CEE POLITICAL RISKS.Indd

COFACE ECONOMIC MARCH 2018 PUBLICATIONS

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By Grzegorz Sielewicz, Coface Economist for Central & Eastern Europe based in Warsaw, Poland

The singularity of political risk in Central and Eastern Europe

ith the ongoing wave of elections in the Central and Eastern Europe region, CEE countries are experiencing a key period of change in a context of political risk and economic acceleration, which currently seem to be the two crucial issues attributed to the region. The region’s average GDP growth rate soared to 4.5% in 2017, i.e. the highest level since 2010. However, local politics and national judiciary system changes Ware creating problems for the region. Worsening relations with the European Union (EU) and a threat of sanctions for Poland have raised additional concerns. Although the social risk has risen in the last decade – mostly in Hungary, according to results of the Coface risk model –, the CEE region is much less risky than other emerging regional markets. However indicators published by international institutions monitoring freedom and civil liberties within the political system show weakened assessments, with Poland joining Hungary as a cause for concern. Although CEE countries have made huge improvements in terms of corruption, it remains prevalent: Bulgaria, Hungary, and Romania placed last among European countries in Transparency International’s corruption index. Despite the numerous benefi ts that EU membership brings to CEE economies, they are becoming more and more “Eurosceptic”: according to the latest Eurobarometer results, the Czech Republic is the third- most Eurosceptic member of the community, despite its integration with Western Europe supply chains and strong EU trade links. Hard data indicates that these political issues have yet to negatively impact CEE economies and businesses. Fiscal easing supports households, and also businesses in some cases, like in Hungary where the corporate capital gains tax was decreased to the lowest rate in Europe. Opinion polls show that the current ruling parties in Hungary and Poland are likely to extend their terms in offi ce. Admittedly, controversial changes to legal systems have triggered social discontent, and demonstrations have been experienced in a number of countries, but companies, including foreign entities have yet to back out of the CEE region. The infl ow of foreign investments remains positive and a number of large investments are conducted in the region. It seems that the advantages of price and quality competitiveness, geographical proximity to Western Europe, and solid economic expansion prevail over political concerns. Any possible further deterioration in terms of political risk could make foreign entities reluctant to remain in CEE countries, especially if it would hurt them directly. If the idea of linking EU funds to the rule of law was implemented, economies would not collapse, but certain businesses would suff er. Due to a signifi cant cooperation with the public sector using EU co- fi nancing, construction and ICT would be the fi rst sectors hit, with their partner sectors second to experiencen n n deterioration. Ultimately, a compromise to these clashed relations would be the most reasonable scenario.

ALL OTHER GROUP ECONOMIC PUBLICATIONS ARE AVAILABLE ON: http://www.coface.com/Economic-Studies 2 -Coface Panorama: The riseandof politicalrisks,March 2017 1 -The Czech Republic,Estonia, Hungary, Latvia, Lithuania,Poland, Slovakia, andSlovenia joinedthe EUin2004;Bulgaria andRomaniadidin 2007, andCroatia did in2013. 0,0 0,5 2,0 3,0 2,5 40 60 1,0 50 70 45 65 1,5 55 2 Coface Political RiskModel CHART 1 Source: Coface 2007 (as penalty) Terrorism

