. In January 2002, the government announced its medium-term
economic plans aimed at raising growth to 5% by 2004 by a package of measures targeted on promoting
enterprise, employment and infrastructure. Unemployment remains a major concern.
The sudden resignation of Finance Minister Marek Belka in July 2002 raised doubts about the
government's commitment to reducing the fiscal deficit and reforming Poland's public finances, as
assurances of continuity in policy were somewhat undermined by a package of 'anti-crisis' measures,
which were seen as making the task more difficult. The break-up of the governing coalition in March
2003 is likely to make it easier for the SLD-UP minority government to agree its reform strategy but it
will need the support of other parties to secure a parliamentary majority for the necessary legislation.
Tensions between expansionary fiscal policy and anti-inflationary monetary policy, which brought the
government and Monetary Policy Committee into conflict in its first year in office, have lessened in
recent months as the National Bank has steadily cut interest rates and the new Finance Minister,
Grzegorz Kolodko has been more conciliatory than expected towards the monetary authorities. Both
recently agreed on a common strategy to enable Poland to meet the Maastricht criteria and adopt the
euro.
2.1.
2.1.1.
ECONOMIC PERFORMANCE AND OUTLOOK
GDP GROWTH
Towards the end of 2000, economic growth in Poland began to lose momentum. In 2001, the economy
remained weak and GDP grew by only 1% year on year, compared with 4% in 2000, as consumer
spending and fixed investment declined. After being the most dynamic component of the growth in
demand for the previous three years, investment in the corporate sector fell by 10.2% in 2001, reflecting
low profitability and high real interest rates as the rapid fall in inflation outpaced interest rate cuts.1
In 2002, GDP grew at a slightly higher rate of 1.3%, driven mainly by private consumption (up 3.3%)
and the falling deficit on foreign trade in goods and services, although the 7.2% fall in fixed investment,
continued to have a negative impact on growth. However, the more rapid rate of growth in the final
quarter of 2002 (2%) points to a more sustained improvement in 2003, when GDP growth expected to
reach 2.7%, rising to 3.8% in 2004.1 This view is supported by industrial output figures for December
1
1
Economist Intelligence Unit, Country Report Poland, August 2002
Economist Intelligence Unit, Country report - Poland, February 2003
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9
2002 and January 2003 which show year-on-year increases of 5.1% and 4.2% respectively. Retail sales
data also show a year-on-year rise of 4.1% in December and 6.4% in January. The higher than expected
increases in social benefits and public-sector wages and salaries in 2003 are also likely to support this
trend through private consumption, and with the gradual improvement of the finances of the corporate
sector, a return to growth of investment is expected in 2003-2004.
On the external side, export growth was more robust than expected in 2001 and 2002, despite the
weakness of Poland's main export markets and the strength of the zloty. This positive export trend is
expected to be sustained in 2003-2004, although all analysts stress the significant downside risks related
to the degree and length of the recession in the main European economies, notably Germany. Another
factor is that the return to growth of investments will boost imports, reducing the net positive
contribution of trade to GDP growth.
2.1.2.
PRICES AND WAGES
Inflation has fallen rapidly as growth rates have declined. Average annual inflation, as measured by the
consumer price index, fell from 10.1% in 2000 to 5.5% 2001 and declined further to only 1.9% in 2002.
This development also gave the Central Bank considerable scope for interest rate cuts in 2002. Inflation
is expected to remain at low levels in 2003, rising slightly towards the end of the period.
Productivity growth has continued to increase despite the economic slowdown, while the growth of
wages has been constrained by fears of rising unemployment and rapidly declining inflation. The average
real growth in wages for 2002 was only 1.5%. The slow growth of wage costs has helped maintain the
competitiveness of Polish goods internationally, although Polish unit labour costs tend to be higher than
in much of the rest of Eastern Europe, as long-term real wage growth has been strong. Non-wage costs,
especially social security charges, are also relatively high so that taxes and social contributions account
for 42% of total labour costs, close to levels in Germany (47%) or France (48%).
2.1.3.
EMPLOYMENT1
High unemployment is one of the main problem areas of the Polish economy and society. After a slight
respite at the beginning of 2001, the number of job losses continued to accelerate, particularly in
construction, as well as in manufacturing and transport. This, combined with a low level of job
vacancies, resulted in a renewed rise in the unemployment rate as measured by the quarterly labour force
survey. By this measure, unemployment rose from 18.5% in the final quarter of 2001 to 20.3% in the
first quarter of 2002 falling back slightly to just under 20% in the final quarter. The labour force survey
of employment levels showed a rapid fall during the summer of 2002 with employment in the third
quarter 3-4% lower than in 2001, although there were clear sectoral differences, with manufacturing and
construction showing the sharpest falls.
Poland has the highest rate of unemployment of the candidate countries. The regional spread of
unemployment is uneven, with the worst-hit areas traditionally in the north-west and east. Within regions
there are also wide variations, with some of the worst districts registering levels of 35%, while leading
cities have much lower rates: in September 2002 Warsaw's unemployment rate was 6.4%, Poznan 6.7%
and Krakow 8.3%.
2.1.4.
