For many voters in Poland, economic growth is not enough

Reuters News
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Posted: Oct 20, 2015 7:35 AM

By Justyna Pawlak and Marcin Goettig

WARSAW (Reuters) - When Google opens an "innovation center" in a former vodka factory in a down-at-heel neighborhood of Warsaw next month, many Poles are unlikely to see it as a good sign.

Even though the economy has grown by almost half in a decade, a large proportion of those who will vote in the parliamentary election on Oct. 25 are unhappy with their share of the spoils of its transformation from communism.

Combined with a string of scandals that has tarnished the ruling Civic Platform, it is driving a shift in Polish politics to the left after eight years of centrist-led rule.

Voters may hand power to the eurosceptic Law and Justice party (PiS), which promises a bigger role for the state in the economy and a lowering of the retirement age.

"The state has abandoned too many people," Beata Szydlo, the PiS candidate for prime minister, said during a recent campaign tour. "There are too many divisions. We need to eliminate those divisions to ensure everyone feels the state is on their side."

PiS is seen getting 36 percent of the vote, according to the latest opinion poll from IBRiS for the Rzeczpospolita newspaper, setting the scene for a coalition with one or more of the five smaller parties that could get into parliament.

To some Poles, Google's new center to nurture and link up with independent tech talent, only its fifth in the world, and its central Europe engineering and administration hub in Warsaw, shows how foreign investment is key to their future prosperity.

To others, it just one more glitzy business welcomed by a government that may have driven up economic growth but has left living standards for many people lagging behind, prompting about two million to seek work abroad.

BANKING IN SIGHTS

Polish GDP expanded by 46 percent in inflation-adjusted terms over the past 10 years. That makes it the steepest rise among the European Union's 28 member states, but per capita GDP is still lower than some of its central European peers.

Real earnings of Polish households, meanwhile, have risen more than 30 percent in the last decade but remain at less than a third of their German equivalent - good news for foreign manufacturers looking to set up shop, but frustrating for many.

Income inequality, which shot up with the end of communism in 1989, has now dropped to roughly the EU average, but one in 10 Poles willing to work is unemployed and more than one in four employees have temporary contracts, twice EU the average.

A significant share of these deals is known as "garbage contracts" because they offer bare bones benefits, have become a hot-button issue in the election.

Civic Platform's election slogan, "Strong economy, higher wages" seeks to address that concern, but the same IBRiS opinion poll predicted it would get only 26 percent of the vote, after winning more than 41 percent in 2007.

"Civic Platform represents stability," said one supporter, Ryszard, a 63-year-old public servant who declined to give his surname. "They care about businesses ... They are relatively socially equitable."

Confidence in the party has been dented by leaked audiotapes in which ministers and other officials could be heard in Warsaw restaurants cracking off-color jokes, ordering expensive wine and speaking indiscreetly about colleagues and foreign leaders.

The party has focused on absorbing EU funds, attracting investors and reducing the fiscal deficit during its two terms in power, drawing criticism from some quarters for leaving politically sensitive parts of the economy unreconstructed.

Poland's likely new rulers could see their election as a mandate to reverse some market-oriented reforms.

Banking may be their first target. The PiS election program includes new taxes and a push towards more involvement of Polish capital after many Poles who were encouraged to borrow in Swiss francs lost out when the currency surged in January.

Some outsiders have cautioned against going too far.

"A government would be poorly advised if it were to entirely redefine the role of the financial sector in growth," said Alexander Lehmann, lead economist with the European Bank for Reconstruction and Development.

PATCHY PROGRESS

A key factor in Poland is the unevenness of the economy.

In western areas nearer the German border - Poland's main trading partner - unemployment is near zero among qualified workers in some sectors, employment agencies say, which helps to improve wages or working conditions as new businesses open up.

But in the east, PiS heartland, there are pockets of extreme poverty and economic stagnation.

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Average monthly wages in the corporate sector may be just under 1,000 euros but about two thirds of Polish employees earn less than that, according to 2012 data, the latest available.

Mieczyslaw Cierpisz, a construction worker from Brzeziny, one of the biggest Polish tailoring centers in the 19th century, said Poland needed a change of government after eight years.

"We don't believe things will improve," he said. "Brzeziny used to be famous for its tailors, there used to be many places to work. There are none now. Tailors are working under the table, people are picking garbage."

Disappointment with post-communist economic reform has been prominent in Romania and Hungary in recent years. In Poland, it is compounded by anxiety over immigration and austerity abroad, bolstering support for fringe and nationalist parties.

Critics say PiS exaggerates economic problems to win votes. PiS-backed President Andrzej Duda, elected in May, has said growth appears "on paper" but the middle class is vanishing.

"Poland has been built up from plywood. Without any order whatsoever," a rightist web portal quoted him saying in April.

Poland still has the second highest level of state control in the economy among OECD countries after Turkey, and critics say PiS, which has combined talk of injustice with nationalist language, is fostering a communist-era mentality.

Prime Minister Ewa Kopacz has urged Poles not to throw away what her government sees as building blocks for the future. "Let's not waste a chance for Poland for the coming years," she said.

(additional reporting by Karol Witenberg and Wiktor Szary, editing by Philippa Fletcher)