Warsaw, 28^th July 2020

THE SUMMIT OF THE EUROPEAN COUNCIL AND ITS AFTERMATH
OPINION OF THE UNION’S CHIEF EXPERTS ON POLITICAL ECONOMY

Following the last summit of the European Council (comprising of leaders of EU member states) and the decision made to establish a reconstruction fund and to create the Next Generation EU programme, the talks of a Hamiltonian moment in Europe began. Let us recall: Alexander Hamilton created the American central bank and his actions made it possible to incur federal debt in place of state debt. This facilitated the country’s reconstruction after the War of Independence, and also lowered the cost of debt as well as made it easier for the states to pay it back. Moreover, the foundation of the emerging republic had been built in this way. Regional interests, thus far often divergent, became unified – and the federal government became the cornerstone of the emerging state. This Hamiltonian moment was a turning point: the restructuring of state debts was one of the key moments in the history of integration of American states. This is what is supposed to take now place in Europe. According to many commentators, the new draft budget, in particular provisions enabling financing of reconstruction funds, is to be such a Hamilton moment.

The concept of such a moment as a turning point, a crossroads in the history of the republic was formulated by J.G.A. Pocock almost half a century ago. He dealt with the Machiavelli moment – the situation when a modern republic (Florence in this case) faces the risk of collapse which, provided people have been made aware, leads to a policy reconfiguration necessary for it to survive. This is the moment when, as Pocock wrote, the republic stands at a crossroads and tries to salvage “political and ethical stability in the rush of irrational events perceived as completely destructive to all systems of secular equilibrium”. This is the moment when republican virtue confronts chance and corruption. Of key importance at this point is the change of political philosophy – because Machiavelli’s moment is a time when the hitherto experiences and knowledge of politics become no longer relevant. Machiavelli understood and recorded this experience in his masterpiece “The Prince”, henceforth Machiavelli’s moment. On the other hand, “The Prince” somehow reflects the process of reconfiguration of political philosophy and politics in Florence.

Such turning points repeatedly take place when a republic founded on secularised Western philosophy is on the verge of collapse. This was the case in 16^th century England and 18^th century North America. In case of the latter, it was James Maddison who played the role of Machiavelli, finally conceptualising American federalism and paving the way for the US constitution. The durability of the American republic was thus ensured by Hamilton and Maddison. The Machiavelli moment and the Hamiltonian moment secured the survival and development of the American republic.

In recent years, the EU has faced such a Hamiltonian moment, as many commentators are pointing out. But more importantly, it might actually be a Machiavelli moment already. The dispute-war waged by leaders at the last summit, post-Brexit, after the Eurozone crisis, and now in the midst of an economic storm sparked by the coronavirus epidemic, although it may appear to be a debate regarding the present, could be a moment of confrontation between republican virtues and corruption. The Union must find a firm foundation for its existence. European federalists are looking forward to that common debt becoming such a foundation. Maybe… if it in fact improves the situation of southern European countries. Maybe… although the issue of debt itself is not answer to the question of need for a new political philosophy of the Union.

It is still uncertain whether the EU has retained the vitality of the European republic or has already become an irreversible administrative behemoth where procedure prevails over virtue. Recent crises have made it possible to rethink and reconsider the concept of community. For the time being, they have been replaced by a dispute between the frugal faction – countries that are net contributors to the European project, and those usually described as spendthrift – the European south.

This is a dispute that reaches the very heart of the European project. For it is about who benefits more from the single currency and who benefits from the de facto status of a European tax haven. Although everyone benefited from the Euro, the distribution of benefits was asymmetrical. The countries of the European North benefitted more. By contrast, tax havens such as the Netherlands and Ireland benefit from artificial profit transfers. Undermining European solutions, they care above all else about their particular national interests. In the Netherlands, as much as 40% of CIT revenues are the result of profits transferred there artificially. The stable fiscal situation of countries such as the Netherlands may therefore be related to the asymmetry of benefits in the EU and the preference for national interests pursued through EU mechanisms. Although such a strategy is understandable and very beneficial in particular terms as the examples of the Netherlands, Ireland or Luxembourg show, it may sabotage the foundations of a European consensus.

