Poland – EU Steps up Pressure

The threatened collapse of the five-year political partnership of the populist-conservative PiS and two further-right parties, UP and Agreement, has been averted the conclusion of a new coalition agreement that will apparently see PiS leader Jaroslaw Kaczynski take a more active role in government, the better to keep a close watch on the main instigator of the recent trouble, Justice Minister Zbigniew Ziobro, who is also the leader of the UP. Polling data suggest that neither of the junior parties in United Right alliance would obtain the minimum 5% vote share required to retain their seats in the Parliament in the event of an early return to the polls, which no doubt factored into the resolution of the internal strife. However, peace within the governing coalition may only be temporary.
Although Poland has fared less well than its immediate neighbors in terms of the number of COVID-19 cases and deaths, poll trends suggest that perceptions of the government’s management of the pandemic are not having a significant impact on party preferences. Rather, the economic fallout from the crisis has underscored Poland’s dependence on the development funding it receives from the EU, which seems to have heightened public discomfort with the deterioration of relations with the EU that has occurred since the PiS was returned to power in 2015.
While the PiS finished on top in the presidential contest, Andrzej Duda only narrowly defeated his PO challenger, Warsaw Mayor Rafał Trzaskowski, who benefited from the united support of pro-European political forces. A similar rallying effect at a snap legislative election could leave Kaczynski’s party vulnerable to an upset.
Indeed, tensions between the government and the EU have become more intense since the July run-off election, as some members of the bloc have proposed making access to financing from the $860 billion COVID-19 recovery fund contingent upon meeting bloc-wide standards for observance of the rule of law. The proposal is obviously aimed at forcing the populist-conservative governments in Poland and Hungary to return to the path of liberal democracy, and there are signs that the opposing sides are preparing for a game of political chicken that could cause lasting damage to Poland’s relationship with the EU.
The government has suspended statutory fiscal triggers as permitted under the emergency provisions of the Fiscal Law, but will face pressure to control spending as required to ensure that the deficit is kept under 3% of GDP once the grace period expires at the end of 2021. The political challenges associated with achieving that objective are mitigated by the fact that the next parliamentary election does not fall due until 2023 but would increase considerably Morawiecki were forced to hold a vote in the next 18 months.
Since 1979, The PRS Group Inc., has been a global leader in quant-based political and country risk ratings and forecasts. This commentary represents a sneak peek from our upcoming political risk reports. For more information please contact us at (315) 431-0511 and sales@prsgroup.com, or explore a subscription to PRS Online and/or ICRG Online today to receive political risk updates.