Jerzy BUZEK: "We paid a very high price for reform in Poland"

The Day: Reforms in Poland and Ukraine seemed to follow the same course, using identical tools: liberalization of prices, privatization, and financial stabilization, yet the results are dramatically different. Why?

J. B.: Ukraine and Poland had different starting conditions back in the early 1990s, and starting conditions almost always determine a country's status 5-10 years later. I think this is the principal reason for what has become of these countries. However, I am convinced that consistent and rapid market reforms, as is the case with Poland, would bring as positive results in Ukraine. I would also like to stress that we paid dearly for our reforms. There was considerable resistance within Polish society, and we had to make very difficult decisions. In this sense our countries do not differ much.

The Day: You paid a dear price, but ridding oneself of one's socialist past must have been worth it. Now that Poland is on its way to the Council of Europe the Polish government also often meets resistance, particularly from farmers. Could it be that Polish society is made to pay an exorbitant price for European integration? Is it worth it?

J. B.: We started restructuring a bad system, so we had to expect the situation to worsen temporarily. It's like a house under repair. We used to live in a old ramshackle building. Now we are refurbishing it while having to live in it, which is anything but comfortable. But several months later we will have a solid home with all the modern amenities, and we will feel much better living in it than ever before. We all know this from our own experience. On a nationwide scope this discomfort manifests itself in the form of public unrest. However, those in power have to think at least 2-3 years ahead.

The Day: We noticed that in the fall of 1998 the zloty rate dropped by more than a quarter, but we learned this only when in Warsaw. Why do you think this decline did not make headlines across the world as was the case with Russia, Brazil, and Ukraine?

J. B.: You are not exactly right. It is true that the zloty fell, but it did by less than 10% and its current decline has nothing to do with devaluation. Its rate is floating and self-regulated, meaning that no one can order it up or down. It's just that the domestic and foreign economic situation took a certain course, and there was some stock exchange outflow. And mind you, we made no decisions to alter the exchange rate. Of course, we could have had the central bank intervene, but in principle this rate is determined by capital flow.

This time the decline must have been caused by the zloty rate being unchanged for several months while the inflation rate went above 8-9%. In other words, the general impression was that the Polish currency had grown too strongly, so now the natural balance is being restored.

The Day: How did the people respond to the events on the exchange market? Were there inflationary expectations or, on the contrary, did people anticipate production growth?

J. B.: The whole thing did not affect the domestic market situation. At the same time, it was quite instrumental for our exports.

The Day: Why do you think people can't change zlotys for hryvnias in Kyiv and Warsaw?

J. B.: Our countries have not as yet approached a currency stability level allowing this exchange, but I am sure that it is just a matter of time.

The Day: Under socialism Poland was primarily oriented toward the Soviet market. How could your country reorient itself toward the European Union so quickly, regardless of who was in power, the Left or the Right?

J. B.: Mainly because we made decisive economic reforms, liberalizing most commodity prices and lifting bureaucratic barriers on business. Our privatization is a large-scale project, and we effectively attract foreign capital. Naturally, this serves to liven up relationships with the countries supplying this capital. Simultaneously, we simplified foreign business procedures on the Polish market. In fact, we did the same with regard to Polish enterprises.

The Day: What is the dominant factor in the Polish movement toward the EU: politics or pragmatic economic considerations?

J. B.: Both factors are important. But perhaps political decisions and the institution of a democratic system played the crucial role as a guarantee of freedom for all those wishing to operate on the Polish market. From the economic point of view, the implementation of market principles warranted our decisions. We proceeded from the need to introduce three basic principles: First, economic freedom for all business entities, along with financial and property liability, bankruptcy included. Secondly, private ownership, privatization of the economy. Thirdly, gradually opening Poland to the surrounding world.

The Day: What problems does Poland encounter in adapting itself to EU norms and standards?

J. B.: We have problems in the heavy, mining, and steel industries. Also, in agricultural restructuring. We rely on EU assistance in this adaptation process. We also started four reforms to bring us closer to EU standards: in public education, health care, pensions, and social insurance. But we would carry them out anyway, EU membership notwithstanding.

We are also carrying out administrative reform. We want to enable people to solve their educational, health care, and other problems on the spot, in keeping with European standards. To do so, simultaneously with local self-government reform, we allowed the local authorities to have one half of budget funds. This will also be important when EU decides on aid to Poland.

The Day: Were your people psychologically prepared to take care of their problems themselves without looking to the central government?

J. B.: Yes, we started self-government reform 8 years ago. I think this period is long enough to get prepared for coping with such problems.