Donald Tusk Bridging East and West

As the former Polish premier begins his new job as president of the European Council, his country threatens to lose some of the economic shine he gave it.
One day on the job and still smiling.

Donald Tusk has been looking forward to Brussels. Poland's astute former premier, who has been boning up on his English for months, has just replaced Herman Van Rompuy, a Belgian, as president of the European Council.

And Brussels has been looking forward to Mr. Tusk. For policymakers in the European Union, the ambitious liberal from Gdansk embodies the successful integration of Eastern Europe. With his sound economic policy, he brought the Poles a crisis-resistant recovery and convinced them to abandon their notorious skepticism over Europe. Many are pinning their hopes on the 57-year-old politician to lift the European Union out of its identity and structural crisis.

Mr. Tusk's first day at his new job on Monday was also a sign that Poland has advanced from being a rebel to an equal partner within the European Union. Many even think the Poles are capable of taking on the role of the increasingly anti-European British. In any case, Europeans have high expectations of Mr. Tusk, the only E.U. leader to maneuver his country through the 2008-2009 financial crisis and even achieve economic growth.

Investors value the political stability in Poland. Michael Kern, Managing Director, Geman-Polish Chamber of Commerce

Ironically, Mr. Tusk, a political star, has arrived in Brussels as his country threatens to lose its halo as an economic miracle. The gross domestic product is growing more slowly, and the country has been unable to effectively reduce unemployment.

On balance, the number of Poles who emigrate exceeds the number of emigrants returning home, because the government has never managed to successfully shape Poland into an incubator for high-tech development. There is a shortage of jobs for highly qualified individuals.

"Poland is at the peak of its success," said Piotr Buras of the European Council on Foreign Relations in Warsaw. "It's time to develop a new concept for more growth, because this growth story cannot be sustained merely with low wages and high E.U. subsidies."

Critics accuse Mr. Tusk of abdicating his responsibility at a strategically favorable moment by fleeing to Brussels.

 

Warsaw's skyline, a sign of Poland new prosperity, partially gained thanks to E.U. subsidies.

 

To the West, Poland looks like a near-perfect success story. Since the country joined the European Union in 2004, GDP per capita has almost doubled to just under $25,000 (€20,000). Not unlike Spain in the 1980s, Poland also benefited from billions in E.U. structural funds – €68 billion between 2007 and 2013 alone. The funding was tantamount to a giant economic stimulus program, and the government estimates that E.U. money was responsible for creating 300,000 jobs in the country. Warsaw attributes up to half of economic growth since 2006 to E.U. subsidies.

That growth has also benefited German companies, of which more than 6,000 do business in Poland. Since the European Union’s eastward enlargement a decade ago, trade with Germany has more than doubled, to about €80 billion per year currently.

"Investors value the political stability in Poland," said Michael Kern, managing director of the German-Polish Chamber of Commerce and Industry. Surveys show that German investors now prefer Poland to the Czech Republic. The opposite used to be the case. "This is very clearly an achievement of the liberal Tusk government," Mr. Kern added.

Unemployment in Poland is almost 10 percent, much higher than in the neighboring, industrialized Czech Republic.

But problems remain. Unemployment in Poland is almost 10 percent, much higher than in the neighboring, industrialized Czech Republic, which is far more deeply integrated into the supply chains of German companies. In addition, Poland spends only 0.8 percent of its GDP on research and development, and the country's universities are unable to supply Polish companies with enough skilled academic talent. Only Bulgaria, Romania and Latvia are ranked lower than Poland on the European Commission's innovation index.

The city of Rzeszow is a small-scale model of what Poland needs to achieve on the whole: to sell the country as a site for research and development, not just for foreign investors, but also as an environment in which local companies can develop and become competitive worldwide.

The tidy city in the remote southeast, near the border with Ukraine, has recently become a boomtown for the aerospace industry. Foreign investors are locating their facilities in a commercial zone that stretches across the city and is promoted as "Aviation Valley." Investors include Munich-based aircraft engine manufacturer MTU and, more recently, mid-sized southern England machine parts supplier McBraida, headed by Malgorzata Poczatek, a young Polish businesswoman.

 

In other parts of Poland, the pace of life is slow. Source SHOBHA/CONTRASTO/laif

 

Money isn't the problem. According to the current budget plan, Poland remains the largest recipient of structural funds in the European Union. Some €86 billion in funds are earmarked for Poland between now and 2020. The message from Brussels is that future investments will be channeled more strongly into developing the country's innovative strength than into its infrastructure.

Now that message has to be understood by Polish industry, argues Elzbieta Bienkowska, Poland's E.U. industry commissioner and previously the minister of regional development in Mr. Tusk's cabinet. "Our companies don't spend any money on innovation," she said. "They prefer to buy ideas from abroad."

 

This story first appeared in Wirtschaftswoche. To contact the authors: [email protected] and [email protected]