This was to be read recently in the Polish press.
Kind regards
Arno Tausch
from Polish News Bulletin (unclassified)
6 August 1998
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Weekly Supplement
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Also in this issue:
Catching Up with Europe
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Poland Vs. European Monetary Union
===================================
The European Monetary Union comprised of eleven member
states from the European Union will be launched next year, and
two years later, the euro will replace the national currencies
of EMU members. Jacques Santer, chairman of the European
Commission has described the introduction of the common currency
as the most important event in the history of European
integration since the signing of the Treaty of Rome in 1957.
The common currency will make a great impact not only on the
economies of the countries comprised within the EMU area, but
also on the global economy as a whole. Thus, despite the fact
that Poland will not be joining the EMU in the nearest future,
the introduction of the euro will affect the Polish economy as
well.
Jan Krzysztof Bielecki, Polish representative to the European
Bank for Reconstruction and Development and Poland's ex-premier,
points out several advantages offered by the euro, which, during
the initial period, will be felt exclusively by individuals and
companies doing business with EU member states. Firstly, they
will obtain access to a huge capital market corresponding to
two-thirds of the American market. Secondly, the common currency
will mean the establishment of a single transparent system of
prices in the European Union. Thirdly, a single currency will
reduce the cost of all money transfers, and the risk carried by
exchange rate fluctuations. Finally, Poland will no longer have
to keep its foreign reserves in so many currencies. However,
Bielecki believes that the average Pole will not feel the
benefits of the EMU until he has the euro in his own pocket.
As Iwona Trusewicz wrote in her article published by
Rzeczpospolita, Polish banks are already preparing for the
introduction of the common currency.
The National Bank of Poland has appointed a special committee
headed by Ryszard Kokoszczynski, the central bank
vice-president, to co-ordinate the efforts undertaken by
particular NBP departments in connection with the adjustment of
the bank's procedures to the introduction of the euro.
Krzysztof Majczuk, director of the NBP Foreign
Operations Department, does not expect the euro to pose any
problems in non-cash settlements, although its introduction will
involve quite a lot of hassle for the banks. They will have to
re-denominate their assets and liabilities, prepare special
opening balances, and modify their software.
The NBP is additionally analysing the impact of the EMU
on the basket of foreign currencies to which the crawling
devaluation rate of the Polish zloty is pegged, as some of these
currencies will now be part of the euro. Decisions concerning
the new system to be introduced for the calculation of the
basket are to be made by the Monetary Policy Council by the end
of the year.
On top of that, Poland's central bank will have to
modify the structure of its foreign reserves. Majczuk projects
that the Central Eastern European countries will be increasingly
oriented towards the euro, and that the role of the U.S. dollar
in Europe will become smaller.
Bank Handlowy has been preparing for the EMU for two years now.
The Bank has established a special adjustment office headed by
Bogdan Karski who was appointed to the post by the BH executive
board. The office is working to adjust the Bank's commercial
offer and computer systems to the new settlement procedure using
the euro. In the meantime, the BH is waiting for decisions to be
made by the Finance Ministry and the central bank concerning the
foreign currency basket for the crawling peg devaluation and the
permitted level of the foreign exchange rate risk. Karski was
unable to estimate the costs entailed by the euro adjustment
process, but said that all the branches of his bank had to put
aside the necessary resources.
Polish exporters are also preparing for the launching of
the EMU.
For example, the copper mining and smelting complex
Polska Miedz has provided special training for its financial
department bearing in mind that export accounts for 70 percent
of the company's sales. 50 percent of the export revenue is
yielded from transactions denominated in U.S. dollars, 25
percent in Deutsche marks, around 15 percent in French francs,
and ten percent or so in British pounds. Export prices are based
on the London exchange quotations which are denominated in U.S.
dollars, but the metal premiums are denominated in Deutsche
marks.
Additionally, banks which provide their services to Polska Miedz
have been instructed to set up accounts denominated in euro upon
request from the company's partners.
According to Pawel Stafiniak, Polska Miedz financial
director, the company will be flexible, although it will try to
keep its foreign settlements in U.S. dollars unless this would
be in conflict with the interests of its partners.
The entire export revenue is converted into the zloty
anyway. Therefore, Stafiniak stressed that the foreign exchange
policy pursued by the NBP would determine whether the dollar or
the euro would gain as a result of the adjustment operation.
The relative value of the euro against the U.S. dollar
will be important for the Polish oil sector. As Marek
Mroczkowski, vice-president of Petrochemia Plock, Poland's
largest oil refinery said, while most of his company's foreign
transactions were denominated in U.S. dollars, the introduction
of the euro would simplify the settlement of liabilities and the
collection of receivables.