At the EU summit, an agreement was reached, because the frugal countries gave way, but at the cost of significant concessions in their favour. They are especially visible in the case of the Netherlands – which, apart from the reduction of the budget contribution, gained in the near term higher remuneration for handling European customs duties. They are among the victors of this summit – from a pragmatic and competitive point of view. But is this a republican approach?

Nevertheless, the problem of the European Union is not the dissatisfied attitude of the thriving economies for which the EU and the common market bring almost nothing but benefits. The problem consists in the increasing headaches of the southern countries, exacerbated even more by the current crisis. The countries of the European south have been developing very slowly for over a decade. Greece still (in 2019, according to the World Bank) achieved the same level of development (measured by GDP per capita) as 2 decades ago, and the same goes for Italy. The Spanish economy grew by just over a dozen percent over that time. Let us compare: the German economy has grown by 30% since 2000, whereas the Polish economy by 100%. The post-pandemic crisis is likely to aggravate these disparities even further. Therefore, the Machiavelli moment should be a moment to re-formulate the European concept, but also a period of real, long-term development aid for the South – a bit like the Mediterranean countries obtained in the 1980s. Today, without aid or in a situation where control and distribution mechanisms included in the European budget and aid programs will drastically limit access to it, the political drift of the Union may become more and more dangerous to its existence.

This moment might be a turning point in the history of a republic. A moment of historical significance when fate can go two ways – it will either drift towards a crisis, or new concepts and ideas will restore its vitality. This moment in EU’s recent history has lasted for several years, and the last summit is just yet another contribution to a longer process whose consequences are still not obvious. The summit of the European Council can be treated as a moderate success of the Polish government. It is also a moderate success for European federalists – although there is still a long walk ahead of us until we reach a Hamiltonian moment. Yet – so it would seem – the Machiavelli moment will determine the future of the Union. Either the idea of a republic will ensure its longevity, or divergent national interests along with an excessive bureaucracy will keep the drift unchanged. The right answer in this increasingly complicated reality would be a common commitment together with an idea how to make use of it for the good of the republic.

Piotr Koryś Ph.D.
Chief Expert of Economic Policy of the Union of Entrepreneurs and Employers

 

28.07.2020 The Summit of the European Council and its aftermath – the opinion of the Union’s Chief Expert of Economic Policy

 

Fot. hpgruesen / pixabay.com

Warsaw, 6^th July 2020

THE CONDITION OF THE POLISH MINING INDUSTRY
THE OPINION OF THE CHIEF EXPERT OF THE UNION OF ENTREPRENEURS AND EMPLOYERS ON ENERGY

The data on the condition of the Polish mining industry, presented to the members of the Social Dialogue Council’s Economic Policy and Labour Market Team, show the current situation in the hard coal mining sector in Poland does not inspire optimism and indicates the necessity to undertake quick stabilising measures, and most importantly, to develop the Plan for Restructuring the Polish Mining Industry, a reasonable, reliable plan that takes into account the specificity of the Polish mining industry and the Polish energy sector. Such a Plan should be consistent with the Energy Transition Strategy and ought to take into account the gradual phasing out of fossil fuels with the 2050 time horizon.

The plan for the Polish mining industry should take into account the European Green Deal Policy, which does not mean the liquidation of the sector by 2050. In 2019, the Union of Entrepreneurs and Employers presented a report entitled “Assumptions for the Energy Development Strategy in Poland”, which presented the place of Polish coal until 2050.

In the near future, we will present the necessary update to this report in which we will try to define more precisely both the place and role of domestic hard coal and lignite resources by 2050. Meanwhile, the presented data show clearly unfavourable trends in the Polish mining industry, on the basis of which it can be predicted in the coming years.

The decrease in sales by an average of 17% and an increase in stocks by 13% is not yet the main concern for the mining sector, but the decrease in production by 7% and the decrease in labour productivity in mines constitute serious problems not only for the mining industry.

This means that it is more and more difficult to extract coal in Polish mines, and thus the costs of this extraction are clearly growing. The fluctuations in thermal coal prices are understandable, but the phenomenon of a 30% drop in coking coal prices indicates a tendency in this matter. This may be related to the decline in steel production in the world, but nevertheless, this issue requires a detailed analysis and inclusion in sectoral plans. According to the report, in 2020 over 82,000 people worked in the mining industry, which means that the employment level has not changed for several years.