2012 European Average C Bulgaria C Bulgaria zech zech 2008 Rep. Rep. Populism +

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2009 Political RiskIndex Fragility Index The Coface Political RiskModel but itdiffers inCEE Political riskhasincreased globally FOCUS COFACE ECONOMIC PUBLICATIONS region isanattractive destination for theirinvestments. European community in2004 EU accession, withmost CEEcountries joiningthe Strong law fundamentals were alsosupported by the countries andconvince foreign businesses that the open to adapttheirlaws to standards ofdeveloped became somehow dormant. CEE governments were to beanimportantfactor however thepoliticalrisk political situation and its possible changes remained of market-oriented economies. Undoubtedly, the countries’ ability to adapt to the new environment Iron Curtain,theattention was mostly focused onCEE Since theeconomic transformation after thefall ofthe making apodiumfinish. East, andAfrica –withAfghanistan, Iraq, andLibya risk isconnected mostly to countries inAsia,theMiddle urbanisation rate. Inourpoliticalriskmodel,thehighest proportion ofyoung peopleinthepopulation andthe education, theliteracy rate, access to the internet, the taken into account, i.e. theeducation rate intertiary the transforming ofpressures into changeare also corruption, andcrimerates. Instruments facilitating unemployment, GDPpercapita,income inequalities, that could have anegative impact,includinginflation, methodology measures socialpressure indicators social movements. Within thisregard, theCoface elevated by risingsocialfrustration, whichcould trigger create apoliticalconsensus. Political riskwould bealso impacts thequalityofinstitutions andtheabilityto i.e. the existence of various groups in competition, also investors, etc.). Ethnicandlinguistic fractionalisation, both residents andnon-residents (tourists, foreign location undoubtedly affects confidence levelsof impact isdifficult tomeasure, terrorism ina certain increased inrecent years. Whereas theireconomic by terrorist attacks, aform ofviolence that has political riskofaparticular country canbeelevated social fragility, whichincludespopulism.Moreover, the and terrorism, andtheriskarisingfrom politicaland government’s inabilityto fulfilitssovereign functions) a given territory, withthelatter often attested to a (either State vs State orbetween factions within major parts:security risk,whichincludesconflict consideration various measures grouped into two

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2012 European Average C Bulgaria C Bulgaria zech zech 2008 as measured by the Gini coefficient deterioration resulted from widerincome equalities same period (from 29% in 2007 to 36% in 2017). This being Hungary, whosescore deteriorated inthe have recorded decreasing riskscores; theexception Over thelast decade, amajorityofCEEcountries to Bulgaria(37%), Hungary(36%)andCroatia (33%). of socialrisk.The highest scores intheregion belong India. CEE countries’ scores average at 29%: a low level in Brazil, 52% inChina,48%SouthAfrica, and42%in emerging countries’ scores, we see64%in Russia, 61% double thoseofCEEcountries. Examining large with certain countries across theworld having scores region is much lower than in other emerging markets, risk modelconfirms that thesocialriskinCEE A component ofsocialpressure inCoface political Western European countries. similar standards oflaw framework that are present in moderate. At thesametime, EUmembershipshapes have contracted significantly, withinflation remaining Western Europe average, andunemployment rates per capita has increased, bringing it closer to the of macroeconomic performance have improved: GDP momentum inrecent years. Socialpressure indicators enjoying stable economic activity, whichhasgained Risk issignificantlylower inCEE countries, withthe region creditors, i.e. theInternational MonetaryFundand loan, resulting instrained relations withthemain cuts that were acondition ofthe2008emergency law. The government alsorefused to introduce budget after thecourt attempted to blockaretroactive tax the Constitutional Court over budgetarymatters, institutions. Moreover, it curtailed the jurisdiction of that consolidated its control over the media and other by Fidesz leaderViktor Orbán, passed aseriesoflaws National Assembly. The resulting government, headed People’s Party won atwo-thirds majorityinthe and itsjuniorpartner, theChristian Democratic of Young Democrats–Hungarian CivicUnion(Fidesz) government. InApril2010, theconservative Alliance to arisefollowing certain actionsby thecurrent Examining Hungaryinparticular, concerns began more recently for Poland (see Chart2). of deterioration inthisregard for Hungary, aswell as measured by Freedom Houseprovide aclearpicture civil libertieswithinthepoliticalsystem. Variables assessments concerning thedegree offreedom and of corruption variables, but mostly less favourable IN CENTRALANDEASTERN EUROPE THE SINGULARITYOFPOLITICAL RISK Rep. Rep. Populism + 2 4 3 2 4 3 6 5 7 2 3 4 1 - 1 1 2 3 2 0 0 0 0 0 1 1 M 5 5 5 5 5 1 - 0 0 0 0 0 0 0 0 0 0 0 5 0 5 5 5 % % % % % % % % a 2013 % % 0 0 0 0 0 0 0 0 % % % % % % % % % y

