December 17, 2019 / 5:06 PM / a month ago

"Ticking bomb": Poland's economic progress under threat - post-communist reformer

WARSAW (Reuters) - Thirty years ago, Leszek Balcerowicz unleashed the “shock therapy” that put Poland on the path to rapid economic growth after decades of communist rule.

FILE PHOTO: Leszek Balcerowicz, a former finance minister, attends celebrations marking the 30th anniversary of the first free democratic parliamentary election in Poland, at the European Solidarity Centre in Gdansk, Poland June 4, 2019. REUTERS/Kacper Pempel -/File Photo

Business boomed, the economy expanded and the former finance minister and central bank chief won plaudits in the West for his reforms.

But after three decades of economic progress, Balcerowicz says Poland’s ability to keep catching up with the wealthier West is threatened by the policies of the ruling nationalist Law and Justice (PiS) party.

PiS says Balcerowicz’s reforms inflicted too much economic pain and the government favours policies which it sees as an antidote to the injustices which it says were suffered by millions of Poles.

“Our historical achievement... was to start catching up with the West after ‘89, and we achieved more than most people expected,” Balcerowicz, 72, told Reuters in an interview marking the anniversary of the launch of the “Balcerowicz Plan” in 1989.

“What is at stake is the historical issue of further catching up.”

Balcerowicz’s reforms freed prices and cut most subsidies to ailing state firms while launching a wave of privatisations.

Poland’s per capita gross domestic product (GDP) is now 50% of that of the United States, compared to 25% in 1989, according to the Civil Development Forum, a think tank of which Balcerowicz is chairman.

“NEOLIBERAL PARADIGM”

But the reforms cut deeply into the buying power of ordinary people and public opinion is divided in Poland over Balcerowicz and the polices he introduced.

PiS has tapped into the resentment of those who found the reforms too painful, increasing spending on social benefits and announcing plans to increase the state’s role in sectors such as banking and energy at the expense of private foreign investors.

Expressing alarm about such policies, especially the state increasing its role in banks, Balcerowicz said: “It is like a ticking bomb. You don’t see it until it erupts.”

“What is the mechanism? Bad loans, political interference. In state banks you have bad loans, an accumulation of bad loans. It is gradual, you don’t see it and then it comes,” he said.

PiS says a bigger state role is required in the economy to make Poland a “normal state”, erasing what it calls the extremes of neoliberalism.

“The Polish market over 30 years ... was much more open for French companies, German companies than vice-versa,” Prime Minister Mateusz Morawiecki told business leaders on Tuesday.

“That tells us something about the neoliberal paradigm under which we were raised for years by various groups. Unfortunately we let ourselves be conned a bit,” Morawiecki said.

Reporting by Alan Charlish

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