STRATDOR, October 24, 2015
Poland will hold general elections on Oct. 25 in a vote that could bring eight years of center-right Civic Platform rule to an end. At issue are Poland's pro-market domestic policies, which have allowed it to grow even during the eurozone crisis but have led to more inequality. Opinion polls suggest that the conservative Law and Justice party will win, although the post-election coalition talks could be fraught with difficulty. Whether or not the ruling party loses power, Poland's foreign policy priorities will not change. Warsaw will continue to maintain close ties with the United States and NATO while supporting Ukraine, diversifying energy suppliers and pushing for a continued tough EU stance on Russia.
Poland is still very much a nation in transition. This is most evident in its capital and largest city, Warsaw. The city center, bombed into ruin during World War II, has been rebuilt as a sort of living museum – a reminder of the country's past. But surrounding the historic center, tall glass buildings showcase Poland's new ambition: to become a key Central and Eastern European business hub. Large infrastructure projects — most notably the massive stadium where part of the 2012 European football championship was played — offer a glimpse of Polish modernization fueled by foreign investment and EU development funds.
Poland's economic growth has been consistent and impressive. It is the only European country that has not stopped growing in spite of the global economic crisis. In fact, Poland's gross domestic product skyrocketed over the past decade, and unemployment is at a relatively low 8 percent – better than it was in the early 2000s. The ruling Civic Platform party has led most of the business-friendly reforms of the past decade. During its eight years in power, it introduced free market policies, including low taxes on corporations and a relatively weak social safety net compared with its competitors in Western Europe. The government's objective was to attract foreign investment while keeping debt at a manageable level.
However, there is a growing sense among some Polish voters that this economic growth has been unequally distributed. While absolute poverty has declined steadily over the past two decades in Poland, equality measures such as the Gini index indicate that earnings inequality has grown. According to the European Union this disparity is also regional, with large urban regions growing faster than small towns and rural areas. Many Poles, especially the young, are under temporary employment contracts and receive low salaries, meaning they are becoming increasingly disenchanted with the benefits of EU membership. Others have chosen to emigrate, as illustrated by the massive population outflow that followed Poland's accession to the European Union in 2004.
These factors have magnified the natural erosion in popularity experienced by any party that has been in power for eight years, and Civic Platform's rival, the Law and Justice party, promises to reverse many of the past decade's policies. The opposition party has campaigned on a platform that includes canceling a recent rise in the retirement age, introducing tax breaks for low-income families and implementing higher taxes on banks and supermarkets, most of which are foreign-owned. Recent opinion polls put popular support for the Law and Justice party at around 36 percent, more than ten points higher than Civic Platform.
A government led by the Law and Justice party could, therefore, lead to greater state intervention in the economy. Banks could be in a particularly uncomfortable situation under Law and Justice party rule. Since Switzerland ended its peg to the euro in January, Polish officials have struggled to come up with a solution for the situation of Polish bank customers who took loans denominated in Swiss francs. The Law and Justice party has targeted banks to bear most of the burden of converting deposits denominated in Swiss francs to Polish zloty, while Civic Platform has been looking for ways to mitigate the negative impact of the conversion on the financial sector.
Game of Alliances
While opinion polls predict an electoral victory for Law and Justice, the party may not be able to form a government alone. This puts it in an awkward position — the Law and Justice party does not have many options for a government alliance. A potential ally is Kukiz'15, an anti-establishment party led by former rock star and social activist Pawel Kukiz. But though Kukiz'15 performed well in May presidential elections, its popularity has waned over the last few months.
The Law and Justice party's lack of strong political allies opens the door for the centrist Civic Platform to form an alliance against its more conservative rival. The alliance could include small parties such as the Polish Peasant Party, also known as the Polish People's Party, which has been the Civic Platform's junior coalition partner since 2007. It may also include the liberal Modern Party, founded less than six months ago. In addition, a variety of other small parties could align with the Civic Platform, provided they surpass the electoral threshold to enter the parliament: 5 percent for parties and 8 percent for electoral alliances.
But while an agreement between the Civic Platform and smaller parties could prevent Law and Justice from forming a government, the shaky alliance would involve parties with very different political agendas, which could make for a fragile government. Such an anti-Law and Justice bloc would also clash with Poland's president, Andrzej Duda. Polish presidents traditionally relinquish their party affiliations upon entering office, but before his election in May, Duda was a longtime member of the Law and Justice party. In late September, the president proposed that the government restore the retirement age to 60 years of age for women and 65 for men versus the current 67, elements of a populist agenda in line with Law and Justice's electoral platform.
Steady Foreign Policy
But neither the Law and Justice Party nor the Civic Platform would change Poland's foreign policy track, which is rooted in the country's enduring geopolitical imperatives and precarious position between Europe and Russia. Warsaw will continue to seek close cooperation with the United States and NATO. The current government has been particularly hawkish when it comes to Russia, and the next administration will continue pressuring the European Union to maintain the existing sanctions regime against Moscow. Warsaw will also continue pushing for energy diversification to reduce its dependence on Russia.
The Civic Platform has been quite ambiguous about Poland's prospects of joining the eurozone, and a government led by the Law and Justice party would not put the country any closer to joining the common currency. More important, Poland will clash with the European Union on issues such as immigration or integration with the rest of the Continent. Poland has resisted EU plans to establish a mechanism for the automatic distribution of asylum seekers across the bloc, and the next administration in Warsaw will continue this line. Poland is interested in preserving its EU membership but will remain wary of measures that involve transferring any more sovereignty to Brussels.
This opens the door for tactical political alliances in the coming years. Poland will probably support proposals by the United Kingdom to protect non-eurozone countries from measures designed by the members of the currency union. Poland will also continue to cooperate with the other members of the Visegrad Group (Hungary, the Czech Republic and Slovakia) as well as with Romania and Bulgaria to defend EU agricultural and development funds and oppose quotas of migrants, among other issues.
After the Oct. 25 polls, Warsaw will enter a new political phase dominated by either a nationalist government or a multiparty alliance that would struggle to remain in power. This will not produce any meaningful changes in the country's orientation, but could freeze or even reverse some aspects of the country's process of economic liberalization and EU integration. The extent of this change will depend on the final composition of the government.
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