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Opinion of ZPP Chief Economist Piotr Koryś on the factors driving development in post-World War II Europe

Warsaw, 24 April 2024


Opinion of ZPP Chief Economist Piotr Koryś on the factors driving development in post-World War II Europe


Determinants of European economic development from the end of the Second World War to the present day

The 20th century saw a continuation of the development of Western Europe, interrupted by world wars, the crises of the interwar period and the oil crisis. After the Second World War, there were several waves of dynamic growth in the countries of the European Community and later the EU. Throughout the period, European countries have retained a high capacity to produce human capital. In addition, due to the level of technological advancement of European economies, at least some of EU member states can be counted among the technological leaders. However, in recent decades, development problems have been intensifying due to a number of factors, including demographics and the model of European social policy affecting labour costs. Another growing and serious challenge is the EU’s industrial policy oriented towards the creation of development niches that cannot be exploited. Since the end of the Second World War, European countries have also been benefiting from globalisation as one of the main global manufacturers and suppliers of advanced high-cost services.

The period after the Second World War brought a wave of rapid growth sometimes referred to as economic miracles. This was the case for Germany, France and Italy – key EEC economies. There were several factors behind the first wave of growth. First of all, the economies that had been destroyed by the war and were returning to civilian production had considerable untapped potential in terms of human capital, labour, and in part also material capital and infrastructure (although not always fit for use). Secondly, the American programme for the reconstruction of Europe created suitable conditions for these resources to be used – the inflow of capital, as well as currency that allowed to rebuild trade between European countries, became key drivers of development. Thus, it can be said that the years immediately following the war were a period of a return to past upward development trajectories and a relatively efficient use of production factors.

In addition, American policy at the time was oriented towards creating conditions conducive to economic integration, both at the level of individual companies (co-operation) and states. In the face of mutual lack of trust in war-ravaged Europe and efforts to rebuild national economies, problems related to currency convertibility were an important factor inhibiting these processes, although these were partly solved through bilateral trade agreements. For several years, the partial dollarisation of the European economy facilitated international trade. The Marshall Plan also brought an influx of American technology, new methods of organising production, and direct investment. The commercialisation of US technology in Europe, the growing use of military technologies for civilian applications, US development aid and the restoration of pre-war economic potential with macroeconomic stabilisation led to a rapid increase in the wealth of Western European societies. This resulted in an increase in demand for consumer goods. It should be pointed out that European economies were highly competitive at the time (due to relatively low labour costs, high productivity, favourable demographics and social cohesion).

These were the primary sources of the post-war economic miracles – a period of rapid economic growth, both in absolute terms and in comparison with the USA. The potential for this growth has been exhausted with increasing tensions in the global economy. The collapse of the Bretton Woods system, the decolonisation processes and, finally, the period of stagflation associated with the oil crisis contributed to the slowing down of this dynamic. In the meantime, recognised European brands expanded globally (in such categories as white goods, consumer electronics, the automotive industry as well as specialised capital goods and products in the modernised light industrial sectors, where Italian and French companies were gaining a competitive advantage despite rising production costs).
Several factors were behind the growth at the time, including the closing of the technological gap to the point where European industry took the lead in certain industries and the transformation of European societies into urban societies characterised by mass consumption. This process had already started before the First World War, but was slowed down by years of war and crisis. It was later resumed by the start of the economic integration process.

This third factor was especially important given that,  the Treaties of Rome gave major impetus to the rapid integration of the major economies of continental Western Europe(after a dozen years or so, the United Kingdom also joined this group of countries). The rapid broadening and deepening of the market opened up new prospects for European companies, which were able to grow in size as the European market was becoming a ‘vestibule’ to global markets. Germany soon became one of the world’s largest exporters, with France and Italy also generating significant international turnover.