EXTERNAL SECTOR
The current account deficit fell to US$ 7.1 billion in 2001 (4.1% of GDP) compared to US$ 9.9 billion in
2000 (6.3% of GDP). This is well below the near-crisis level of over 8% of GDP reached in 1999. In the
twelve months to December 2002, the deficit continued to narrow to US$ 6.7 billion or 3.6% of GDP.2
1
For a more detailed assessment of employment policies, see the supporting document to the Commission
Communication of 30.01.2003 on 'Progress on the implementation of the Joint Assessment Papers on employment
policies in the candidate countries', COM(2003) 37 final and SEC(2003)200.
2
EIU Country Report Poland, February 2003
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Exports recovered after weakening at the beginning of the year and, although imports have also started to
rise, the rate of growth has been much slower. In US Dollar terms, imports rose by 30.4% in 2002 and
imports by 24.1% y/y. However, this sharp rise also reflects the falling value of the US currency and, in
euro terms, exports grew by 14.3% y/y, while imports increased by 8.6% y/y.
The recent strength of Poland's export performance has surprised analysts, given the weakness of the
international and, particularly, the EU economy and the strength of the zloty. However, better access to
developed markets and an improved product range, as well as the cyclical situation of the world
economy, which is relatively favourable to the specific structure of Polish exports, have contributed to
this positive development. Export growth is expected to gain momentum in 2003 and 2004, although
recovery in domestic demand will also boost imports. Higher transfer payments to Poland, particularly
from the EU, and continuing low levels of interest rates should help contribute to moderating current
account deficits, and much of the funding gap should be covered by foreign direct investment inflows,
provided the global economy does not weaken further and the government meets its ambitious FDI
targets. Overall, the current account deficit is expected to widen slightly in 2003-2004 to 3.9% and 4.4%
of GDP.
The EU Member States remain Poland's main trading partner, accounting for 69% of its exports and
supplying 61% of its imports. Germany alone accounted for 33% of Polish exports in 2002. However,
although exports to Germany rose only slightly in 2002, sales to France, Sweden and the UK rose
sharply, and exports to Russia and the CEFTA countries were particularly buoyant.
2.2.
2.2.1.
ECONOMIC POLICY
POLICY BACKGROUND AND
FRAMEWORK
In the early years of transition, from 1989 until the mid-1990s, Polish economic policy was dominated by
the goal of stabilisation. Under IMF guidance, a tough stabilisation plan was implemented with cuts in
public spending, a sharp devaluation of the zloty and wage controls. Underpinning this was a
commitment to a fixed nominal exchange rate to control inflation and a tight tax-based incomes policy.
The so-called 'Balcerowicz plan' brought inflation under control but also provoked a deep recession.
Even after this initial period of so-called 'exceptional politics' was over, macroeconomic policy remained
fairly consistent through most of the 1990s, despite the breakdown of the initial political concensus.
Thus, government deficits were relatively stable, the commitment to the market economy was
maintained, banking and tax reforms were introduced and privatisation proceeded. In 1995, the currency
was reformed and, in 1998, the Central Bank (NBP) was made more independent. Economic
policymaking in Poland has two main poles, the Finance Ministry and the National Bank and
independent monetary policy committee (RPP).
On 11 February 2000, the European Commission and the Polish Government published a Joint
Assessment of the medium-term economic policy priorities of Poland in accordance with the
recommendations of the Accession Partnership.
On 9 October 2001, the newly-formed SLD/UP-PSL government coalition signed a policy agreement.
The new government pledged to stabilise public finances, complete EU accession negotiations in 2002
and create a sound basis for economic development, boosting GDP growth to 5% by 2004. At the end of
January 2002, the government announced details of its new economic programme, including a package
of medium-term measures to promote enterprise, especially SMEs, employment-creation schemes and
infrastructure investment, notably in housing and road-building. In July 2002, a further mini-package of
anti-crisis measures was announced.
At the beginning of March 2003, the Finance Minister, Grzegorz Kolodko presented an outline of the
long-awaited public finance reform programme, which aims to allow Poland to meet the Maastricht
criteria in 2006 with a view to adopting the euro in 2007. The departure of the junior coalition partner
WIP/2003/01/0041-42
11
should make discussion of the proposed reforms easier within the government but it will still have to find
the necessary parliamentary majority to implement the reforms. However, the package, which
concentrates on changes to the tax system, has already been criticised for failing to address properly the
high proportion of fixed spending in public finances.
2.2.2.
FISCAL POLICY
Fiscal policy has been one of the main concerns of economic policy-makers in both the previous and
present governments. A sharp fall in revenues in the first half of 2001 forced the outgoing AWS
government to rebalance the budget in July 2001 by raising the state budget deficit (the state budget
accounts for around half of total public expenditure) and another readjustment had to be made before the
end of the year. The final budget deficit, at 4.3% of GDP, turned out to be just within the revised
scenario, although this was double the 2.2% deficit recorded in 2000.
The new SDL-PSL government acted quickly on the taxation side of public finances with measures
announced in November 2001 to freeze tax thresholds, tax benefits in kind and revoke various
allowances. The most controversial measure was the introduction of a tax on unearned income. Other
measures included a freeze on the salaries of ministers and senior officials, a commitment to streamline
and rationalise administrative structures and a package of immediate spending cuts for the 2001 budget.
