EUROPEAN PARLIAMENT Directorate-General for Research Directorate A Division for International and Constitutional Affairs RFM/rfm Brussels, 28 February 2002 NOTE on POLAND'S POLITICAL AND ECONOMIC SITUATION AND ITS RELATIONS WITH THE EUROPEAN UNION WITH A VIEW TO ACCESSION This note has been prepared for the information of Members of the European Parliament. The opinions expressed in this document are the author's and do not necessarily reflect the position of the European Parliament. WIP/2002/02/0052-53 [FdR 463073] PE 313.120 CONTENTS 1 POLITICAL SITUATION............................................................................................................................... 4 1.1 HISTORICAL BACKGROUND ............................................................................................................................. 4 1.2 INSTITUTIONS................................................................................................................................................. 5 1.3 CURRENT ISSUES AND RECENT DEVELOPMENTS................................................................................................ 6 1.3.1 The results of the September 2001 general election and the party political landscape............................. 6 1.3.2 The new government ............................................................................................................................. 7 1.3.3 External relations ................................................................................................................................. 8 2 ECONOMIC SITUATION .............................................................................................................................. 9 2.1 ECONOMIC PERFORMANCE AND OUTLOOK ..................................................................................................... 10 2.1.1 GDP growth ....................................................................................................................................... 10 2.1.2 Prices and wages................................................................................................................................ 10 2.1.3 Employment........................................................................................................................................ 10 2.1.4 External sector ................................................................................................................................... 11 2.2 ECONOMIC POLICY........................................................................................................................................ 11 2.2.1 Policy background and framework ..................................................................................................... 11 2.2.2 Fiscal policy....................................................................................................................................... 12 2.2.3 Monetary and exchange rate policy..................................................................................................... 13 2.2.4 Privatisation and inward investment ................................................................................................... 13 3 RELATIONS WITH THE EUROPEAN UNION.......................................................................................... 14 3.1 INTRODUCTION............................................................................................................................................. 14 3.2 THE EU INSTITUTIONS' APPROACH TO ENLARGEMENT .................................................................................... 15 3.2.1 European Commission........................................................................................................................ 15 3.2.2 European Parliament.......................................................................................................................... 17 3.2.3 The Council and the European Council............................................................................................... 18 3.2.4 Negotiations with Poland.................................................................................................................... 19 3.3 POSITION OF THE POLISH GOVERNMENT ........................................................................................................ 20 3.4 PRE-ACCESSION ASSISTANCE, THE ASSOCIATION AGREEMENT AND ACCESSION PARTNERSHIP ....................... 21 3.4.1 Pre-accession aid ............................................................................................................................... 21 3.4.2 Association Agreement........................................................................................................................ 22 3.4.3 Accession Partnership ........................................................................................................................ 22 ANNEX 1 ................................................................................................................................................................. 23 ANNEX 2 ................................................................................................................................................................. 24 ANNEX 3 ................................................................................................................................................................. 25 ANNEX 4 ................................................................................................................................................................. 26 ANNEX 5 ................................................................................................................................................................. 27 ANNEX 6 ................................................................................................................................................................. 29 ANNEX 7 ................................................................................................................................................................. 30 ANNEX 8 ................................................................................................................................................................. 31 WIP/2002/02/0052-53 2 [FdR 463073] PE 313.120 For further information contact: Frank McAvoy, European Parliament, Directorate-General for Research 1047 Brussels e-mail: [email protected] Tel. 0032 2 2842130 General sources: Economist Intelligence Unit, ISI Emerging Markets, Oxford Analytica, Reuters Business Briefing, European Commission, European Parliament. WIP/2002/02/0052-53 3 [FdR 463073] PE 313.120 SUMMARY Poland is the largest and most populous (38.7 m inhabitants) of the EU candidate countries. It submitted its membership application on 5 April 1994. Negotiations opened in March 1998 and, by the end of December 2001, Poland and the EU had provisionally closed discussions on 20 chapters following a change in strategy whereby concessions were made on some outstanding chapters in order to focus on the agricultural, structural funds and budgetary chapters due for negotiation later in 2002. This has not been without its consequences in domestic political terms, as both junior coalition member, the PSL, and the radical opposition parties have reacted critically to the change in approach. However, the strongest feeling has been aroused by the European Commission's recent proposals for paying direct subsidies to farmers after enlargement. Domestic political events have been dominated by the parliamentary elections held on 23 September 2001 and the initial actions of the new coalition government of the Democratic Left Alliance (SLD) - Polish Peasants' Party (PSL). The new government is headed by Leszek Miller of the SLD. The main losers of the election were the ruling Solidarity Election Action - Right (AWS) and its former coalition partner, the Freedom Union, which failed to win any seats in the Sejm, as their vote slumped below the threshold for representation. Populist and eurosceptic parties gained more than a quarter of the votes in the election. GDP growth slowed in 2001 to only 1.1% for the year as a whole, while unemployment has risen from what was already a relatively high level to reach 18%. As domestic demand faltered, import growth was sluggish, helping to narrow the current account deficit. Inflation has also been falling since the highs reached in 2000 ending the year 2001 at 3.6% year on year and thus increasing the pressure on the central bank to cut interest rates further. Fiscal policy remains an area of great concern after the high deficit in 2001 and the likelihood of high deficits for some time to come. The new government faces the problem of boost flagging revenues and cutting spending while attempting to revive the economy. A new economic plan was unveiled at the beginning of 2002. 1 POLITICAL SITUATION 1.1 HISTORICAL BACKGROUND The Polish state is over 1000 years old. In the XVIth century, under the Jagellionian dynasty, Poland was one of the richest and most powerful states in Europe. On 3 May 1791, Poland ratified its first constitution. However, soon after, Poland ceased to exist as state for 123 years following its partition by Russia, Austria and Prussia. The country regained independence in 1918 but was overrun, first by Germany and then by the Soviet Union, in World War II. It regained independence within the Soviet sphere of influence and new