This period of rapid global expansion allowed many European companies established before the Second World War to rebuild their position and was conducive to the development of new ones, as well. The increase in labour costs served to stimulate the R&D sector and promoted productivity gains. In turn, the falling cost of capital encouraged investment in new industries. The regulatory role of the European institutions was quite limited at the time, and national regulations tended to focus on protecting the interests of workers rather than creating new economic sectors. Environmental regulations began to significantly improve the quality of life for Europeans, while competing labour costs had not yet become a challenge for the most developed economies.

The oil crisis of the mid-1970s brought a slowdown in growth. The internal migration within Europe underway since the 1960s as well as the economic slowdown halted the labour cost dynamics in the countries of the European core (especially Germany, the UK and France). This was due to waves of immigrants both from southern Europe and from behind the Iron Curtain, which kept the European economies competitive.

The subsequent wave of rapid growth was further driven by the enlargement of the European Economic Community in the 1970s and later in the 1980s (what proved crucial was the accession to the European Community of less-developed countries, including Ireland, Greece, Portugal and Spain). This created suitable conditions for the relocation of parts of the manufacturing sector, especially to southern Europe (through direct and capital investment). At the same time, starting in the 1970s, after a decade of stagnation, the integration processes, especially in terms of monetary integration, accelerated. The result was the creation of the European Monetary System, which brought significant benefits to businesses, especially those active on European markets.

An important growth factor for the enlarged Community was the convergence process of the newly incorporated economies. The complementary flows of capital and labour added considerable potential to the European economy.

During this period, the key growth factors were:

  • closer economic integration;
  • broadening the integration grouping;
  • efficient allocation of capital, labour and human capital resources within the integration grouping.

The end of the Cold War, the collapse of the USSR and the subsequent enlargement of the EU contributed to another wave of economic growth in Europe. It was driven by the expansion of the market as a result of two successive waves of expansion of the Community after the end of the Cold War (which included the neutral countries Sweden, Austria and Finland, and later a large group of countries from behind the Iron Curtain). Once again, this made it possible to benefit from the efficient allocation of human and physical capital as well as labour resources (including migration of workers to the countries of the European core from Central and Eastern Europe and investments made in the countries of the region). The need to rebuild and modify the transport infrastructure (such as roads, railways, but also urban spaces) in the newly acceded countries, made possible by EU funds and carried out with the significant participation of experienced companies from the European core, also become a catalyst for growth.

At the same time, the processes of deepening integration accelerated, as reflected by the single political formula of the European Union, a common currency, and the expansion of the Schengen area. This was beneficial for European companies. During this time, however, global competition revolving around labour costs began to intensify. The competition from Southeast Asian countries was, over time, becoming a problem.

At the beginning of the 20th century, and in particular with the advent of the Great Financial Crisis (2008–10), European industry and the competitiveness of European companies started to decline. The positive effects of the subsequent phase of European integration were felt relatively briefly in the European core, although the new form of the Union (with 25–28 members) brought another wave of growth – although driven mainly by processes of convergence and the relocation of industry to the new member states.
Industrial and development policies served as political tools to stimulate development, specifically economic evolution.

Europe’s economic development in recent decades has been linked to new concepts of economic policies designed to foster the development of businesses and especially that of industry. In historical terms, the first wave of post-war industrial policies was linked to the Marshall Plan. The period of economic miracles – the golden age of European economic development – brought in turn a wave of national policies supporting the specialisation of the countries of the European Community. These were based on identifying winners – companies and sectors that were to succeed with state support. At the dawn of the European integration process, the European Coal and Steel Community was established, oriented towards sectoral industrial policy at Community level.

From the 1970s onwards, this strategy was replaced with the idea of liberalisation and moving away from state interventionism towards building a market environment conducive to development. In particular, this meant deregulation and a drive to reduce companies’ operating cost. Industrial policy took on a horizontal approach. At the level of the European Community, it was becoming increasingly clear that the lack of coordination of national development policies (including industrial policies) was a barrier to faster development. This resulted in the introduction of regulations at European level to ensure a favourable market environment, while at the same time fostering national and supranational development strategies, especially those oriented towards research and development in key sectors.