The state budget deficit for 2002 was within the target at 5.1% of GDP. The general government
balance, according to the European Union's ESA 95 methodology, showed a deficit of 4.4%, while the
'economic deficit'1 is estimated to have been between 5.5% of GDP (Finance Ministry) and 5.8%
(Monetary Policy Council). The 2003 budget foresees a lower state budget deficit of 4.9%, a deficit on
the ESA definition of 3.9% and an 'economic deficit' of 4.7%, but the National Bank of Poland considers
that the 'economic deficit' is more likely to be around 5.4% of GDP because of higher borrowing by offbudget funds. The planned reduction in the deficit is expected to come more from faster growth of
projected revenue rather than from spending cuts but if the ambitious GDP growth target of 3.5% is not
met as seems likely, some limits on spending may be necessary in the second half of the year.
Poland's public debt rose in 2002 to 47.5% of GDP from 43.2% of GDP in 2001 (by ESA standards
public debt reached 44% of GDP in 2002). Public is expected to rise in 2003 to over 50% though much
depends on the level of privatisation revenues.
The main fiscal policy challenge for the government is the reform of public finances. This is all the
more urgent as privatisation inflows will begin to decline in the medium term at the same time as higher
principal repayments fall due on the country's external debt. The Finance Minister, Mr Kolodko, finally
announced details of his ideas on reform at the beginning of March 20032. Outlining various possibilities,
he stressed that the 'stability and development scenario' would help avoid severe spending cuts and create
the opportunity for Poland to co-finance EU projects without tax increases. This would involve
abolishing most tax concessions and lowering income tax rates, introducing capital gains tax on equities
from 2004 and abolishing some funds and agencies. The reforms would also provide for greater
devolution of powers to local government, which would be given more revenue-raising and spending
powers. The automatic indexation of public sector wages and social benefits would be abandoned. If
these reforms are implemented, Mr Kolodko expects growth to accelerate to 4.9% in 2004, rising to 6%
in 2006, and the budget deficit to narrow to 3.5% in 2006. He also suggested that part of the National
Bank's revaluation reserves might be used to co-finance EU projects, although this is likely to be resisted
by the Bank. According to Mr Kolodko, failure to implement the reforms would raise the spectre of what
he referred to as a 'stagnation and crisis scenario', in which growth would decline from 2.5% in 2003 to
1.7% in 2004 reaching -1% in 2006.
1
General government deficit adjusted for payments to pension funds, compensation payments to state workers etc.
(Source Ministry of Finance website)
2
ISI Intellinews - Poland Today, 3 March 2003
WIP/2003/01/0041-42
12
The government has yet to discuss the reform proposals, although this is likely to be easier now that the
PSL ministers have been expelled. Whether the government will be able to find a parliamentary majority
to support radical reform remains to be seen, and it is unlikely that any politically contentious spending
cuts will be announced before the EU referendum. As elections are due in 2005, any reform package
would therefore have to be steered through parliament by 2004 at the latest.
2.2.3.
MONETARY AND EXCHANGE RATE POLICY
Poland has operated a free-floating exchange rate regime for the zloty, with occasional smoothing
interventions by the central bank (NBP), since the crawling band system was abandoned in April 2000.
There are no controls on long-term capital flows. The zloty fell in value amid market uncertainties
following the change of Finance Minister in June 2002. However, it regained ground in October and
November and is likely to continue to rise against the weakening dollar but to lose ground against the
euro as it strengthens.
The central bank (National Bank of Poland), which is headed by the former finance minister, Mr
Balcerowicz, is responsible, under the terms of the constitution, for safeguarding the value of the
currency, while monetary policy is a matter for the monetary policy committee (RPP), chaired by the
central bank governor. Tensions between the RPP and the government have eased in recent months. On
the one hand, the government has toned down the highly critical stance it had adopted in opposition and
in its early months in office, while on the other, the RPP has continued to cut interest rates. In repeated
small cuts since February 2001, when the rate was 19%, the RPP had brought the key intervention rate
down to 6.5% by January 2003. However, real rates have remained relatively high as inflation has also
fallen sharply. Analysts consider there is more scope for further cuts in 2003 as inflationary pressures are
likely to remain subdued.
In February 2003, the RPP adopted a 'Monetary Policy Strategy after 2003'. The main assumptions of its
approach are that Poland will adopt the euro in 2007, that the free float of the zloty will be maintained
until entry into the exchange rate mechanism (ERM 2) and that inflation will be stabilised at 2.5% +/1%. The RPP has also decided to shift from the year-end inflation target to a continuous inflation target
involving monthly monitoring after 2003. The RPP warned that a loose fiscal policy during Poland's
membership of the ERM 2 might lead to a currency crisis. Disagreements between the government and
the RPP could resurface later in 2003, as the issue of the zloty's entry to the ERM-2 comes to the fore.
Many in the government would like to see the National Bank intervene to bring the value of the zloty
down so that it can enter the exchange rate mechanism at a relatively weak central rate to the euro, while
the current RPP is likely to resist such moves. However, the membership of the RPP is due to be renewed
in February 2004, and a majority of its members will be nominated by the government.
2.2.4.
PRIVATISATION AND INWARD INVESTMENT
In line with international trends, the inflows of foreign direct investment (FDI) to Poland fell in 2001 to
US$ 6.9 billion from a high of US$ 8.2 billion in 20001. However, this was still close to the average
figure for FDI inflows to Poland over the last five years. The decline intensified in 2002, with FDI
inflows of only US$ 3.7 billion as the privatisation programme made slow progress. In per capita terms,
Poland has performed somewhat less well in attracting FDI than some of its neighbours, notably the
Czech Republic and Estonia, but, as a percentage of GDP, FDI inflows to Poland in 1996-2000, at 4.3%,
were nevertheless close to the central European average of 4.4%, and the cumulative value of inward
investments in Poland is the highest in central and eastern Europe. The foreign investment agency PAIZ
announced in January 2002 that a new act on state assistance for foreign investors would come into
force in June providing a range of incentives for qualifying projects.