On the other hand, there was a significant increase in investment outlays, and so in 2019 they amounted to over PLN 4 billion, and by 30^th April 2020 over PLN 1.2 billion was invested in the mining industry.

It can be assumed that 30% of these amounts are investments in mining-related companies, not included in the report. Considering the above, the annual level of investment in the Polish mining industry certainly exceeds PLN 5 billion, and yet the level of extraction and labour productivity are declining.

If one adds to this the amount of the budget subsidy of PLN 1 billion per year and the mining sector’s liabilities of PLN 15 billion, the conclusions regarding the state of this sector are obvious.

However, this does not mean there is neither room nor role for the hard coal sector in the Polish economy until 2050. It is true that coal will be replaced by renewables and natural gas, but for many years to come, coal will be the basic raw material for the Polish energy sector.

To sum up, immediate action should be undertaken within the Polish mining sector:

• Making an inventory of Polish mines in terms of their future, opportunities, economy, seam depth and employment.
• Defining the volume of domestic production (e.g. 25 million tons) as a reserve to secure the country’s energy demand.
• Redirecting investment outlays to mines selected for further extraction.
• Developing a co-operation system for coal-fired energy with renewable and gas sources in the timeline until 2050.
• Carrying out a market analysis for black energy, sales areas, prices, volume of black energy supplies in individual years until 2050.
• Simulating the cost of mine closures, along with the cost of mining pensions until 2050.

Only immediate and consistent actions presented above can stop the degradation of the Polish mining industry and open its new chapter, taking into account the European energy policy and the specificity of the Polish energy sector.

If the transformational activities in the mining sector do not begin immediately, we are concerned that the situation will force the development of such events that are very unfavourable for the mining industry.

Włodzimierz Ehrenhalt
The Union of Entrepreneurs and Employers’ Chief Energy Expert

06.07.2020 The condition of the Polish mining industry – the opinion of the chief expert of the Union of Entrepreneurs and Employers on energy

 

Fot. Tama 66 / pixabay.com

Warsaw, 16^th June 2020

Two representatives of the Union of Entrepreneurs and Employers among the proposed candidates for the European Economic and Social Committee

The Ministry of Family, Labour and Social Policy informed that Marcin Nowacki and Tomasz Wróblewski, representatives of the Union of Entrepreneurs and Employers, were nominated to the Secretariat of the EU Council as candidates for members of the European Economic and Social Committee for the 2020-2025 term.

For the first time, the government did not bow to the dictates of the post-communist majority on the side of employers at the Social Dialogue Committee. Apart from the Union of Entrepreneurs and Employers, the post-communist organisations indicated 7 of their candidates out of the 7 seats in the EESC as agreed by the “majority”. The Union of Entrepreneurs and Employers nominated two of its candidates separately, Tomasz Wróblewski and Marcin Nowacki.

In the course of the selection procedure of candidates for members of the European Economic and Social Committee for the 2020-2025 term, the government selected two candidates from the Union of Entrepreneurs and Employers and five from the post-communist majority. Among the rejected candidates, there was Mr. Andrzej Malinowski, President of Employers of the Republic of Poland. In January 2020, in the Do Rzeczy weekly, an article about the cooperation of Andrzej Malinowski, President of the Employers of Poland, with the military intelligence of the People’s Republic of Poland. The weekly paper also published scans of the commitment to cooperate, including some bearing Malinowski’s signature, and other documents signed or prepared by him.

Since September 2017, the Union of Entrepreneurs and Employers has been actively running its Representation to the European Union. The office in Brussels focuses on representing the interests of Polish enterprises. It deals with general matters relating to all companies and works with the industries represented in the Union of Entrepreneurs and Employers. The Delegation is responsible for maintaining a permanent relationship with the most important EU institutions and economic stakeholders. One of the key areas of the international activity of the Union is also integration and undertaking joint activity with other employers’ organisations from the region of Central and Eastern Europe.

Marcin Nowacki and Tomasz Wróblewski will constitute a proper and worthy representation of the Republic of Poland on the international arena in the European Economic and Social Committee.