This way of thinking prevailed in the 1990s and 2000s, as reflected in the Lisbon Strategy of 2000, the aim of which was to create a framework for the development of citizens, companies and economies that would make the EU a leading global economic force, both in terms of productive capacity, innovation and the quality of life.
The financial crisis of the end of the first decade of the 21st century brought another change in the approach to development and industrial policies. The involvement of the state in building and restoring domestic industrial capacity and modernising manufacturing processes was a fairly widespread and global, not just European, response to this crisis. The return to industrial policy gained a new dimension when its aim became to create a framework for economic development adapted to increasingly boldly formulated climate policies.

Since then, industrial policy has become a tool integrating both the previous experience of vertical, sectoral industrial policies and horizontal regulatory policies. This type of industrial policy has had a significant impact on shaping the market environment in which European companies operate. Despite their active participation in shaping many of these policies, it has proven to be extraordinarily challenging to confront the challenges of global competitiveness and adapt to regulatory frameworks at the same time.

European industrial policy today

In many areas, the European Union seeks to be a regulatory reference point, a leader of positive change and a model for shaping the regulatory environment for the whole world. The same is true of EU development and industrial policy. In this case, the aim has become to identify or find niches for the green economy and, through regulatory measures, to create suitable conditions for European companies to succeed in them as global pioneers. In other words, regulatory barriers are supposed to shape the economic playing field in such a way as to foster innovation in desirable sectors and ensure their successful commercialisation.

To understand the difficulties involved in making policy, it is worth taking a look back at the experience of a few key sectors in the European economy. In the case of sectors that are key for green transformation, where global competition is taking place, the niches created have been taken over by external competitors. What is meant here is wind power and photovoltaics, where the EU share in global production has fallen dramatically in favour of China despite the efforts of the European Commission.
The results of attempts to build a strong position in the BEV sector through regulations banning the production of combustion cars have been worrying so far. The position of European car companies, one of the key sectors of European industry, has been unusually weak. This could have an impact on the European labour market due to the high level of employment in this sector.

Climate regulations are also affecting, albeit to a lesser extent, the competitive position of an increasing number of sectors due to the fact that they are not as strictly enforced in many regions competing with Europe. This means that, in addition to high labour costs, European companies are facing another challenge driving up production costs. This raises concerns that the new concept of industrial policy in support of the green transition could, in its current formulation, become a development challenge for the European manufacturing sector. Regulatory pressure is often intended as a response to the misidentified (including by the companies themselves) needs of large corporations, including those in the automotive sector. In turn, support measures provided at EU and national level often limit the possibility for new industries to develop spontaneously from the start-up level. In the US and China, successful automotive start-ups such as Tesla are trying to challenge unprepared and insufficiently agile large European car companies. This, in turn, begs the question whether the model of fostering innovation and shaping the development of the manufacturing sector through regulatory barriers that raise operating costs should be pursued in the current model. The objectives defined in the Green Deal should be pursued, but the way in which they are achieved should be reconsidered so as not to compromise the situation of European businesses. Otherwise, there is a serious risk, at both the political and economic level, of preventing the achievement of these objectives.


See more: 24.04.2024 Opinion of ZPP Chief Economist Piotr Koryś on the factors driving development in post-World War II Europe

Leaders of the TSL sector at the ZPP conference ‘Poland in Motion’

Warsaw, 18 April 2024


Leaders of the TSL sector at the ZPP conference ‘Poland in Motion’


The TSL (transport, shipping and logistics) sector is one of the champions of the Polish economy. In the more than 30 years since the political transformation, the sector has established a strong position on the European market. Today, the market faces a great opportunity for further growth, but at the same time companies have to deal with a number of challenges.

After a difficult period of global crises, the market looks to the future with optimism, seeing the potential for growth, but also the need to adapt to new political and economic conditions. This and other topics were all discussed by the guests of the ‘Poland in Motion’ Conference organised by the Union of Entrepreneurs and Employers on 18 April in the Listing Room of the Warsaw Stock Exchange. Infrastructure Logistics Transport, which announced new strategies and solutions for the effective management of the sector.