Jerzy Marciszewski from the foreign trading company
Ciech shared that opinion, but stressed that the benefits of the
monetary union will not be really felt in Poland until the
country joins the EU.
The euro is also welcomed by Maciej Formanowicz,
president of the furniture company Forte, who expects the single
currency to minimise the risk carried by fluctuating exchange
rates of the national currencies.
On top of that, Maria Przedpelska of the food and
livestock trading company Animex noted that, for her company
which used several currencies in its transactions, the euro
would reduce the costs of banking services involved.
However, not all Polish exporters will be switching to
euro right away. For example, the Zelmer factory which
manufactures household appliances will continue to denominate
its foreign contracts in the national currencies of its partners
for the time being.
The Polish Airlines LOT do not expect dramatic changes
related to the introduction of the single currency because,
similar to other airlines, most of their transactions are done
in U.S. dollars. LOT's financial department has been provided
the necessary training, and to them the euro will mean just
another currency and another bank account.
On the other hand, Grzegorz Jankiewicz, director of
LOT's financial policy department, fears that the monetary union
may be followed by a growth in interest rates in Germany. That,
in turn, may imply an increase in costs for Polish companies
which use loans denominated in Deutsche marks.
Nonetheless, Wprost's Krzysztof Golata and Andrzej
Szoszkiewicz believe that the euro will bring direct benefits to
airline customers. They will have no problems comparing air
fares offered by various carriers if the prices are listed using
a single currency. Additionally, travel agents and ticket
offices will also be spared the need to convert prices from one
currency to another, which will not only mean savings for them
but also reduce the time of handling consumer inquiries.
In the context of opinions that direct benefits of the
single currency will not be felt in Poland until the country
joins the monetary union, it is worth looking at Poland's
prospects to satisfy the EMU criteria.
Golata and Szoszkiewicz quote analysts from the
Government Centre for Strategic Studies, according to whom
Poland's priority is to achieve membership in the European
Union. Nonetheless, the country should also have the aim of
joining the EMU due to the very same economic reasons which
underlay the establishment of the monetary union by the eleven
EU member states. Additionally, bearing in mind that EMU
partners are the countries with the strongest economies within
the European Union, Poland should also try to join the monetary
union which will play a key role in the EU and produce a major
impact on the situation of non-EMU countries.
In the document laying out the guidelines for
preparations for Poland's accession to the European Union, the
government stressed that the medium term economic programmes
converged with the EU economic policy goals aiming at price
stability, low government deficit and public debt. Still this
year, the Polish government is to work out a programme for the
accession to the economic and monetary union. The document will
specify the economic measures necessary for Poland to satisfy
the EMU convergence criteria.
Poland already satisfies two of these requirements
related to the level of public debt (which corresponds to 48
percent of Poland's GDP, the maximum allowed by the EMU being 60
percent) and government deficit (amounting to around 1.3 percent
of the GDP). However, the rate of inflation is several times
higher than the maximum level permitted for EMU members.
Gazeta Wyborcza's Witold Gadomski projects that Poland
will join the monetary union in ten years or so. He expects that
Poles will have greater confidence in the euro than they have in
their national currency, although a comparison of salary levels,
once the amounts will be expressed in the same currency, will be
quite a shock to them. Poland's accession to the monetary union
would also put an end to problems such as inflation and high
interest rates. On the other hand, the government will have less
room to manoeuvre when designing the state budget because the
level of deficit will have to be kept within certain limits. It
will also be stripped of the possibility of playing with the
exchange rate as an economic policy instrument.
Gadomski stressed the effort required of Poland to
fulfil EMU criteria. He evaluates that the criterion concerning
the total public debt level as a ratio of the Gross Domestic
Product is already satisfied thanks to the fast growth of the
Polish economy. However, he pointed to different methods used by
Poland and the European Union to assess the government deficit
level. Therefore, the Polish deficit would translate to around
3.4 percent of the GDP if measured according to EU standards.
Nevertheless, he expects that Poland may be able to satisfy the
3 percent requirement as soon as next year. Gadomski agrees that
the criterion concerning inflation will be the most difficult to
meet. He projected that Poland would be able to bring its rate of
inflation down to 2.5-3 percent around the year 2007, which
would make it eligible to join the European Monetary Union.
(Based on 29 June 1998 issue of Gazeta Wyborcza No. 150, p. 18;
4-5 July 1998 issue of Rzeczpospolita No. 155, p. 10; and 17 May
1998 issue of Wprost No. 20, p. 46).