Although FDI inflows are likely to continue at a respectable rate over the next few years, the peak in
terms of privatisation proceeds seems to have passed. While in opposition, the SLD criticised the
1
Data of National Bank of Poland based on balance of payments
WIP/2003/01/0041-42
13
previous government's privatisation programme, claiming much of it was motivated by the need to make
up budgetary shortfalls rather than by a concern to promote economic development, so-called 'fiscal
privatisation'. The SLD-PSL coalition government initially froze any major asset sales while formulating
its new approach. In May 2002, the Treasury Minister, Wieslaw Kacmarek, gave further details of the
government's privatisation plans aimed at giving Poland an ownership structure typical of an EU
Member State's economy, with the state's share of assets (currently 28%) falling to between 10 and 15%
by 2005. 1 Both coalition parties had pledged to ensure that any privatisation of the two remaining large
banks still under state control PKO BP (savings bank) and BGZ (agricultural bank) would respect their
'national character'. The share of foreign capital already represents over 70% of the total assets of the
domestic banking sector.
Consolidation is most likely in the sensitive steel, chemicals, energy, telecoms and defence equipment
sectors where privatisation has proved increasingly difficult, although Mr Kacmarek has insisted that this
strategy would be a preparation for privatisation, not an alternative to it. Privatisation is to be guided by
three broad goals: enhancing competitiveness in the economy as a whole, restructuring sensitive sectors
and supporting further development of the capital market. Greater use is likely to be made of partial
public offerings on the stock market and the state will encourage pension funds to play a more active
role. The state will also retain a controlling interest in certain areas of strategic sectors such as transport
and energy.
The 2002 budget foresaw privatisation revenues of PLN 6.7 billion but, in practice, only PLN 2.86
billion (US$ 733 million) was raised, compared to the revised target of PLN 3.7 billion, and PLN 1.5
billion of this was from the sale of 85% of the power distributor STOEN to the German group RWE.
Other larger privatisation projects in 2002 included the sale of the WSK PZL Rzeszow engine plant, the
Skawina power plant and the pharmaceutical distributor Cefarm. The procedure for the sale of the G-8
group of electricity distributors has started and should be completed in 2003. Other power distributors
are to be consolidated into four groups and sold in the period 2004-2006, while a number of individual
power plants and heat and power companies will be sold in 2003. The sale of the Rafineria Gdanska oil
refinery has not yet been completed. A consortium of the Russian company LUKoil and the UK firm
Rotch Energy was selected as strategic investors for Rafineria Gdanska with a stake of 75% up for sale,
but the Treasury has been critical of the consortium's latest offer and has not excluded other options for
RG's future, including a possible merger with PKN Orlen. Privatisation of the insurance company PZU,
which was scheduled for the second half of 2003, may be delayed, as the Treasury Minister has indicated
recently that complete privatisation should not take place until restructuring and modernisation had taken
place since this would alter the company's value. In 1999, 30% of PZU was sold to a consortium of
Ereko and the BIG BG Bank.
In a move in the opposite direction, the government effectively re-nationalised the Szczecin shipyard
following its bankruptcy and protests from the workforce. A new company has been formed and the
government has guaranteed 70% of the credit to be granted by the state-owned PKO BP bank for the
completion of three ships. The shipyard had an order book for 31 vessels to be built up to 2004 which the
successor company is anxious to maintain. The government has indicated that it intends to sell off the
shipyard once its liquidity problems have been solved. The State Agency for Industrial Development
AKP hopes to complete the consolidation of the shipbuilding sector as a whole by the end of 2004, the
aim being to ensure that the commercial activities of the two shipyards and the marine engine
manufacturer are more complementary.
Another problem area is steel production. In December 2002, Poland finally closed the negotiations
with the EU on the competition policy chapter in which steel was a major issue. Under the restructuring
plan, net capacity will have to be reduced by 901 000 tons and employment by 30%, while state aid to
the sector would be authorised with the aim of restructuring and modernising the industry to try to
achieve profitability by 2006. The detailed programme should be approved in March 2003. In the
1
Economist Intelligence Unit, Country Report Poland, December 2002.
WIP/2003/01/0041-42
14
meantime, the process of privatising the main steel producer, PHS, is underway with three major
companies, Arcelor, LNM Group and US Steel, expressing an interest in bidding for the 51% stake.1
3. RELATIONS WITH THE EUROPEAN UNION
3.1.
INTRODUCTION
The basis for current political and economic relations between Poland and the European Union is the
Europe Agreement, which came into force, after a transitional period of two years, on 1 February 1994.
The Agreement improves the conditions for effective economic and political reform and provides the
institutional framework and legal basis for relations between Poland and the EU with a view to bringing
Poland closer to EU membership.
Poland's application for membership of the European Union was submitted on 5 April 1994 and the
accession negotiations began in March 1998. By the end of July 2002, 26 of the 31 chapters had been
provisionally closed.