The Vice President of the ZPP Marcin Nowacki, delivering an opening speech, recognised the importance of the development of the national transport infrastructure for the development of the TSL sector in Poland.

‘The Union of Entrepreneurs and Employers is actively involved in the development of the TSL segment in Poland. Our involvement has visibly intensified in the context of EU regulations and the difficult situation on the Polish-Ukrainian border. We have advocated and continue to advocate for extensive measures to increase the capacity of border crossings, warehousing space, the expansion of domestic seaports, the development of the road and rail network, as well as the construction of the Solidarity Transport Hub. Our location on the map of Europe gives us the opportunity to become the largest transport and logistics hub in this part of the world’, said the ZPP Vice President.

The event commenced with a panel discussion: ‘Poland on the European Map of the TSL Market’. Speakers drew particular attention to the challenges posed by the lack of investments driving rail and combined infrastructure development. Poland is a transit country between Western and Eastern as well as Northern and Southern Europe. For this reason, according to the speakers, investments should be made in rail transport corridors for road transport, as well as the development of intermodal transport.

Panel II, ‘The TSL Sector in the Face of Contemporary Challenges’, addressed the most pressing challenges that the logistics and transport industry is facing.

MEP Mirosław Suchoń, chairman of the parliamentary Infrastructure Committee, emphasised that one of the key issues in the context of the sector’s development is the proper shaping of the legislative and institutional environment.

‘This major challenge faced by the transport industry can be divided into two areas. The first concerns internal, national regulations. We need to organise the whole regulatory area so that companies can finally get on with running their business rather than focusing on bureaucratic obligations. On the other hand, however, we need to have a serious talk with our partners in the EU, as the majority of regulations are adopted in Brussels’, said Mirosław Suchoń.

The TSL industry is particularly sensitive to changes in climate policy regulations, especially in the context of European Union initiatives, including the Green Deal and Fit for 55. The legislation introduced to reduce CO2 emissions and incentivise the use of greener solutions, such as low-emission transport or electrification of the vehicle fleet, will require companies to invest in new technologies and adapt to new standards.

‘In my view, there are two key areas that need to be addressed. One of these are regulations concerning carbon footprint reduction. The second challenge Poland has been facing for years is the shortage of labour. This applies to both drivers as well as warehouse workers’, emphasised Adam Galek, Member of the Management Board, Rohlig Suus Logistics.

During the panel ‘Infrastructural Must-Haves – Essential Investments in Infrastructure’, speakers addressed topics related to the most important infrastructure investments for Poland.

‘Poland needs investments in road, rail and port infrastructure. This has been clearly vividly demonstrated by the events of recent months related to Ukrainian grain that should be handled quickly and efficiently at Polish ports and then transported further to other countries around the world. There are similar problems with other agri-food products, which need to be exported from Poland as quickly as possible. This is why the funds under the National Recovery and Resilience Plan are crucial to ensure that these investments are implemented in order to continuously improve Poland’s infrastructure’, stressed Stefan Krajewski, Secretary of State at the Ministry of Agriculture and Rural Development.

In turn, Rafał Zahorski, Board Representative for Port Development, Zarząd Morskich Portów Szczecin i Świnoujście, paid particular attention to the link between port and rail infrastructure:

‘Poland’s maritime economy has been on the upward growth trajectory. Polish ports are developing. All ports allocate significant amounts to investment. At the moment, we are waiting for a very strong development impulse for the railway infrastructure, because this is the first condition for the ports to be able to absorb a much higher volume of cargo’, he stressed.

In the concluding panel of the conference  ‘Can Poland Become a European Transport and Logistics Hub?’, discussions revolved around the accession of Ukraine to the EU. Today, it is certain that Poland will be one of the most important  links connecting Ukraine with the West. This requires strengthening and modernising existing routes and delivery models, but also creating new ones based on domestic infrastructure. However, transports from other parts of the world also pass through Poland. Our country has everything it takes to become the most important transport and logistics hub in this part of the continent.