Catching Up with Europe
==========================
Trybuna's Wladyslaw Bielski recalls how, shortly after
having taken over the premiership, Prime Minister Jerzy Buzek
said that Poland would become a member of the European Union in
the first months of the third millennium. Bielski also recalls
another statement made by Fran(oise Gaudenzi who co-ordinates
accession talks with Poland on the European Union's side. She
said that it was not possible to determine specifically the date
of Poland's accession to the EU until the mutual legislation
screening was completed in 1999, and added that the country's
eligibility to achieve fully fledged membership would depend on
the degree of compatibility of its law with Community
legislation. Farmers' fears
Agriculture is one of the areas in which Poland will
have to undertake great efforts to adjust to EU standards.
Bielski quotes figures according to which 27 percent of the
Polish labour force is employed in agriculture, while accounting
for only 7.6 percent of the Gross Domestic Product. The figures
in the European Union are 5.3 percent and 2.4 percent,
respectively.
Out of Poland's approximately two million farms
(compared to 7.8 million farms in the entire European Union),
only between 500,000-600,000 produce for the market, which,
theoretically, gives them a chance of withstanding competition
from EU farmers. However, the prospects for the rest of the
farmers, especially those from economically underdeveloped areas
are rather gloomy, as the gap between them and the EU farmers
gets wider. Additionally, despite the fact that the average area
of a farm in Poland (less than 8 hectares) is half the EU
average, the process of farmland concentration is proceeding
very slowly, mainly due to a lack of capital.
Bielski describes some of the specific problems faced by
Polish farmers. For example, he claims that for only 8 percent
of Polish cattle the animal breeds are specified, which makes
most of the locally produced beef unfit for export to the EU.
Meanwhile, the cattle breeding modernisation programme launched
several years ago has ground to a halt due to a lack of funds.
Dairy producers also have problems satisfying standards
set for products imported into the Common Market. Bielski blames
that situation on the fact that most milk producers in Poland
have, on average, two or three cows, while the economies of
scale make the use of modern breeding and sanitary methods
profitable for farms with fifty cows or more.
Tadeusz Wojciechowski, author of another article
published by Trybuna, shares Bielski's pessimistic evaluation of
the situation in Polish agriculture. He claims that farmers from
the Poznan and Bydgoszcz regions, and to a certain extent
Szczecin and Wroclaw, may be ready to integrate with the
European Union. One may also find individual modern and
efficient farms in other parts of Poland. Nonetheless, the vast
majority of small farms from central and eastern parts of the
country struggle to make ends meet, while the civilisation level
of their farms dates back to the early 20th century rather than
the late 1990s.
Wojciechowski gives an example of some typical villages
located barely 60 kilometres from Warsaw, whose farms are so
small that no more than 40 percent of the local population are
able to make their living from agriculture, but even their
incomes are relatively small.
A further 30 percent of farmers from the village sold
most of their land long ago, and used to have other full-time or
seasonal jobs. However, most of their companies have gone out of
business, and the people are unemployed now. They are unable to
live on the land which they have left, so they try to find
temporary work in local private businesses, on bigger farms, and
some look for jobs in larger towns or cities, including Warsaw,
but the latter option is taken only by the most dynamic
individuals.
According to Wojciechowski, no more than five percent of
the people in the village have managed to take advantage of the
opportunities provided by the free market. They have established
legal or unregistered business operations, most often in areas
such as retail trade, agriculture related services, construction
services, or transport. Their living standards are quite high,
and they even manage to put aside some money to invest.
At the other end of the social spectrum, one may find a
group comprised of about a quarter of the local population who
have neither a stable source of income nor any prospects for the
future.
Most of the people in the village know hardly anything
about the European Union, and are unable to connect European
integration with their individual situation or to project its
results for Poland.
Under these circumstances, Wojciechowski believes that,
instead of visiting Poland's best farms, politicians should also
go to villages such as the one that he described, so that they
would realise the civilisation, technology and intellectual gap
which exists between Polish rural areas and the European Union.
It is necessary to prepare a sound analysis of the current
situation and to make a great effort to improve it within the
next three to five years. Otherwise, if such measures are not
undertaken as part of the policy to promote the idea of European
integration, the votes of Poles living in rural areas may be
decisive in the accession referendum by delaying or even
preventing Poland's membership of the European Union. The threat
does not seem so remote given the farmers' fear that their
interests may be forfeited during the accession negotiations
with the EU.
Challenge for bureaucrats
Agriculture, however, is but one of many fields in which
Poland will have to catch up with EU member states.
Krzysztof Golata and Andrzej Szoszkiewicz in Wprost look
at European integration from the perspective of job
opportunities which the process will open to Polish state
administration officers.
f First of all, accession to the European Union will make
attractive positions in EU institutions and agencies available
to Poles. It is difficult to project the job quota which the
European Commission will set for Polish staff, but the number is
likely to be relatively large bearing in mind that it is
proportional to the size of the country (Poland compares to
Spain in that sense). Nonetheless, the actual number of
representatives of a particular country working in the EU
headquarters depends on the qualifications of individual
candidates.