A central element of the enhanced pre-accession strategy adopted by the Luxembourg European Council
in 1997 is the Accession Partnership. The partnership sets out short and medium-term priorities and
outlines the way the Phare, Sapard and Ispa programmes will support Poland's preparations for
membership. The latest revision dates from November 2001.2 The revised National Programme of
Preparation for Membership of the EU, which sets out how Poland proposes to meet the partnership
objectives, was adopted in June 2001.3
3.2.
3.2.1.
THE EU INSTITUTIONS' APPROACH TO ENLARGEMENT
EUROPEAN COMMISSION
The Commission, which has an important role to play in the enlargement process, delivered its opinion
on the applications by the countries seeking membership in a key document published in July 1997 Agenda 2000. In the case of Poland, following the Commission's recommendation, negotiations were
opened in February 1998.
In Agenda 2000 the Commission also said that it would report regularly on the progress made by each of
the candidate countries. The first reports were presented in November 1998 and the fifth and latest report
was published in October 2002.4
In its 2002 Strategy Paper 'Towards the Enlarged Union'3, the Commission concluded that, bearing in
mind the progress achieved, their track record in implementing their commitments, and taking into
account their preparatory work in progress, Poland and nine other countries 'will have fulfilled the
economic and acquis criteria and will be ready for membership from the beginning of 2004'. The
Commission recommended concluding the negotiations with what it termed the 'ten acceding countries'
by the end of 2002.
In its 2002 Regular Report, the Commission concludes that Poland continues to fulfil the Copenhagen
political criteria having made considerable progress since 1997 in further consolidating and deepening
1
'Steel Industry - Forging Ahead', Warsaw Voice, 9 February 2003
For the text of the Accession Parnership as well as the Commission Opinion and Regular Reports see:
http://europa.eu.int/comm/enlargement/poland/index.htm
3
For the full text of the programme see the website of the Committeee for European Integration:
http://www.ukie.gov.pl/eng.nsf/B-DP-NPPC
2
3
COM(2002) 700 final
WIP/2003/01/0041-42
15
the stability of its institutions guaranteeing democracy, the rule of law, human rights an respect for and
protection of minorities. It finds mixed progress in the area of reinforcing administrative capacity, noting
that implementation of the Civil Service Law had been limited by the temporary suspension of the
system of recruitment by open competition. The Commission notes progress in reforming the judiciary
and urges that efforts should be focused on ensuring that the progress made delivers the desired results in
terms of improved efficiency. Corruption remains a cause for serious concern and substantial efforts are
needed to ensure concrete results in combating the problem.
The Report notes the progress of Poland in achieving macroeconomic stability and concludes that Poland
is a functioning market economy. It singles out fiscal consolidation, the completion of restructuring and
privatisation and further improvements to bankruptcy procedures and the land registry as areas for action.
Reviewing the situation with regard to the adoption of the acquis, the Commission notes that Poland's
progress was initially slow but subsequently accelerated to a point where the vast bulk of primary acquis
is now in place. While administrative capacity has progressed, it has not done so to the same extent as
legislative alignment. Detailed plans have been agreed in the negotiations and in the Action Plan to cover
the remaining gaps.
Bearing in mind the progress made, the level of alignment and administrative capacity achieved and
Poland's track record in implementing its commitments, the Commission concludes that Poland will be
able to assume the obligations of membership in accordance with the envisaged timeframe.
On 19 February 2003, the Commission adopted a favourable opinion on the accession applications of the
ten acceding countries. The Commission will continue to monitor their progress and will present a final
report to Council and Parliament in November 2003, six months before the date of accession.
3.2.2.
EUROPEAN PARLIAMENT
Although, formally, its main role in the enlargement process is to give its assent to the final agreement
reached after the conclusion of the intergovernmental negotiations with the individual candidate
countries, in practice, the European Parliament has been involved in the process in an number of ways
since the beginning. In particular, it has expressed its opinion on the unfavourable conditions for
enlargement, notably on the unsuitability of the current institutional framework for dealing with an
increase in the number of Member States.
When Parliament gave its opinion on the Commission's Agenda 2000 document and the individual
country applications, stressed that the enlargement process should be as inclusive as possible and that
each country should be judged according to the progress of its negotiations, which should proceed at a
pace appropriate for each country (Resolution on the Communication from the Commission ' Agenda
2000 - for a stronger and wider Union' , C 4-0371/97). The resolution also states that Parliament
"believes that intensive negotiations on an individual basis should begin with the countries which have
made most progress.
Parliament has also adopted resolutions on the enlargement process and on the Commission's regular
progress reports. The latest resolutions on enlargement 1 were voted in June and November 2002. In
June 2002, Parliament also adopted resolutions on specific aspects of enlargement: financing, border
regions, agriculture and the ISPA and SAPARD instruments. The enlargement resolution of 20
November urges the Copenhagen European Council to set the date for accession for early 2002 and no
later than 1 May 2004.
In the section of the November 2002 resolution dealing specifically with Poland's progress, Parliament
points out the efforts made by Polish society, its social and economic actors and successive governments
to implement the necessary reforms, and applauds the considerable legislative work completed by the
1
For Parliament's resolutions, see the Enlargement pages on Europarl:
http://www.europarl.ep.ec/enlargement/default_en.htm
WIP/2003/01/0041-42
16
Polish Parliament. It encourages the authorities to redouble their efforts to remedy the shortcomings
identified in the latest Regular Report, notably as regards enforcement capacity. It points out that Poland
has helped to bring the European area of security and justice into being. Parliament also welcomes the
progress made in adopting the environmental acquis. It expects the new anti-corruption programme to
produce practical results as soon as possible. The resolution notes with satisfaction the attention paid by
the Polish authorities to the European Parliament's anxieties about the media law, central bank
independence and civil service recruitment procedures and the progress in the first two of these areas,
while stressing the need to continue to monitor the situation of the media.
