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The Warsaw Voice » Business » September 30, 2013
Business & Economy
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Krynica Economic Forum: Business and Politics
September 30, 2013   
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More than 2,500 prominent politicians, financiers, businessmen and scientists from across the world, accompanied by crowds of journalists, descended on Krynica in southern Poland in early September to discuss the most pressing problems in Europe and further afield. This year a key subject of debate was whether the global crisis is still in progress or has already ended.

During the official opening of this year’s Economic Forum in Krynica, Polish Prime Minister Donald Tusk said the crisis in Poland is over. “Here in Poland we can confirm what Europe is saying with growing confidence: the crisis in Europe is coming to an end,” he said. “Poland has fended off the crisis... Back in January or February I would still hear professional pessimists saying that Poland was in for either a recession or stagnation; the only question was which of these two options would materialize. Today I have bad news for these pessimists: there will be neither a recession nor stagnation in Poland.”

In his address, Tusk referred to his announcement five years ago at Krynica that Poland would quickly join the euro zone. This still has not happened and is unlikely to happen anytime soon. But nobody could predict that a few days after his speech in 2008 the Lehman Brothers bank would fall, sending shock waves through the global economy, with the tremors reaching Poland.

“Poland, however, has not wasted that time. Over the course of those five years, Poland’s cumulative GDP growth has reached 20 percent, which is an absolute record in the EU. Poland’s exports have grown 38 percent to 146 billion euros in 2012,” said Tusk.

Tusk added that Poland needs a new strategy for the post-crisis period. “In 2017 our GDP will exceed zl.2 trillion, having doubled over 10 years,” he said. “A simplified tax system will be a part of our post-crisis plan. Without improving the tax system, we won’t be able to take advantage of all the opportunities that we have. We should enter 2016 with new, easier rules for those doing business.”

A day after Tusk’s speech, Jaros豉w Kaczy雟ki, former prime minister and leader of the largest opposition party, Law and Justice (PiS), outlined a new economic program. He said Poland’s economy was still in crisis and the country needed “temporary solutions” to deal with its problems. These measures should help increase government revenue and bolster investment by businesses.

One of the measures proposed by Kaczy雟ki is a 39-percent income tax rate for high-income individuals for five years, along with tax breaks when funds are plowed into investment projects. Kaczy雟ki also proposed a 1-percent sales tax on large retail chains and a 0.5-1 percent tax on financial transactions on the stock market. He also said PiS would increase salaries and the minimum wage once it takes over power.

“Poland needs a policy that would guarantee social equilibrium,” said Kaczy雟ki. “We must acknowledge that we need some kind of solidarity, balance, at least between two social groups: employers and employees, as well as between producers and consumers. Without this mechanism we will not be able to create a well functioning market.”

Poland’s economy is nonetheless in better shape than that of most other EU states. Europe is still struggling with recession. The International Monetary Fund predicts that the eurozone economy will shrink by 0.2 percent in 2013. Although some Eurostat statistics on EU countries are optimistic, the crisis is not over yet, said Wilhelm Molterer, vice-president of the European Investment Bank.

Molterer said there are some signs of revival, but unemployment in Europe is dangerously high. He added he was concerned about the mood among businesspeople, who are not certain about the results of reforms introduced by governments. It is businessmen above all who should be provided with reliable information as to the timing and scope of reforms, including tax reforms, said Molterer.

According to Pedro Pereira da Silva, Chief Operations Officer of Jeronimo Martins, owner of Biedronka, a major retail chain in Poland, there is still some uncertainty about ways of getting out of the crisis, particularly when it comes to the real economy. “What is still needed to overcome the crisis is confidence among consumers and businessmen that it can be overcome,” said da Silva. He added a long-term vision is needed to ensure adequate conditions for economic growth in the EU.

According to Alastair Teare from consulting company Deloitte, another significant problem is that the EU is divided into countries with the single currency, the euro, and those without this currency. There are clear differences in the rate at which these two essentially separate economies are growing, Teare said. Poland and other countries with their own national currencies are growing faster, in part because they still have monetary policy tools at their disposal and thus a greater range of options when dealing with economic problems, Teare added.

According to Gnter Verheugen, former vice-president of the European Commission, the economies of Central and Eastern European countries should not be separated from the West. He also said that Europe is suffering a leadership crisis. “European politics must focus on the competitiveness of Europe on the global market,” said Verheugen.

Another widely discussed issue during the Economic Forum in Krynica was energy. Those taking part in a debate on nuclear energy agreed that government intervention is necessary in the energy sector because the energy market is unable to create long-term solutions essential for the security of energy supply by itself. According to experts, nuclear energy, despite high initial costs, is competitive with regard to other types of energy. However, nuclear energy should not be seen in opposition to other energy sources, they say; every country should work out its own optimal energy mix.

“Energy security has to cost money, but the role of the government is to introduce market regulations in order to minimize market risks,” said Aleksander Grad, CEO of PGE EJ1, a company established to build a nuclear power plant in Poland. “If we are to put the EU’s political decisions on emissions into practice, we need political decisions about the shape of our energy mix.” Grad added that coal cannot be treated as the only source of energy for Poland because sooner or later the country will run into problems with the EU climate policy. Nor should Poland excessively focus on renewable energy sources, Grad said, because support systems for renewable energy introduced in some countries have turned out to be very expensive.

Factfile
The Economic Forum in Krynica, organized by the Institute of Eastern Studies, has an established reputation as one of the most important economic conferences in Central and Eastern Europe. The event attracts those who want to discuss the future and use their expertise to help build a secure Europe based on solidarity and stimulate the economy to turn the European Union into the most competitive economy in the world.

The Economic Forum also presents major promotional opportunities for the town of Krynica and for Ma這polska province. This year, the Ma這polska Regional Development Agency helped organize the Economic Forum for the fifth time. Wies豉w Bury, chairman of the agency’s management board, says the event is the most important meeting of politicians and economists in Central and Eastern Europe. According to Bury, the presence of Ma這polska province at the Economic Forum will help the region seek new investors and showcase its potential in terms of business and innovation.

Ma這polska province ranks fourth in Poland in terms of foreign investment. In the past three years alone, international businesses have invested around $3 billion in Ma這polska. The region is also a top 10 outsourcing location and tops statistics in terms of BPO projects.

Ma這polska province is the main partner of the Economic Forum in Krynica.
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