Matthew Olex-Szczytowski
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Poland: Twenty years in the EU, vast distance still to travel

Matthew Olex-Szczytowski has held senior roles in banks in London, Luxembourg, Frankfurt, and Warsaw. In Poland he was full-time adviser to several prime ministers and ministers. The latter included the first non-communist Finance Minister, Leszek Balcerowicz, and Radoslaw Sikorski as Defence Minister and Foreign Minister. He comments on economics in English-language and Polish media.


Poland and seven post-communist neighbours recently recorded 20 years of membership in the EU. This coincided with forecasts by the World Bank suggesting that by 2030 Poland will have overtaken the UK in GDP per capita. Donald Tusk, head since December of a centre-right coalition government, quickly voiced triumphant paeans to the Union as begetter of this supposed sorpasso.  (In Britain the opposition leader Sir Keir Starmer expressed his discomfort at the prospect; the Daily Telegraph deplored it.)

Poland’s role as front-line state to Ukraine, and its plans to spend above 3 percent of GDP on defence, have palpably increased its standing in NATO and the EU. The defeat by Tusk’s coalition of the euro-sceptic “Law and Justice” party (PiS) triggered relief in many quarters. Expectations for and in Poland have been raised. But many are built on myths and misconceptions, and a dose of deconstruction is in order.

Poland’s economy has done well, but not well enough. The country remains an importer of capital. Its economy is still 70 percent fired by coal. Its GDP is fifth largest in the EU and qualifies it for the G-20. But its size is less than 20 percent of Germany’s and around a quarter of that of France. Its influence will continue to grow, but the Tusk government must temper any wilder dreams of shaping policy in NATO, or in the Union via the “Weimar triangle” with Germany and France.

Tusk leads a coalition itself formed of mini-coalitions. It has the support of around one-half of the electorate (the PM’s own KO is backed by a third). The coalition’s disparate components are united around the urge to oust PiS, to expunge distortions in the justice system, to reverse crass nepotism in the state machine, and to re-establish amicable relations with Brussels. The coalition is biased to the right, but within it low-tax thinking competes with statist strains, green attitudes confront support for nuclear power, and “pro-choice” collides with “pro-life”. Still, all support the US alliance, NATO, Ukraine, rearmament, and the EU. This makes Poland palatable again to most of the West’s traditional elites.

Meanwhile, PiS remains powerful. Its poorer and provincial base makes up a third of the electorate, so the Tusk government will hang together whatever the internal schisms. Virtually all areas of policy need rapid attention. Public finances are in a lamentable state: this year’s budget deficit of 5.4 percent of GDP puts Poland alongside serial recalcitrants such as France and Italy. Decarbonisation is an overriding goal, but no one knows the way. Part of the answer might be state-driven programmes for Baltic wind power and for two nuclear plants. With other schemes, such as for a central airport and high-speed rail, the cost may be over US$ 200 billion.  Here EU money, expected to total US$ 55 billion to 2027, should help.

Still, a huge administrative effort is called for by such mega projects, by day-to-day business, and by unceasing floods of EU legislation. Yet the coalition’s ministerial teams are inexperienced. They sit athwart a chronically weak state machine. A byzantine bureaucratic system obtains, form and substance jostle in an endless dialectic.  

Military spending is due to consume 3.5 percent of GDP this year, and potentially 4.0-plus in 2025. Procurement under PiS was PR-driven and chaotic, with scant attention to costs. This year expenditure on equipment is to be US$ 34 billion, but US$ 158 billion is needed in coming years for kit and for “sustainment”. In theory one-half is to go to indigenous industry, so extra bottlenecks are guaranteed. Poland’s military is competent enough, but it will struggle for years to fulfil its goal to have the largest land force in Europe.

Increasingly, Poland’s elites recognise that rising domestic costs will soon extinguish the economic model which ruled since communism fell. To the end of last year foreign corporations had invested US$ 310 billion. They have driven a quintupling of exports (to US$ 380 billion in 2023). Since 1990 Poland has done better than the rest of OECD, South Korea included. When in the Union, its GDP expanded by an average of 4.2 percent, and doubled in terms of purchasing power.

But figures for GDP per capita show the distance still to travel. Poland’s may seem respectable at 80 percent of the EU average, but this is merely a third of levels in The Netherlands and Denmark, and 41 percent of Germany’s. (And no, there is no early chance of a sorpasso of the UK.)

Ironically, by-products of EU membership now exacerbate the challenges. The bureaucratic and safety-loving Union is fast falling behind the US, China, and India. For Poland, difficult demographics have been made disastrous by the loss of 2.5 million emigrants, 14 percent of today’s speedily shrinking labour force. “Embedded” in them was US$ 173 billion-worth of education also gifted to the West. Net transfers from the EU, US$ 176 billion to end-March, have only just begun to compensate. (Money from Brussels was around two percent of aggregate GDP, so contrary to propaganda was peripheral in respect to growth.)

The EU of course forbade protection, so Poland could not emulate the likes of South Korea and Taiwan and grow multinational firms. Instead, foreigners own over half of large-scale industry and services. Half of manufacturing exports are mid-value goods extracted by them. Poland is a classic “branch economy”. Outsiders benefit disproportionately from its value added. To build productivity and incomes Poland must rely on weaker domestic firms, and unsurprisingly these are hard put to innovate. Given this colonial context, the struggle to get to average Union incomes will be tough enough. To get to northwest Europe’s levels may be impossible.  

Most of the coalition’s energies will be directed to domestic matters. On security, the Russian danger is seen as existential. A strong consensus holds (it is shared with PiS) about the primacy of the US alliance and of NATO.  Sotto voce Poland is suspicious of Chinese influence too. On EU-based defence and other Union policies Poland will triangulate (expect it to do so actively during its presidency of the EU in the first half of 2025). Tusk’s coalition will carefully calibrate the country’s interests. The bias will be to the right on topics such as tariffs on Chinese goods, migrants, and Net Zero. (Tusk has already resisted Brussels on migration; his government performs push-backs as brazenly as did PiS.) Poland will support some majority voting in the EU, but never on defence. At all times, armed with new self-confidence the country will aim to “punch above its weight.”


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