The full list of candidates for members of the European Economic and Social Committee for the 2020-2025 term is as follows:

1. Mr Jacek Piotr KRAWCZYK – Lewiatan Confederation
2. Mr Lech PILAWSKI – Lewiatan Confederation
3. Mr Janusz PIETKIEWICZ – Employers of the Republic of Poland
4. Mr Krzysztof OSTROWSKI – Business Centre Club – Employers Association
5. Mr Jan KLIMEK – Polish Craftsmanship Association
6. Mr Marcin NOWACKI – Union of Entrepreneurs and Employers
7. Mr Tomasz WRÓBLEWSKI – Union of Entrepreneurs and Employers
8. Mrs Dorota GARDIAS – Trades Union Forum
9. Mr Rafał JANKOWSKI – Trades Union Forum
10. Mr Tadeusz MAJCHROWICZ – Independent Self-governing Trade Union “Solidarity”
11. Mr Mateusz SZYMAŃSKI – Independent Self-governing Trade Union “Solidarity”
12. Mr Marcin ZIELENIECKI – Independent Self-governing Trade Union “Solidarity”
13. Mr Wincenty Sławomir BRONIARZ – All-Poland Alliance of Trade Unions
14. Mr Dariusz POTYRAŁA – All-Poland Alliance of Trade Unions
15. Mr Krzysztof Stanisław BALON – Working Community of Associations of Social Organisations WRZOS
16. Mrs Małgorzata Anna BOGUSZ – The Kulski Foundation
17. Mr Maciej Dawid KUNYSZ –EKOSKOP Association
18. Mrs Justyna Kalina OCHĘDZAN – Greater Polish Coordination Council – Union of NGOs
19. Mr Krzysztof Jerzy PATER – Polish Scouting Association
20. Mr Marcin Seweryn PLUTA – Sensible Poles Association Initiative
21. Mr Tymoteusz Adam ZYCH – Polish Non-Governmental Initiatives Confederacy

 

Fot. GregMontani/pixabay.com

Warsaw, 20^th July 2020

Union of Entrepreneurs and Employers:
the final beneficiaries of the ERP system must be the citizens and the environment

The deadline for Poland to introduce the provisions of the European Directive implementing Extended Producer Responsibility (ERP) has passed on 5^th July, and we have less than three years to amend the current system. The Union of Entrepreneurs and Employers hereby presents its proposal regarding the ERP system, taking into account the demands of entrepreneurs and organisations representing waste management companies.

In the face of the necessity to introduce Extended Producer Responsibility into Polish legislation, Poland has a chance to heal the waste management system and eliminate current abnormalities. The purpose of improving the ERP system is to increase the efficiency of collection, preparation for recycling and the recycling of packaging waste itself, so as to achieve higher levels of recycling specified in EU law, and thus restore valuable material to the economy and protect the environment.

The vestigial ERP system currently in force in Poland, based only on the obligation to meet the recycling levels without being linked to the economy of achieving these goals, does not meet the basic EU requirements. The Union of Entrepreneurs and Employers and the Working Group for Extended Producer Responsibility operating within its framework, in which organisations representing producers of packaging products (including food, pharmaceutical, cosmetic or detergent industries) and organisations representing waste management companies participate, presented postulates and proposals of entrepreneurs regarding the improvement of this system, in accordance with the requirements contained in Article 8a of the waste directive.

According to the Union, the ERP model should meet the following criteria:

• The system must be simple and comply with the directive and in particular with Article 8a;
• The final beneficiaries of the system should be the citizens and the environment (therefore, ERP Organizations, among others, should operate in the not-for-profit formula);
• The responsibility of system participants should be adjusted to the scope in which they can bring the greatest added value; moreover, the responsibility should go along with the possibility of actually exerting an impact on efficiency in the area covered by this responsibility;
• The ERP system should maximise the use of synergies between the activities of individual system participants;
• The system must be cost-effective along the entire value chain (money follows waste).

When thinking about creating an ERP system, one should bear in mind, in addition to environmental goals, the cost-effectiveness of the entire chain.

“As part of the public debate, many ERP models are proposed, including the extremely ineffective model based on a centrally determined fee (para-tax) and its arbitrary redistribution,” emphasises Marcin Nowacki, the Union’s vice-president. “Therefore, the Union of Employers and Employees proposes that all the minimum requirements contained in Art. 8a be included in the Polish act, as only a properly implemented ERP system will ensure the achievement of environmental objectives while maintaining economic efficiency among all its participants,” he adds.