The European Parliament maintains relations with the Polish Parliament through the Joint
Parliamentary Committee which meets twice yearly. The European Parliament invited members from
the parliaments of the candidate countries to attend the debate on enlargement held during its
November 2002 part session in Strasbourg1. Members of Parliament from the acceding countries will
already attend meetings of the European Parliament as observers once the Accession Treaty has been
signed. Parliament will be required to vote on the results of the negotiations under the assent procedure,
which requires parliamentary approval before the Treaty can be signed. The vote will take place during
its April 2003 part-session.
3.2.3.
THE COUNCIL AND THE EUROPEAN COUNCIL 2
The European Council, meeting in Luxembourg in December 1997, decided to "launch an accession
process comprising the ten central and eastern European applicant states and Cyprus". It also "decided to
convene bilateral intergovernmental conferences in the spring of 1998 to begin negotiations with Cyprus,
Hungary, Poland, Estonia, the Czech Republic and Slovenia on the conditions for their entry into the
Union and the ensuing Treaty adjustments". It mandated the Commission to carry out the screening
process and conduct the negotiations and to present to it regularly an assessment report on progress
towards accession, taking account of short- and medium-term priorities set by the Council in the
Accession Partnership.
At the Helsinki summit on 10-11 December 1999, the European Council discussed progress on
enlargement and decided to launch negotiations with a further six countries. In particular, the EU leaders
stressed that "in the negotiations, each candidate State will be judged on its own merits'. At Nice, in
December 2000, the European Council reaffirmed the Union's earlier commitment that the EU would be
in a position to welcome those candidate countries which are ready to join from 2002, the target for the
countries which have achieved most progress being membership by 2004, in time for the next European
Parliament elections. It insisted that no further obstacles should be put in the way of the enlargement
process and again endorsed the differentiation and catch-up principles. A 'road map' setting out the
priorities for the next 18 months was adopted.
The Laeken European Council held on 14-15 December 2001 named the ten candidate countries,
including Poland, which have the potential to be ready for membership in 2004. The Council stated that
it was necessary to keep the pace of negotiations with candidate countries and the pace of reforms in
these countries.
At Brussels, in October 2002, the European Council endorsed the Commission's recommendation that
the ten countries, including Poland, fulfil the political criteria and will be able to fulfil the economic
criteria and to assume the obligations of membership from the beginning of 2004. The Union reaffirmed
its determination to conclude the accession negotiations with these countries at the Copenhagen summit
and sign the Accession Treaty in April 2003. The European Council also endorsed the Commission's
proposals on monitoring in the run-up to accession and the two specific safeguard clauses to be included
1
For details of the debate, see the Enlargement webpages on Europarl:
http://www.europarl.ep.ec/enlargement/default_en.htm
2
For the Conclusions of the various European Council meetings, see theEnlargement pages on Europarl:
http://www.europarl.ep.ec/enlargement_new/europeancouncil/conclusions_en.htm
WIP/2003/01/0041-42
17
in the treaty, concerning the operation of the internal market and the area of justice and home affairs. At
Copenhagen, in December 2002, the European Council endorsed the results of the negotiations with the
ten countries which will accede to the Union on 1 May 2004, notably the final agreement as regards
agriculture and budgetary matters and the institutional arrangements. It confirmed that the Accession
Treaty will stipulate that the Commissioners from the new Member States will join the current
Commission as from the date of accession and that the newly-elected European Parliament will approve
a new Commission to take office from 1 November 2004, on which date the provisions of the Nice
Treaty concerning the Commission and Council will enter into force
3.3.
ACCESSION NEGOTIATIONS WITH POLAND 1
In 2001, there was much criticism of Poland's apparently slow progress in the accession negotiations as it
found itself overtaken by countries which had started negotiating later. This was due in part to the
increasing difficulties which the AWS government faced in terms of public opinion and in getting
legislation through parliament, but also to its tactic of trying to include issues such as free movement of
workers and capital only in the final negotiation package. The new SLD - PSL government not only
changed the structure of the departments and agencies dealing with EU integration but also adopted a
different strategy for the negotiations on the basis of the proposal of the Committee for European
Integration (KIE). The strategy also foresaw an acceleration of the work of implementing legislation to
align with the acquis:75 laws and 867 executive acts will have be adopted by the end of 2002. The
success of this new strategy is clear from the fact that, by the end of July 2002, Poland and the EU had
provisionally closed negotiations on 26 chapters.
During the Spanish Presidency, Poland had closed the fisheries, transport, taxation, institutions and free
movement of capital. The closure of the free movement of capital chapter was a major breakthrough, as
success hinged mainly on solving the difficult question of land sales to foreigners. The compromise
reached gives Poland a five-year transition period before foreigners, except those already living in the
country, can buy second homes. Self-employed foreign farmers can buy their farms within three to seven
years, while foreign companies will have to wait twelve years to buy land. The Polish side also agreed to
try to liberalise land sales earlier but is not bound to do so. The beginning of the Danish Presidency saw
Poland close the justice and home affairs chapter following its submission of a detailed action plan to
implement its commitments, notably in the areas of border control, the Schengen Action Plan, the fight
against crime and drug trafficking. Poland has a long border with Belarus and Ukraine, as well as
Kaliningrad, and visa exemption agreements with these two countries and Russia will be terminated by
July 2003. Substantial investments in personnel and equipment will be required to reinforce border
controls and the impact on the economies of the border areas of the four countries is likely to be
considerable.