During the panel, Katarzyna Ostojska, Marketing Manager at Raben Logistics Polska, emphasised the importance of the conference in developing new strategies and technological solutions to effectively manage the TSL sector:

‘Conferences on transport, or transport solutions, and the logistics industry in general, are very important. They provide a platform for sharing experience, exchanging views and perhaps finding new ways to build a positive image of companies’, she emphasised.

To solidify our position but also to provide the business with conditions for constant growth, the industry now needs strong investment impulses and a predictable, transparent law. These and a number of other issues were discussed during the ZPP Conference ‘Poland in Motion – Infrastructure, Logistics, Transport’ by experts, journalists, and representatives of government and business. The conference brought together representatives from the maritime, road, and rail transport industries but also from the agricultural sector and a number of other cooperating segments of the business community.

The Minister of Economic Development and Technology assumed honorary patronage of the conference. The event was partnered by the Warsaw Stock Exchange. Honorary partners of the event were: The General Inspectorate of Road Transport, the Civil Aviation Authority, the Road and Bridge Research Institute and the Poznan School of Logistics. The media patrons were Obserwator Logistyczny and Polska Press.

 

Conference ‘European Parliament Elections 2024: Challenges for Digital Democracy in the CEE Region’


Warsaw, 23 April 2024


Conference ‘European Parliament Elections 2024: Challenges for Digital Democracy in the CEE Region’


On 22 April, the SGH Warsaw School of Economics hosted the conference ‘European Parliament Elections 2024: Challenges for Digital Democracy in the CEE Region’, partnered by the Union of Entrepreneurs and Employers (ZPP).

Present as a guest of honour was Secretary of State at the Ministry of Digital Affairs, Dariusz Standerski. The meeting was opened by the co-host of the event Piotr Wachowiak, PhD, lecturer and rector of the SGH Warsaw School of Economics. In a discussion moderated by Zosia Wanat, Senior CEE Correspondent from Sifted, the ZPP was represented by Paulina Szkoła, Director of the ZPP Digital Forum; other members of the panel were:

– Jan Jęcz, digital economy analyst, Polityka Insight;

– Mateusz Łabuz, Technische Universität Chemnitz; and

– Aleksandra Wójtowicz, Senior Analyst, NASK.

During the meeting, the report ‘Things to Watch For in European Parliament Elections in 2024’was presented, which you are warmly encouraged to read!

The event was organised by the CEE Digital Democracy Watch.

Polish micro-entrepreneurs – passionate individuals with a sense of mission. They are satisfied with their jobs, although the earnings are not too high. They save money, take short holidays and do not take sick leave. They value independence

Warsaw, 25 April, 2024

Polish micro-entrepreneurs – passionate individuals with a sense of mission. They are satisfied with their jobs, although the earnings are not too high. They save money, take short holidays and do not take sick leave. They value independence

 

The Union of Entrepreneurs and Employers presented the results of the original and one of a kind Polish survey entitled “Material situation, private income and assets of Polish entrepreneurs”, portraying the owners of Polish micro-businesses. The main objective of the project was to draw a portrait of the socio-demographic and material situation of small Polish entrepreneurs and to find out their attitudes and opinions on the conditions and prospects for doing business in Poland. The survey was commissioned by the the Union of Entrepreneurs and Employers to the research company Maison & Partners. The survey – as emphasised by experts during the presentation of the report – is unique in the country and shows a profile of the Polish micro-entrepreneur that differs from many prevailing stereotypes.

Passionate individuals with a sense of mission and a need for independence…

For the majority of Polish micro-entrepreneurs, the most frequently mentioned motive for setting up a business was the need for independence (37%) and the desire to pursue one’s passion (31%). The need for independence as a motive for setting up own business dominated among sole proprietors (43%). Among company owners, the more frequently indicated motive for setting up a company was reluctance to work full-time for someone else, as well as economic necessity. In turn, individuals combining a full-time job with running a business were more likely to explain their decision to start a business by coincidence.

