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The Warsaw Voice » Business » August 26, 2010
Reforms Vital
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Reforms Vital
August 26, 2010   
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Former central bank chief and ex-finance minister Leszek Balcerowicz, the architect of Poland’s free market reforms in the early 1990s:

Poland was the first Central-Eastern European country to start radical market reforms. Thanks to that, we have been catching up with the West. Poland was also the only European country in 2009 to avoid recession. Having said that, let me stress that Poland needs reforms too, in order to reduce or eliminate problems before they take on serious proportions and in order to strengthen economic growth. Poland has great potential but that potential has to be released through reforms.

What do I have in mind? First, we should tackle, as soon as possible, the problem of the public debt and public finances. The root cause of that is that the spending-to- GDP ratio in Poland is too high. It is now about 46 percent. And a good way of tackling this problem is to increase reforms which would increase the employment ratio among people or individuals who are capable of working, and also to reduce excessive spending.

It is very important that Poland starts doing this as soon as possible. If we mobilize more people to work, this would not only help cure the problems with public finances and the growing public debt but would also boost our economic growth through increased employment.

Second, we should complete privatization, which is a fundamental reform both for politics and for the economy. Because privatization means that enterprises are in a way liberated from political influences which are usually not very good for them and for development. And Poland still has a pretty high ratio of state-owned enterprises as measured by employment, higher than most Central and Eastern European countries. That challenges us and demands that we accelerate privatization, which would boost productivity and would at the same time help Poland reduce the growth of public debt, through privatization revenues.

Third, we should deregulate the economy in a decisive way so that markets can work, so that markets are flexible, including the labor market and the housing market.

And fourth, while our justice system is, fortunately, independent and judges are independent, courts need to be much more efficient, prosecutors should be much more professional, on the whole.

If I had to mention some other things, I would also stress education reform. The educational standard of Polish people is pretty high but we need to strengthen it, especially regarding higher education, and to strengthen the links between institutions of higher education and the economy. So as to foster innovation-based growth.

These reforms are not very different from those needed in most Western economies. Poland is well advanced in the transformation of its economy and quite successful. In order to continue that, to strengthen economic growth, to catch up even faster with the West—which is quite feasible—we need to introduce these reforms. And, as in every democratic country, that needs and requires that a substantial part of the public is mobilized, so that it supports what is good for Poland.
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