In October 2002, Poland closed the regional policy chapter with agreement that all Polish regions would
qualify for objective 1 status. Following the agreements reached subsequently at Copenhagen, over the
period 2004-2006 Poland is eligible for commitment appropriations totalling € 7 320.7 million under the
Structural Funds and will receive between 45.65% and 52.72% of the total of more than € 7 590 million
available under the Cohesion Fund.
This left the competition chapter, as well as the key agriculture and budgets chapters, for the final
stage of the negotiations at Copenhagen. Poland adopted the strongest stand of the candidate countries to
secure higher direct payments for farmers and to ensure it would not be a net budget contributor in the
first few years of membership. The government was under constant pressure from the PSL coalition
partner and from the opposition parties.
In the competition chapter Poland obtained transition periods for the phasing out of incompatible fiscal
aid for SMEs and the conversion of incompatible aids for large companies into regional investment aid
1
For full details of the individual negotiating chapters, see the factsheets on the Enlargement pages on Europarl:
http://www.europarl.ep.ec/enlargement_new/negotiations/default_en.htm
WIP/2003/01/0041-42
18
as well as a specific period for the conversion of incompatible aid to car manufacturers. Additional
transitional periods were agreed with regard to state aid for environmental protection. In the important
steel sector, Poland obtained an agreement allowing it until the end of 2006 to restructure the steel
industry.
In the crucial agriculture chapter, Poland obtained the agreement of the EU to top up the direct aids paid
to farmers partly from its national budget and partly from rural development funding. A series of
transitional arrangements was also agreed on specific issues. However, following disagreements over the
interpretation of some aspects of the agreement during the drafting of the Accession Treaty, further talks
were held with EU representatives at the end of January 2003 which led to a compromise over the system
of direct payments. These talks took place amid considerable tensions within the coalition government,
with the PSL threatening to oppose accession if it did not obtain a satisfactory solution. The dispute
centred on the way in which the payments would be distributed among farmers. The final compromise
met some of the Polish concerns and enabled the coalition to survive the crisis, but the mixed system,
which distinguishes between different types of farmers and products, has not won universal approval.
In the budgets chapter, Poland obtained a larger amount under the special temporary cash-flow facility
for 2004-2006, bringing its total entitlement to € 1 443 million. The extra € 1 000 million results from a
corresponding reduction in the level of structural funds available to take account of the risk of a lower
uptake rate for funds in the first years of membership. Under the Schengen facility, Poland will receive €
280 million. It is not eligible for temporary budget compensation as it will be a net beneficiary.
In the final discussion of the Treaty text, Poland also secured agreement for a declaration that EU
membership would not influence its anti-abortion laws.
In a survey of public opinion conducted in January 2003 by CEORG in Poland, the Czech Republic and
Hungary on the outcome of the negotiations, Poles were most satisfied with 32% believing the outcome
was as expected and 20.4% considering it better than expected. According to the same survey, 62.7% of
Poles would definitely participate in the EU accession referendum, while another 10.3% were likely to
do so and 12.4% were undecided. The level of support for membership among the population as a whole
was 62.5%, little changed from the 62.1% in May 2002. Of those likely to vote around 70% would
definitely vote in favour.
3.4.
THE CONVENTION ON THE FUTURE OF EUROPE
The Polish government is represented on the Convention by State Secretary for European Integration
Danuta Hübner (alternate: Janusz Trzcinski). The Sejm is represented by its European Committee
Chairman Jozef Oleksy1 (alternate: Marta Fogler) and the Senate by Edmund Wittbrod (alternate:
Genowefa Grabowska, Chair of the Senate Foreign Affairs and European Integration Committee).
3.5.
3.5.1.
PRE-ACCESSION ASSISTANCE AND THE ASSOCIATION AGREEMENT
PRE-ACCESSION AID
Since January 2000, three pre-accession instruments financed by the European Community have been
available to assist the applicant countries of Central European in their pre-accession preparations: the
existing Phare programme, SAPARD, which provides aid for agricultural and rural development; and
ISPA, which finances infrastructure projects in the fields of environment and transport. These
programmes concentrate their support on the Accession Partnership priorities that help the candidate
1
Co-chair of the EU-Poland JPC.
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countries to fulfil the criteria for membership. In April 2002, agreement was reached by the Commission
and the Polish authorities on an Action Plan to strengthen Poland's administrative and judicial capacity.
During the period 1992-1999 the Phare programme allocated commitments of € 2 534 million to Poland.
In the years 2000-2002, total financial assistance to Poland amounts to €398 million annually from
Phare, €168.6 million from SAPARD (at 1999 prices) and between €312 and €385 million from ISPA.
At the end of June 2002, the European Commission decided to confer the management of SAPARD aid
to Poland, thus enabling the implementation of the programme to go ahead.
