Budgetary blues and reds
In most countries, politicians can be guaranteed of at least a couple of weeks away from the tensions of office. Not so in Poland. This year, most politicians realized that they would have to cut back on their rest in preparation for the upcoming September elections. What few realized, however, was that on top of the feverish electoral activities a new financial crisis would emerge, which in the best of times would require cool heads to resolve. In the context of the elections however, that is looking like a tall order and not just in the short term.
There has always been a suspicion that there was something not quite right about the Polish boom recovery of recent years. True, the reforms of the early 1990s laid a solid foundation for the initial spurt of growth, derived from opening markets to world trade, privatization and liberalization, as well as the reform of Poland's financial institutions. After an initial shakeout, the economy from the mid-1990s displayed solid growth, encouraging politicians from both the left and right to feel that that growth was God-given, and that it allowed for the introduction of large-scale state spending programs especially in the field of pensions, wage law, and benefits. Yet the truth is that Poles have long been living beyond their means, their consumption fueled by consumer credit and state-funded handouts. With the economy slowing down, those fixed-spending items have suddenly turned out to be a millstone around the economy's neck, and Finance Minister Jaroslaw Bauc has realized that unless drastic reform takes place, next year's budget deficit may be close to the $20 billion mark. Such a large budget deficit cannot be funded, and failure to act now could cause a meltdown of national finances.
Bauc is familiar enough with the inertia in Poland's political system to recognize that only the generation of a public debate is sufficient to move the entrenched interests that have until now blocked reform. So with a judicious campaign of planned leaks to major newspapers, the Finance Ministry revealed its projections, and demanded action to avert the oncoming catastrophe. The result? For the government, there was either real or pretended failure to recognize the problem, and for the opposition short-term glee at the government's predicament, compounded by a less-publicly displayed panic at the responsibility about to be thrust upon them.
Most observers have long given up on the government of Jerzy Buzek being concerned about anything but short-term survival, and the reaction of ministers to Bauc's warnings did not disappoint them. The ever-reliable Jerzy Kropiwnicki, head of the government's Strategic Studies Center and long-time bete-noire of the Balcerowicz school of economics, pooh-poohed the Finance Ministry's calculations as panic mongering. Deputy Prime Minister and Economy Minister Janusz Steinhoff proudly announced, to apparent self-satisfaction, that there was "zero chance" of the government accepting Bauc's draft 2002 budget. In the background, the Solidarity trade union fired off salvoes of protest calling for Bauc's removal for proposing "anti-social" policies.
Hardly surprising. Despite the superficial removal of overt trade-union influence with the sideling of Solidarity trade union leader Marian Krzaklewski to the ranks of Solidarity Election Action (AWS), Buzek and his closest allies remain closely wedded to the myth of Solidarity and the obsessive belief that national political success can only come from pandering to short-term sectional interests. To them, agreeing to a radical savings program just weeks before an election would smack of treachery, as well as political suicide.
Predictably, the Democratic Left Alliance (SLD) has exploited the government's problems to the full, claiming that the crisis is due entirely to the government's incompetence. That is only partly true, since all the government has done is continued with the same myopic policy toward the state's finances that has been demonstrated by all governments since 1989, including the SLD-led governments of 1993-1997. However, Leszek Miller, the SLD leader, must be feeling some discomfort at the prospect of taking charge of the mess in a couple of months' time, and the way he responds to the crisis will be a test of his mettle. Assuming Miller obtains the overall majority in Parliament that he is seeking, he will have all the political instruments at his disposal and no excuses not to do what is right for Poland.
Yet Miller's problem is twofold. First, it cannot be denied that he and the SLD are genuine social democrats. After all, they say they are, and for the last four years they have roundly criticized the current AWS government for pursuing the policies of former Finance Minister Leszek Balcerowicz, claiming that the solution to Poland's ills was to tax and spend more. Second, in so doing, Miller has built his electoral support on those who are opposed to liberal market economics and suspicious of privatization. If Miller were to dump his ideological baggage overnight and support Bauc's successor as finance minister in revamping the Polish welfare state to rescue its finances, he would be betraying both himself as well as his voters. The initial signals, moreover, are not encouraging. Already SLD politicians are warning against trimming welfare commitments, and the most creative ideas on saving money seem to revolve around vague proposals of cutting spending on bureaucrats.
If Miller fails to rescue the country's finances, he may find his election to be a poisoned chalice. Yet such an economic catastrophe may well be the cathartic shock that Poland's political elites need to convince them that there is no alternative to radical anti-welfare reform as a guarantee of future growth. For the real breakthrough in Polish politics, wait for the next elections in 2005.
Marek Matraszek is the Warsaw director of CEC Government Relations. He can be e-mailed at director@cec.com.pl (mailto:director@cec.com.pl)