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Fragility Index l . s s y a a n d a a d a a a e y n a k a d a g y i i i i i K p i l i i i r i a t u m d r r r n n l r c a e t n k n n a v g n n U e r u n a a t n u a a a a t a a n i t d a a a p l u o l a s p I e l g R a o g a t t a g e m o v l S o e M y l l v n m m r u r r r b L s r h n i o r u hu e w o un o P I Greece A C F l C l o E t c e e F e i S m B B S S H R P e h L t D e G z x e Social Political C u Populism N Risk Fragility L

700 3,0

2,5 600

2,0 500 Czech Rep. Hungary 1,5 400 Poland Romania 1,0 COFACE ECONOMIC PUBLICATIONS THE SINGULARITY OF POLITICAL RISK 3 300 FOCUS 0,5 IN CENTRAL AND EASTERN EUROPE 200 0,0

2011 100 2007 2008 2009 2010 2012 2013 2014 2015

Bulgaria Hungary Slovakia 0 the EU. The following years saw the nationalisation CHART 3 Czech Rep. Poland Romania 9 10 12 13 14 15 16 18 0 g p t v c of the assets of compulsory private pension funds, Corruption Perceptions Index (scores) ay u e c o e M July 11 A S O N D Jan and the passing of the Constitution Act, whose rapid June process and limited input from civil society was 70 criticized by the Venice Commission of the Council of 30% Europe. Some actions of the Fidesz government have Czech Rep. 65 hurt businesses via various additional fiscal burdens, 25% Hungary including an advertising tax on media, a progressive Poland 60 retail tax depending on companies’ turnover, 20% Romania

additional taxes on energy sector entities if they do Improvement Slovakia not invest in Hungary, and plans of implementing an 55 15% internet tax. Some of these measures were abandoned 10% due to the European Commission’s objections or 50 demonstrations. On the political side, international 5% transparency watchdogs and the Organization for 45 Security and Co-operation in Europe (OSCE) pointed 0%

to strong government influence over the media, and Deterioration unequal financial resources for parties. 40 -5% Source: Transparency International Transparency Source:

More recently, Poland has been home to speculations 2012 2013 2014 2015 2016 2017 -10% 1 3 4 2 1 4 3 2 Q regarding an increase of populism and elevated Bulgaria Slovakia Q Q Q Q Q Q Q Hungary 2 5 1 3 2 4 5 6 7 1 1 1 1 1 1 1 0 0 0 0 0 0 0 0 political risk. This started after the May 2015 presidential Czech Rep. Poland Romania 2 2 2 2 2 2 2 2 elections, won by Andrzej Duda of the Law and Justice European Average Party (PiS), followed by PiS obtaining a parliamentary majority in the Autumn 2015 general elections. Since Note: the index uses a scale of 0 to 100 (where 0 is highly corrupt then, a number of reforms have been introduced, and 100 is very trustworthy), and then ranks the results from scores. with similarities to those seen in Hungary. In late 2015, the Polish law concerning the Constitutional Tribunal was changed, and thereafter other judiciary changes followed, including changes to the National Judiciary Council, Supreme Court, and the merging of the posts be assessed by the attitude to the EU. The CEE of Justice Minister and the formerly independent region enjoys a significant inflow of foreign direct Prosecutor General. In December 2017, the European investments, and individuals gained gradually-opened Commission concluded that “there is a clear risk of access to better-paid labour markets in Western a serious breach of the rule of law in Poland” and Europe. Nevertheless, developments in Hungary and recommended member states to trigger Article 74 of the Poland suggest that the EU is treated as a partner EU treaty, which is considered to be ”a nuclear option”. whose imposed conditions and recommendations This mechanism has never been used, although its use could be considered as meddling and interfering with against Hungary was considered. The final decision on national matters. The level of risk can also be assessed triggering Article 7 is made by a supermajority of four by the CEE’s resistance to the mandatory migration fifths at the meeting of the European Council. However, quota. Indeed, the latest European Commission’s imposing sanctions requires unanimity. Eurobarometer6 confirms that immigration is seen as the most important issue facing the EU, especially Although Coface’s social risk model indicates low risk, in Estonia (mentioned by 62% of respondents), the CEE society polarisation can be seen in the number Czech Republic, and Hungary (both 58%). The EU of civilian demonstrations. Various changes affecting average put it also as the main concern, but this was inhabitants’ situations or the political landscape have only mentioned only by the calculated average of 39% led to a number of demonstrations across the countries, of respondents. including Hungarians protesting against the idea of The latest Eurobarometer results (Chart 4) also implementation of an internet tax, Poles showing their provide interesting insights into the Czech Republic, discontent on changes in judiciary system, Romanians which is the third-most EU sceptic member of the protesting against weakening of anti-corruption Community. 30% of respondents declared that the powers, Czechs demonstrating against President Milos EU conjures up a negative image for them. The only Zeman and Finance Minister Andrej Babis (the current countries with a more negative response were Greece Prime Minister), with the latter being suspected of tax and the UK. evasion and abuse of media, and Slovakians conducting the biggest protests since communism as a response The Czech Euro-scepticism frightened businesses in to the killing of Jan Kuciak, a young journalist who was the country when Prime Minister Andrej Babis’s ANO investigating government corruption. party held talks on introducing a new referendum law, with a far-right leader who has been openly Corruption issues continue to play a role in the CEE calling to leave the EU. Although the Prime Minister region’s political risk, despite countries adopting to stated that he did not intend to hold a referendum EU standards and making crucial improvements in on EU membership, the evoked principle of “Czexit” this field, including setting up anti-bribery watchdogs shook investor company sentiment. Indeed, Czech in many countries. In 2017, Transparency International exports and the economy as a consequence strongly expressed that “bias and corruption have become dependent on exports to other EU countries, as a fundamental traits of the system in Hungary”, and result of close trade links and an inclusion in Western that “corruption also disrupts economic development European (mostly German) supply chains. The EU in Hungary”. Indeed, recent data from Transparency received 84% of Czech total exports last year. On International’s Corruption Perceptions Index5 show the other hand, lots of other CEE countries have a that the score of Hungary has been gradually positive view on the EU, including Lithuania, Estonia, weakening since 2014 (see Chart 3). Currently: the Latvia, Poland, Romania, Bulgaria, and Hungary. country is assessed at the lowest levels in the EU, along with Bulgaria and Romania. Globally, Bulgaria ranks 71st on the Index (the same as South Africa), and Hungary ranks 66th (the same as Senegal). n n n The level of political risk in the CEE region can also

1 - The Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Slovakia, and Slovenia joined the EU in 2004; Bulgaria and Romania did in 2007, and Croatia did in 2013. 3 - The Gini coefficient is a measure of the deviation of the distribution of income among individuals or households within a country from a perfectly equal distribution. 2 - Coface Panorama: The rise and rise of political risks, March 2017 (http://coface.com/content/download/150827/2487577/file/Panorama-03-2017-GB-V07.pdf) 4 - Never before used, Article 7 is a law that suspends voting rights for a nation that has violated EU core principles and values. 5 - Source: https://www.transparency.org/news/feature/corruption_perceptions_index_2017 4 COFACE ECONOMIC PUBLICATIONS THE SINGULARITY OF POLITICAL RISK FOCUS IN CENTRAL AND EASTERN EUROPE