Confident in their decision to set up a business

The majority of entrepreneurs (75%) positively assessed their decision to set up a business and would continue to run it if faced with a choice between this and other forms of employment (in this case, there were also more entrepreneurs who were not simultaneously working full-time and were mainly running a business). However, some entrepreneurs, mainly less educated and younger people, would be more willing to work full-time for someone else.

Highly educated

Polish micro-entrepreneurs are mainly educated individuals – there are more people with higher education in this group (69%) than in the population as a whole, and fewer with primary and vocational education (6%). In addition, there are also fewer residents of rural areas among entrepreneurs (19%) than among Poles in general (38%).

Parents of children in state schools and kindergartens

The majority of entrepreneurs have children (68%), 60% of whom have more than one child. The majority of children of small entrepreneurs benefit from public education (88%), attending state nurseries and kindergartens, state schools and universities. Polish entrepreneurs do not spend high amounts on their children – 39% do not spend more than PLN 1,000 per child per month.

No spectacular earnings

Around a third of Polish micro-entrepreneurs, after paying the necessary levies, earn no more than the national average. Only 10% of the respondents declared earnings of more than PLN 15,000 per month, while only 4% – above PLN 30,000. Larger monthly earnings were observed in the case entrepreneurs running larger companies, with higher turnover and number of employees.

No spectacular property or luxurious cars

The majority of Polish micro-entrepreneurs own their own flat or year-round house (86%) and private car (83%). This also means that 14% of respondents do not own their home and 17% do not own a private car. In addition, around a third of them own a house or flat for rent (30%), while fewer own a holiday cottage or apartment (27%).

The dominant car makes owned by the entrepreneurs included Audi (10%, with significantly more cars of this make among this group than among Poles in general), as well as Opel, Skoda and Toyota – makes also popular among Poles who are not entrepreneurs. Only 14% of the respondents declared the value of their car to be over PLN 100,000

But with savings

Most micro-entrepreneurs are frugal. Polish entrepreneurs have more savings than the average Pole. However, it must be stressed that these savings are not always used for private purposes – as many as 47% of micro-entrepreneurs had to finance the operations of their business with private money at some point; quite obviously, this applies more often to sole proprietors than to companies. At the same time, the opposite also happens – small entrepreneurs borrow money from the company for private purposes.

Content with life despite difficulties

Interestingly, despite their material situation that is not much different from from that of Poles in general, it is entrepreneurs who seem more satisfied with their situation (56% of entrepreneurs vs. 36% of Poles in general). Of course, there are also people in financial difficulties among entrepreneurs who do not have enough money for their basic needs. Most of them come from the Łódzkie and Podlaskie provinces, have been in business for less than a year and mainly do physical work.

On average, Polish micro-entrepreneurs show a similar level of satisfaction with their lives as the general Polish population. Interestingly, satisfaction with life is not really related to the type of business run, but to universal demographic characteristics (i.e. similar to other Poles) – entrepreneurs who are better educated, have children and are older tend to be more satisfied with life. This may show that family, education and experience acquired with age constitute assets that translate into a better life.

Expert comments

Cezary Kaźmierczak, President of the Union of Entrepreneurs and Employers

The Union of Entrepreneurs and Employers is the only employers’ organisation dealing with the micro- and small-business segment. Poles are an exceptionally entrepreneurial nation and this spirit of entrepreneurship and courage to take matters into one’s own hands is one of the very important factors driving Poland’s development. Keeping the micro and small business segment in good shape ensures the stabilisation of the middle class and the development of small towns. It is often the case that 100 companies employing 10 people each contribute more to the stable development of a region than one company with 1,000 employees. We should take care of their development because, as our survey shows, micro-entrepreneurs are extremely hard-working, thrifty people who do not succumb to conspicuous consumption and who do not want to live off state benefits.

Prof. Dominika Maison, Maison & Partners.

