What a tangled web we weave
The dramatic events of last week, involving the veto by President Aleksander Kwasniewski of the government's flagship personal income tax legislation, followed by the near-resignation of Deputy Prime Minister and Finance Minister Leszek Balcerowicz, were enough to satisfy the most sensation-seeking observers. But equally fascinating are the consequences of the presidential veto for Polish politics in the months to come.
When Kwasniewski stepped up to his podium last Sunday evening playing to a live prime-time television audience only a few intimates truly knew what he had decided to do about signing into law the government's hard-fought tax policies. The previous few days had seen both Balcerowicz, and the opposition Democratic Left Alliance (SLD) shuttling back and forth, each trying to persuade the president as to what he should do. Those who thought Kwasniewski made his decisions based on the national interest, and in favor of modernizing policies, were firmly expecting him to sign into law a package of proposals that would have revolutionized Poland's antiquated tax system to make it fit the requirements of fast growth into the 21st century. They were to be disappointed.
To their surprise, Kwasniewski vetoed the personal tax law. On what grounds? That was the first argument. According to government officials and Balcerowicz himself, the reason for the veto was completely bogus. Kwasniewski argued that the previous weeks' maneuvering in Parliament had undermined the constitutional principle that Poland is a "democratic state of law," and that the decision to reduce top tax rates went against the constitution's defense of "social justice." But observers quickly noted that what had happened in Parliament was simply the normal to-and-fro between opposition and government, with the use of procedural nuances. Nothing to do with illegality, or still less lack of constitutional legitimacy. As for the second argument, the president seems to have made the discovery that tax cuts are illegal in Poland, and that therefore high economic growth is constitutionally impossible to achieve.
The president's decision has done much to undermine his own authority, and cement the government coalition as never before the precise opposite of what he had intended to achieve. Firstly, Kwasniewski has damaged his claim to be above politics, since it was precisely the opposition SLD that was demanding that he act as he did, and doing so with the use of demagogic arguments about how tax cuts only benefit the rich. SLD leaders also suggested that support by Kwasniewski for Balcerowicz's reforms would have caused an anti-Kwasniewski reaction at the founding congress of the new SLD party in December. Now Kwasniewski can be confident of the full mobilization of the SLD behind his presidential bid next year.
Secondly, Kwasniewski has undermined his claim to be a "modernizing" politician. He has invested much time persuading Western embassies and investors that he is a force for moving Poland into the 21st century, in the face of resistance from "populist" Solidarity Election Action (AWS) politicians. The paradox of the last week is that it is AWS which proved to be the most committed to the tax reform, and it was the presidential veto that threatens to leave Poland permanently mired in late 20th-century tax policies while the rest of Europe and the world cuts and simplifies personal tax rules. In acting as he did, Kwasniewski also fatally damaged his relations with Balcerowicz, whom he had long wooed as a potential political ally. Kwasniewski had promised privately to Balcerowicz that he would sign the tax law and his last-minute turnaround was received by Balcerowicz as a betrayal, with only last-minute pleading from his party colleagues and Prime Minster Jerzy Buzek persuading him to stay on as finance minister.
Finally, Kwasniewski and the SLD have succeeded in uniting the governing coalition as never before, and ensuring that it will stay together until the parliamentary elections of 2001. Having fallen into the trap of believing their own propaganda about a renegade AWS just waiting to knife Balcerowicz, they put into train a chain of events that have finally persuaded even the most left-leaning of the Freedom Union (UW) leaders that the SLD has lost credibility as a potential loyal coalition partner. It has even revived talk of a possible joint AWS-UW presidential candidate for the presidential elections next year.
Neither is that the end of the story. Balcerowicz has announced immediate plans to reintroduce tax reform next year, to enter force in 2001 a parliamentary election year with the bill to land on Kwasniewski's desk at the height of the presidential campaign. As for the SLD, over enthusiasm for snatching power from the government, and glee at the mistakes of the government and respected politicians such as Balcerowicz, may do them more harm than good in the eyes of the Polish electorate.
Marek Matraszek is the Warsaw director of CEC Government Relations. He can be e-mailed at director@cec.com.pl