Has political risk hurt CDS rates show that the risk connected with CEE countries has lowered in last years. Chart 5 shows that CEE businesses? the CDS of CEE countries reached its lowest level in last nine years. In 2011, Hungary’s CDS were elevated CEE companies enjoy a supportive macroeconomic by political issues, but also fuelled by external environment, with the average GDP growth rate developments. Similar trends were observed in other soaring to its highest level in the last eight years in countries. Political concerns have been also seen in 2017 (4.5%), and Coface forecasts indicating that this Poland’s CDS prices, which fluctuated moderately will remain at a solid 3.9% in 2018. Households benefit after PiS took office in autumn 2015 – however, it from a tremendous improvement of the labour market, decreased to pre-crisis levels over recent quarters. with unemployment rates hitting new lows and fair wage growth. Part of this economic improvement Foreign investors’ willingness to invest in the CEE success could be attributed to governments, as region has not yet deteriorated as a result of political authorities have introduced measures that aim to issues. Their sentiment would more likely be shaken increase the wealth of inhabitants. For example, by concerns regarding the rule of law, CEE countries’ Hungary introduced measures supporting families, access to EU co-financing, or tougher relations with including child support, family housing incentives, EU institutions. Nevertheless, the CEE region remains and support for household modernisation. Foreign an attractive destination for expansion, as investors currency mortgage borrowers benefitted from seek to make the most of the region’s cost and quality converting their loans into domestic currency, which competitiveness. In the middle of the Fidesz party’s contributed to the near-disappearance of foreign second consecutive term as leader of the country, currency home loans from the Hungarian market. Mercedes announced a EUR 1 billion investment into Businesses have benefited from the reduction of the its Hungary site. It also appears that investors are corporate capital gains tax from 19% to 9%, i.e. the not targeting low-value textile and food-processing lowest tax rate in Europe. Poland implemented a wide sectors anymore, but are moving to premium cars coverage child support programme and decreased (Mercedes in Hungary, Jaguar Land Rover in Slovakia), the retirement age ; although this ran contradictory to renewable energy, and technology. Poland has demographic projections, the move was an election managed to attract a number of international banks in campaign promise. Investors’ attitudes and the risk recent years, and both Goldman Sachs and JP Morgan connected with particular economies are often linked have set up Polish operations centres, in 2017 and to trends in capital markets. Although government 2018, with the latter creating 3,000 jobs. Companies bond yields and foreign exchange quotes belong to in other sectors have also enjoyed an inflow of foreign such measures, they are also subject to the current investors to Poland, including LG Chem, who is monetary policy and its expected developments. In building the biggest electrical vehicle battery factory this case, the more accurate measure is the most in Europe. A number of such important investors widely used type of credit derivative: credit default have received local grants. Foreign Direct Investment swaps (CDS)7. (FDI) dynamics data shows that CEE countries have enjoyed a positive inflow of direct investments in the last few quarters, and most of them even across the last several years (Chart 6). Nevertheless, a long and CHART 4 Eurobarometer: share of respondents with a negative image of the EU steady deterioration of the business environment could lead to a decline in investment flows, as has 45% been seen in Russia and Turkey. Terrorism Conﬂict 40% (as penalty) Index However, market prices and FDI inflows do not 354%5% mean that there are no risks related to political Terrorism Conﬂict 304%0% (as penalty) Index developments in the CEE region. European + 253%5% Political Risk Index institutions are concerned about breaching the rule 203%0% of law. Koen Lenaerts, President of the European + 152%5% Political Risk Index Court of Justice, declared that independent courts 102%0% are a fundamental value of the European Union that 15% Political 5% should be respected on the national level. Whereas in and Social 10% a case of Poland the way to a sanctioning mechanism Source: Eurobarometer Source: 0%