The model proposed by the Union of Entrepreneurs and Employers is based on the synergy of activities between all stakeholders, from the Regulator and communes, to producers of packaged products and ERP Organisations, licensed by the Regulator and operating in the not-for-profit formula.

The tasks of the Regulator would include control and supervisory functions, primarily in the area of waste management costs, as well as ensuring the transparency of the system and implementing supervision, audit, and control systems. The Regulator should be a government administration body reporting directly to the Minister of the Environment. The tasks of a commune (gmina – subdivision of a poviat) as a public participant in the system would include cooperation with ERP Organisations – local governments, in consultation with them, would introduce the standardisation of selective collection and coordinate educational and information activities. Local governments would also participate in organising joint tenders for the collection of packaging waste.

Producers would pay fees to the ERP Organisation in accordance with the applicable rates and report the number of packages placed on the market broken down into individual streams (households and businesses).

Other not-for-profit ERP Organisations licensed by the Regulator would take over the obligations from producers and cover the costs of the packaging waste management system from households, but also fulfil recycling obligations regarding the entire stream of packaging, also collective and transport packaging. ERP Organisations would establish, under the supervision of the Regulator, ERP rates for packaging producers reflecting the actual net cost of collection and management of packaging waste.

An important role in the model designed by the Union of Entrepreneurs and Employers would also be played by the National Fund for Environmental Protection and Water Management, which would have a special fund supplied by ERP Organisations, used for research and development in the field of eco-design or recycling.

The members of the Union of Entrepreneurs and Employers wish to introduce the Extended Producer Responsibility in Poland primarily in order to meet environmental goals. The fees paid by producers should be an incentive to introduce recyclable packaging. On the other hand, the funds obtained from them should be allocated to the processing of waste into a secondary raw material of appropriate quality suitable for reuse.

The model proposed by the members of the Union of Entrepreneurs and Employers also guarantees transparency and cost-effectiveness for all participants of the system. To achieve this, producer fees cannot be imposed arbitrarily in isolation from environmental and market realities, as this will create inefficiencies for which the citizen will ultimately pay (as a resident and a consumer).

 

Fot. Jonathan Chng / Unsplash.com

Warsaw, 27^th July, 2020

 
Position of the Union of Entrepreneurs and Employers on a fair minimum wage

On 4th June 2020, the second stage of consultations with trade unions and employers’ organisations began with ensuring a fair minimum wage for all workers in the European Union in mind. A fair minimum wage is one of the priorities of the European Commission chaired by Ursula von der Leyen. Basing on the outcomes of the consultations’ first stage, the European Commission concluded that there was a need for further action at the EU level. As part of this second phase of the consultations, the Commission seeks to find out what the views of trade unions and employers’ organisations are with regard to the type of instrument that would be most appropriate and its potential goals.

At present, the Commission is considering both the possibility of adopting a directive and non-legislative measures, such as a Council recommendation. In order to justify the need for EU action on the minimum wage, EU institutions refer to the European Pillar of Social Rights (hereinafter EPSR). It is worth stressing, however, that the EPSR is not a legal act, but merely a non-binding political declaration, which some believe is intended to stimulate the development of EU legislative initiatives on social rights. Nonetheless, the provisions of the EPSR themselves exclude this possibility. Section 18 of the EPSR Preamble states clearly that “at Union level, the European Pillar of Social Rights does not entail an extension of the Union’s powers and tasks as conferred by the Treaties. It should be implemented within the limits of those powers”, while Section 19 sets forth that “the establishment of the European Pillar of Social Rights does not affect the right of Member States to define the fundamental principles of their social security systems and manage their public finances, and must not significantly affect the financial equilibrium thereof”. Moreover, as a potential legal basis for a fair minimum wage, the European Commission proposes Art. 153 sec. 1 of the Treaty on the Functioning of the European Union (TFEU), which allows the EU to act in the field of social rights. However, these actions ought to be of the following nature “the Union shall support and complement the activities of the Member States”. Therefore, the Union of Entrepreneurs and Employers is of the opinion that the regulation of the minimum wage remains within the exclusive competence of member states, and that EU instruments referring to these issues should be of a non-binding nature, should they be at all adopted.