Phare priorities in Poland for the year 2002 include: the reinforcement of institutional and administrative
capacity: the internal market, the strengthening of co-operation in the field of justice and home affairs,
institution building in agriculture and environment, economic and social cohesion and cross-border cooperation for which an additional € 56 million has been allocated. The programme’s funds are not
granted unless the projects identified match up with the priority measures and the technical and
institutional conditions laid down by the Commission.
Since 1998, the Commission has also put in place another instrument, institutional twinning. It is
financed by Phare and encourages the adoption of the acquis communautaire by providing pre-accession
advisers from the Member States’ administrations. These advisers prepare and implement what is
required (e.g. training) for adoption of the acquis. For Phare 200, there are 34 twinning projects with
Poland in addition to programmes ongoing from previous years.
Poland also participates in various EU programmes, including Leonardo da Vinci II, Socrates II, Youth
and Culture 2000, Media Plus SAVE II and the Fifth RTD Framework Programme.
3.5.2.
ASSOCIATION AGREEMENT
The Association Agreement or 'Europe Agreement' with Poland was signed in December 1991 and
entered into force in February 1994. It provides a framework for political dialogue, promotes the
expansion of trade and economic relations between the parties, provides a basis for Community technical
and financial assistance and an appropriate framework to support Poland's gradual integration into the
Union.
An institutional framework was set up under the agreement providing for a discussion forum, an
assessment body and also a decision-making body. A Joint Parliamentary Committee brings together
members of the European Parliament and the Polish Parliament for twice-yearly meetings. The
Association Council meets once a year to review the candidate's progress in the framework of the preaccession strategy and set priorities for future work within the framework of the Europe Agreement. The
8th meeting of the EU-Poland Association Council took place on 20 November 2001.
*****
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ANNEX 1 President, Government, Parliament & Central Bank
PRESIDENT of the REPUBLIC
(Elected: October 2000)
Aleksander KWASNIEWSKI
COMPOSITION OF THE POLISH GOVERNMENT (sworn in on 19 October 2001 and modified on 3
March 2003 following the departure of the PSL from the coalition)
Prime Minister
Leszek MILLER
(SLD)
Minister of Agriculture
Adam TANSKI
(Non-Affiliated)
Deputy PM and Infrastructure
Minister
Marek POL
(UP)
Deputy PM and Finance Minister
Grzegorz KOLODKO*
(SLD)
Interior and Administration
Minister
Krzysztof JANIK
(SLD)
Foreign Affairs Minister
Wlodzimierz CIMOSZEWICZ
(SLD)
Defence Minister
Jerzy SZMAJDZINSKI
(SLD)
Economics Minister
Jacek PIECHOTA
(SLD)
Treasury Minister
Wieslaw KACZMAREK
(SLD)
Justice Minister
Grzegorz KURCZUK*
(SLD)
Education Minister
Krystyna LYBACKA
(SLD)
Culture Minister
Waldemar DABROWSKI*
(SLD)
Health Minister
Mariusz LAPINSKI
(SLD)
Employment Minister
Jerzy HAUSNER
(SLD)
Environment Minister
Czeslaw SLEZIAK
(SLD)
Science Minister
Michal KLEIBER
(SLD)
Chief EU negotiator
Jan TRUSZCZYNSKI
* Appointed July 2002 to replace Marek Belka
PARLIAMENT
Parliamentary Speakers:
Sejm
Marek BOROWSKI
Senate
Longin PASTUSIAK
NATIONAL BANK
Governor
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Leszek BALCEROWICZ
ANNEX 2 (Results of the general election (23 September 2001))
SEJM
Turnout: 13 017 929 votes cast (46.28 % of electorate)
(Threshold 5% for parties, 8% for coalitions)
PARTY
% VOTES
SEATS
Democratic Left Alliance and Labour Union (SLD-UP)
41.04
216
Citizens' Platform (PO)
12.68
65
Samoobrona (Self Defence)
10.20
53
Law and Justice (PiS)
9.50
44
Polish Peasants' Party (PSL)
8.98
42
League of Polish Families (LPR)
7.87
38
German Minority *
0.36
1
German Minority Upper Silesia *
0.06
1
Electoral action Solidarity (AWS)
5.6
0
Freedom Union (UW)
3.1
0
Total
460
* Minimum threshold does not apply.
Democratic Left Alliance and
Labour Union (SLD-UP)
SEJM
Citizens' Platform (PO)
1
1
42
Samoobrona (Self Defence)
38
44
Law and Justice (PiS)
216
Polish Peasants' Party (PSL)
League of Polish Families
(LPR)
53
65
German Minority *
German Minority Upper
Silesia *
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SENATE
PARTY
SEATS
SLD-UW
75
Blok Senat 2001
15
PSL
4
LPR
2
Sambroona
2
HTS*
1
SLK*
1
Total
100
* independent
1
SENATE
1
4 2 2
15
75
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SLD-UW
Blok Senat 2001
PSL
LPR
Sambroona
HTS*
SLK*
ANNEX 4 (Country Forecast)
Source: European Commission, Directorate General for Economic and Financial Affairs, Economic Forecasts for
the candidate countries Autumn 2002.
http://europa.eu.int/comm/economy_finance/publications/enlargement_papers/2002/elp12en.pdf
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ANNEX 5 (Trade UE/Poland)
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ANNEX 6 (Trade EU/Poland by Member States)
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ANNEX 7 (Trade relations EU/Poland)
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ANNEX 8 (External trade of Poland)
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ANNEX 9 (Basic statistics for C.Countries)
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