Fragility Index l Political 5% . resulting from the aforementioned Article 7 would s s y a a n d a a d a a a e y n a k a d a g y i i i i i K p i l i i i r i a t u m d r r r n n l c e t n n n a v n n U e r r a n a k a g and Social t u u a a a t a a n a n i t d a a a p l u o l a 0% s p I e l g be difficult to implement, given that several CEE R a o g a t t a g l e m o v l S o e M u y r l v r n m m r r i b L s r Fragility Index h n o r u P l I hu . e w o un o C s F s l y a a n d a a o d E a a t Greece c A a e y e n al k e a C d F a g y e i i i i i K p i l i i i m r B i a t i B m S r S r H r n P n l countries have already claimed that they would vote u d R r c h e S t n k n n a v g n n U e e r a n a D e G a L t u t n u a a a t a a z n i t d a a a p l o a p I e a x g u l R s e l o g a t a g a e m o l t e M Political l l v v m S o r Social C u y r r n b u m L s h Nr n i r u r hu against sanctions, other measures could hurt the Populism o un P I C F e w o l L o o Greece A e l e C F E t Fragility c e B i Risk B S S m H P S R e h L t D e G z x e Polish economy, such as the European Commission’s Social Political C u Populism N Risk Fragility L recent initiative to link budget transfers to the rule of CHART 5 Credit Default Swaps (CDS) law. Poland is the single largest recipient of the EU 700 3,0 budget, with an allocation of EUR 82.5 billion in the 700 3,0 2014-2020 financial framework, equivalent to roughly 2,5 600 20% of the total EU budget, or about 2% of country’s 2,5 600 GDP per year. Hungary receives around 2.5% of its 2,0 500 Czech Rep. annual GDP from EU structural and cohesion funds. 2,0 8 500 Czech Rep. According to Oxford Economics’ estimations , Hungary 1,5 Hungary Poland’s GDP would have been about 1% lower in 1,5 400 Poland 400 Poland 2016 without EU funds, and 1.9% lower in 2014 – the Romania 1,0 Romania 1,0 year of peak absorption. In terms of GDP, Hungary is 300 300 an even bigger beneficiary, with its GDP enhanced 0,5 0,5 by 2.7% in the peak year of absorption. Given the 20200 solid economic expansion of these countries (GDP 0,0 0,0 growth reached 4.6% in Poland and 4.0% in Hungary 2011 2011 2012 2013 2015 10100 2007 20082007 20082009 20092010 2010 2012 2013 2014 2014 2015 in 2017), such measures would have a limited impact in the short-term. However, their impact would be felt Bulgaria Bulgaria Hungary SlovakiaSlovakia Hungary 0

Source: Bloomberg Source: 0 Czech RepC. zech Rep. Poland Poland RomaniaRomania during the next EU budget (2021-2027), when growth 09 10 12 13 14 15 16 18 y0 9 10 ug 12 ep 13 ct 14 ov 15 ec 16 18 ya July 11 A g S p O ct N v D c Jan aM June u Se O o e Jan M June July 11 A N D 70 70 6 - European Commission, Standard Eurobarometer 88, Autumn 2017 30% 7 - The30% contract is similar to insurance because it provides the buyer of theC zechcontract, Rep. who often owns the underlying credit (municipal bonds, emerging market bonds, mortgage-backed securities, or 65 corporate debt), with protection against default, a credit rating downgrade,Hungary or Cotherzech Repnegative. credit events. An annual protection fee is expressed in basis points, i.e. CDS quotes. The contract can be 65 25% used2 as5% a hedge or a separate instrument about the credit quality of a particularPolandHungary reference entity. Source: https://www.investopedia.com/articles/optioninvestor/08/cds.asp. 60 20% RomaniaPoland 60 20% SlovakiaRomania 15% 55 Slovakia 15% 55 10% 50 10% 5% 50 45 5%0% 45 40 0-%5%

40 2012 2013 2014 2015 2016 2017 -5-1%0% 1 3 4 2 1 4 3 2 Q Bulgaria Slovakia Q Q Q Q Q Q Q Hungary 2 5 1 3 2 4 5 6 7 1 1 1 1 1 1 1 0 2012 2013 2014 2015 2016 2017 0 0 0 0 0 0 -10% 2 0 Czech Rep. Poland Romania 2 2 2 2 2 2 2 1 3 4 2 1 4 3 2 Q Bulgaria European Average Slovakia Q Q Q Q Q Q Q Hungary 2 5 1 3 2 4 5 6 7 1 1 1 1 1 1 1 0 0 0 0 0 0 0 2 0 Czech Rep. Poland Romania 2 2 2 2 2 2 2 European Average 45% Terrorism Conﬂict 40% Index (as penalty) 35%