The candidates must know at least one of the official
languages of the European Union in addition to their mother
tongue. In practice, they should know at least English and
French.
Meanwhile, World Bank experts have noted that a poor
level of foreign language skills among the Polish state
administration staff may constitute a barrier in Poland's
accession talks with the EU.
Golata and Szoszkiewicz quoted Arkadiusz Michonski from
the Integration Policy Department of the European Integration
Committee's Office, who projected that Poland would need to
delegate to Brussels around 400 officials during the initial
stage. However, the country would have problems finding even
that number of candidates with appropriate qualifications.
Michonski shared the opinion that the requirement to know two
foreign languages posed an insurmountable problem for Polish
officials. "Therefore, I think that during the first recruitment
process, the selection criteria would be applied less strictly
to our officials," he said. "The European Commission is aware
that we are not able to compete with member states which have a
longer experience in the Union."
In addition to those several hundred officials who will
be working in the permanent Polish delegation to the EU, in the
structures of the European Commission, the European Council, the
European Parliament, the Court of Justice, the Court of
Auditors, or the EU committees, Poland will also require several
thousand experts to handle European integration issues in the
coming years. Meanwhile, the authors of the National Integration
Strategy identified barely 300 officials who knew what
integration was all about.
According to Jacek Saryusz-Wolski, former government
representative for European integration and foreign aid in
several consecutive cabinets since the early 1990's and
currently deputy head of the College of Europe in Warsaw, it
takes several years to train a civil servant with appropriate
qualifications. Therefore, efforts to prepare staff should have
been undertaken long ago. The process also requires money, and
in this context, Saryusz-Wolski noted that, starting this year,
30 percent of funds provided for Poland under the European
Union's grant assistance programme PHARE would be spent on the
establishment of modern and efficient state administration which
would be able to adopt the acquis communautaire effectively.
Meanwhile, as Jedrzej Bielecki wrote in his article for
Gazeta Bankowa, Poland has to address an important structural
problem of a financial nature, which leads to the situation
where the people who come to work in the state administration
are those who did not make it in the private sector.
Golata and Szoszkiewicz made a similar point quoting
figures according to which a person starting work in the Office
of the European Integration Committee (where the salaries are
relatively higher compared, for example, to the Ministry of
Foreign Affairs) is offered a monthly salary in the range of PLN
1,000-1,500 before tax. Some of the staff are paid from EU
assistance funds, and their salaries are automatically at least
20 percent higher because the income is tax free. Therefore, the
Office receives few job applications from young people
graduating from the Warsaw School of Economics because their
salary expectations are several times higher than what the
Office can offer.
Nonetheless, some do come to work in the state
administration, treating their jobs as a step on the career
ladder and hoping to continue their careers in the European
Commission or in the Council.
For the time being, apart from improving their
qualifications, Poles will also have to learn one more thing,
namely, not to take their internal problems to Brussels.
According to Bielecki, while other countries try to
conceal their internal political conflicts from Brussels, Poles
do not hide that their ruling coalitions have been unable to
resolve competence conflicts among officials responsible for
integration with the European Union.
Furthermore, by tackling relations with the European
Union during internal political conflicts, Polish politicians
are wasting the achievements of political and economic reforms
implemented with such great effort. Therefore, regardless of the
fact that, apart from Hungary, Poland is probably the best
prepared for EU membership among the associated states, it has
earned a reputation as an arrogant country which does not keep
its commitments and behaves in an irrational way.
Bielecki warns that, if that situation continues, Poland
may have to pay a high price for its attitude, as its accession
to the European Union may be delayed or the terms of accession
may be less advantageous.
A similar opinion has been voiced by Fran(oise Gaudenzi
who also warned against a possible delay in Poland's integration
with the EU. "If Poles themselves have difficulties with
preparing for membership," she told the Polityka weekly, "if
they cannot agree on their order of priorities, if they cannot
manage to work out a programme for the adoption of the acquis
communautaire, this means that the Union still has a lot of
time."
In this context, Bielecki draws attention to the fact
that a delay in Poland's accession to the EU may also be
expressed in terms of a financial loss because Poland can hope
to receive between 7 and 9 billion euro per year from the common
coffers once it becomes a member of the EU. Furthermore, the
volume of new EU legislation which the country will have to
adopt keeps growing as well.
(Based on 13 July 1998 issue of Trybuna No. 162, p. 12; 17 July
1998 issue of Trybuna No. 166, p. 18; 12 July 1998 issue of
Wprost No. 28, p. 39; 18-24 July 1998 issue of Gazeta Bankowa,
No. 29, p. 5).
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errors or omissions or misleading statements, however caused, in
either source or final texts.