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Gloom and Doom

Has the mood improved in Central Europe as business leaders and politicians sit down again at the 'Eastern Davos'? by Martin Ehl 3 September 2013

The annual Economic Forum in Krynica has always been a good place to ponder the state of Polish business and politics, especially now as the conference begins its 23rd year this week on the spa promenade of this small town beyond the Tatra mountains. One of the most memorable events to take place here happened five years ago, when Polish Prime Minister Donald Tusk, then at the height of his energy and power, announced that Poland would introduce the euro within three years. A week later the Lehman Brothers investment bank went bankrupt, and the Western world in which Poland so happy felt itself entrenched, was radically transformed.

 

For now, Poland holds the euro at arm's length, even though the country depends on exports to the euro zone. And the latest data indicate that exports and industrial production have been spurring the recovery (not only in Poland but throughout Central Europe). The country, saved from recession in 2009 by domestic consumption, has been seeking new markets and anxiously follows the condition of its main partner, Germany.

 

"The anemic growth of consumption and a further decline in investment show that the sole driver of the Polish economy remains exports," Adam Czerniak, an analyst at the PolitykaInsight think tank, wrote a few days ago about the latest numbers.

 

Only a few foreign companies, however, find their way to Krynica, which likes to style itself as the Eastern Davos. Although Polish and Slovak highways and railroads have definitely improved, the journey to the southeast of Poland – from wherever you start – is still evidence of the difficulties of post-communism, especially the quality of governance.

 

After accession to the EU, Central European states don’t lack for money to build roads or railways, but rather for the management and meaningful spending of those funds, and corruption doesn't help.

 

Otherwise, the Polish A4 motorway, over which the trip from Prague to Krynica would be the most logical, would surely have been connected long ago with some Czech highway and would lead all the way to the Ukrainian border. Or the bypass around Zilina, Slovakia, would already be ready and the northern section of the Slovak D1 would be connected to its western section – let alone all the way to Kosice.

 

But this isn’t just about the exasperation of someone who tests each year the pace of construction as he or she travels along the same road or railroad link to the east.

 

Since the collapse of Lehman Brothers, it hasn't been only global business that's changed. The Krynica conference was once unique and the trip made sense for politicians and businessmen to this remote part of Poland. Today the Economic Forum has several competitors that are easier to reach (in Katowice, Wroclaw, and Sopot). And Tusk – anything but a dynamic politician with liberal reform plans – is hardly a draw.

 

It’s as if the crisis – not only in Poland but also in the other Visegrad countries – has sapped all the energy I used to see in Krynica. In the meantime, political leaders have become technocrats considering what further taxes to introduce in order to fill up the state coffers. And creative entrepreneurs have often turned into worrying accountants who fear government regulation.

 

I am, therefore, curious whether I will find this gloomy mood, quite palpable in recent years in Krynica, apparent on the spa promenade this year. The August numbers on the Central European economies give some hope that the worst is over. But when it comes to the post-communist countries and their political elites, the title of this year’s conference – Toward a New Deal, with its reference to Roosevelt's revolutionary program – is probably too ambitious.

Martin Ehl
 is the foreign editor of the Czech daily Hospodarske noviny, where this column originally appeared. He tweets at @MartinCZV4EU.
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