30% + 25% Political Risk Index 20%

15%

10%

Political 5% and Social 0%

700 3,0

2,5 600

2,0 500 Czech Rep. Hungary 1,5 400 Poland Romania 1,0 300

0,5 200 COFACE ECONOMIC PUBLICATIONS THE SINGULARITY OF POLITICAL RISK 5 0,0 FOCUS IN CENTRAL AND EASTERN EUROPE 2011 100 2007 2008 2009 2010 2012 2013 2014 2015

Bulgaria Hungary Slovakia 0 Czech Rep. Poland Romania 09 10 12 13 14 15 16 18 y g p ct v c in CEE countries is likely to stabilise at lower levels CHARTa 6 u Se O o e Jan M June July 11 A N D if supply constraints are not improved. The current Dynamics of foreign direct investments inflow rebound of fixed asset investments experienced transactions (year-on-year changes) 70 in the region is fuelled in large part by projects co- 30% financed by the EU budget. This applies to lots of Czech Rep. 65 public investments, which have also elevated in the election year9. Moreover, particular sectors could 25% Hungary suffer from the limiting of EU funds. Any possible Poland 60 squeezing of co-financing from EU funds would be 20% Romania harmful for the construction and ICT sectors (the sectors in which the most companies are dependent Slovakia 15% 55 on public orders). Indirect negative consequences could be experienced by local transport companies, or businesses cooperating with the construction 10% 50 sector (producers of building materials, steel manufacturers and distributors, machine producers 5% 45 etc.). On the other hand, worsening relations would disadvantage the EU as much as Poland: Poland is 0% not only the biggest beneficiary of EU funds, but 40 also supplies most of its exports (79.7% of total -5% exports in 2017), and will be the fifth-largest EU nation after the UK leaves the EU. It is therefore 2012 2013 2014 2015 2016 2017 -10% Source: Eurostat Source: likely that the current Poland-EU stand-off will end 1 3 4 2 1 4 3 2 Q Bulgaria Slovakia Q Q Q Q Q Q Q Hungaryin a compromise: both parties have too much to 2 5 1 3 2 4 5 6 7 1 1 1 1 1 1 1 0 0 0 0 0 0 0 lose in a case of worsening relations. 2 0 Czech Rep. Poland Romania 2 2 2 2 2 2 2 European Average

8 - Oxford Economics, “Poland: A problem the EU is unlikely to solve”, 7th March 2018. 9 - Parliamentary elections scheduled for April 2018 in Hungary; municipal elections scheduled for autumn 2018 in Poland. RÉSERVE Le présent document reflète l’opinion de la direction de la recherche économique de Coface, à la date de sa rédaction et en fonction des informations disponibles ; il pourra être modifié à tout moment. Les informations, analyses et opinions qu’il contient ont été établies sur la base de multiples sources jugées fiables et sérieuses ; toutefois, Coface ne garantit en aucun cas l’exactitude, l’exhaustivité ou la réalité des données contenues dans le présent document. Les informations, analyses et opinions sont communiquées à titre d’information et ne constituent qu’un complément aux renseignements dont le lecteur dispose par ailleurs. Coface n’a aucune obligation de résultat mais une obligation de moyens et n’assumera aucune responsabilité pour les éventuelles pertes subies par le lecteur découlant de l’utilisation des informations, analyses et opinions contenues dans le présent document. Ce document ainsi que les analyses et opinions qui y sont exprimées appartiennent exclusivement à Coface ; le lecteur est autorisé à les consulter ou les reproduire à des fins d’utilisation interne uniquement sous réserve de porter la mention apparente de Coface et de ne pas altérer ou modifier les données. Toute utilisation, extraction, reproduction à des fins d’utilisation publique ou commerciale est interdite sans l’accord préalable de Coface. Le lecteur est invité à se reporter aux mentions légales présentes sur le site de Coface.

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