In the document providing the basis for the second stage of consultations, the European Commission identified possible options for EU action to ensure a fair minimum wage: establishing a well-functioning collective bargaining system for wage setting; creating a national legal framework to establish and regularly update a statutory minimum rate based on clear and stable rationale; social partners’ real involvement in the process of minimum wage setting; elimination of exceptions allowing for deviation from the application of the minimum wage; creating an effective system for monitoring and enforcing the minimum rate.

When it comes to establishing an efficient collective bargaining system, the EC distinguishes between countries with a statutory minimum wage and countries that set a minimum wage only by means of negotiations with unions. This distinction is a nod to the Scandinavian countries, which have a well-functioning collective bargaining system and fear that minimal harmonisation at the EU level may worsen their standards. Of course, Poland does not belong to this group of countries due to, among other things, an insufficient unionisation. Moreover, the European Commission notes the positive impact of a well-functioning collective bargaining system even on statutory minimum wage systems. Unfortunately, the Commission does not make any specific proposals with regard to how to build or reform such a system, but merely points out that a future instrument may provide a non-exhaustive list of possible actions to support collective bargaining. This proposal is a step in the right direction, as it allows for a more appropriate adaptation of the minimum wage to economic conditions in different sectors and regions. However, this proposal’s main weakness is its lack of precision.

The Commission’s proposals regarding the legal framework for keeping the minimum wage up-to-date, the involvement of social partners, and the minimum wage monitoring and enforcement system do not go beyond the provisions of the Act on the minimum remuneration for work being in force in Poland. The minimum wage is negotiated on a yearly basis within the Social Dialogue Council (hereinafter SDC). By 15th June each year, the Council of Ministers presents to the SDC a proposal of the minimum wage for the following year, considering 10 statutory economic and social premises, and the National Labour Inspectorate monitors compliance with these provisions by entrepreneurs. Owing to this, from the Polish point of view, one may wonder whether such proposals are at all justified. Moreover, it should be also noted that currently six EU countries, namely Sweden, Denmark, Finland, Italy, Austria and Cyprus, do not regulate their minimum rates in a statutory manner. The European Commission claims that the European minimum wage will not force these countries to introduce a statutory minimum wage, but only to introduce clear and stable criteria to the collective bargaining process. Still, taking into consideration the fact that these countries offer a relatively good minimum wage (according to the European Commission), it may be questioned whether the EC’s intervention is necessary in this respect, and consequently whether it adheres to the principles of subsidiarity and proportionality in its activities.

According to the Commission, the above-mentioned measures could contribute to the improvement of working conditions and the standard of living of workers, while keeping jobs and maintaining competitiveness. Improving minimum wage conditions would reduce inequality and poverty among employees. The EC also notes that the exact impact of the Union’s action on the state of affairs in each EU country would be different, reflecting the different characteristics of their minimum wage setting systems, workforce, and economic structures. In an ideal world, raising labour standards would indeed reduce social inequalities. Instead, in its analysis, the Commission forgets to look at the minimum wage from a non-workers’ perspective which in turn raises serious concerns. Namely: employers, avoiding rising labour costs resulting from raising the minimum wage, may force employees to switch to part-time work, which will effectively reduce their remuneration. Rising labour costs will primarily affect the SME sector, which may have a negative effect on the European economy as a whole. Moreover, further increases in the minimum wage may cause the employment contract to become an even greater luxury on the labour market. According to research by The Netherlands Economic Review, the average employment on a basis other than an employment agreement in OECD countries amounts to 11.5%. On the other hand, in Poland, France, Italy, Portugal, Spain and the Netherlands, 21% to 27% of all employees work on the basis of civil law contracts, and this number is constantly growing. The introduction of additional regulations may therefore lead to strengthening of arbitration on the labour market, which – so it would seem – is not consistent with the EU concept of social policy.

The institutions of the European Union are primarily bound by the principle of subsidiarity, i.e. taking the least intrusive, yet effective means to achieve a given goal. Considering the vast discrepancies in the regulations behind the minimum wage in individual member states, establishing even a minimum standard seems to be a difficult task. There is undoubtedly a lot of work to be done in European social policy. However, trying to regulate the minimum wage in a top-down manner seems like somebody is attempting to bite off more than one they chew. To sum up, the Commission’s proposal should be assessed negatively.

 

27.07.2020 Position of the Union of Entrepreneurs and Employers on a fair minimum wage

 

Fot. Bru-nO/pixabay.com