Our survey has shown that the typical Polish micro-entrepreneur is not a rogue who just wants to make as much money as possible. Many micro-entrepreneurs are highly-educated people who set up their own business in order to be independent and pursue their passions. They work more than the average full-time employee, do not take sick leave and do not complain that they are not earning a fortune.

Mariusz Filipek – Plenipotentiary of the Minister for Deregulation and Economic Dialogue, Ministry of Development and Technology

The Union of Entrepreneurs and Employers has prepared a very valuable report for the economy and the business sector. It contains a range of data showing the largest segment of companies in Poland. From the perspective of the Ministry of Development, the key part was information on the development prospects of micro-enterprises. Taking into account the expectations of entrepreneurs, we are preparing a deregulation law to make it easier to do business in Poland.

Ignacy Morawski, Chief Economist, Puls Biznesu

Entrepreneurs play a very important role in the economy, creating companies and jobs, and at the same time providing the economy with flexibility to adapt to technological changes. Small companies tend to be quick to adopt new technologies, trends and products, playing a huge role in the growth of economy and productivity. At the same time, we must take into account that they are less efficient than large organisations. What surprised me most about the report of Union of Entrepreneurs and Employers was that almost half of those surveyed would be willing to change their current business for a full-time job, which shows how hard it is to run a business.

About the survey

The survey was conducted using the CAWI (Computer Assisted Web Interviews) method based on online surveys on the Ariadna survey panel. The persons invited to take part in the survey were representatives of the micro sector (companies with up to nine employees, regardless of employment form) and sole proprietors. The total sample size was N=658 respondents. The survey was conducted from 8-14 February 2024.

Lifestyle and related expenses

  • Restaurants. Half of the entrepreneurs do not eat in restaurants at all, eat there rarely (21%) or once every few months (29%). The other half eat in restaurants at least once a month. Only 3% go to restaurants at least once a week.
  • Takeaway food delivery. Ordering takeaway food with home delivery is slightly less popular, with 31% of entrepreneurs not using this type of service at all. However, those who regularly order takeaway food (at least once a week) are slightly more numerous than those who frequently eat in restaurants (5%).
  • Eating-out expenses. Among those eating in restaurants and ordering takeaway food with home delivery, half spend on these services less than PLN 200 monthly.
  • Cultural events. 41% of the entrepreneurs surveyed declared that they participate in cultural events at least once a month. Half of them declared an average expenditure of up to PLN 200 per month for that purpose.
  • The dominant pattern of private travel is relatively frequent but short (2-3 days) domestic trips, which 78% of respondents declared in 2023. The most popular international destinations among Polish micro-entrepreneurs were Italy, Spain and Greece.

Assessment of the material situation

  • Enough to survive. The vast majority of entrepreneurs surveyed described their material situation as sufficient to survive, but insufficient to afford additional major expenses (42%). 11% described their situation as bad to the point of not having enough to live, of which 8% had to significantly cut back on the spendings to “make ends meet”, while 3% did not have enough for even their immediate needs.
  • No changes. Two-thirds (63%) of the micro-entrepreneurs surveyed declared that there had been no change in their material situation over the past year. One in five respondents (20%) declared their material situation got worse, while 16% replied that it improved. Interestingly, the perception of a change in one’s situation compared to the previous year was less negative among entrepreneurs than among Poles in general.
  • Who was worse off and why? Deterioration of one’s material situation was declared more frequently by respondents from the Podlaskie, Łódzkie, Dolnośląskie and Kujawsko-Pomorskie provinces, by entrepreneurs performing both physical and white-collar work, not employing people, over 45 years of age. The most important reasons for the deterioration of one’s material situation were: inflation (25%), price increases / higher costs (25%), reduced income / turnover (17%), fewer customers (12%), government policies (8%), employment costs, social security contributions (6%) and the general economic situation in the country and around the world.
  • Who was better off and why? The improvement in one’s situation was more often felt by entrepreneurs from the Mazowieckie and Podlaskie provinces and by people with higher (post-secondary and tertiary) education. This was due to: an increase in own or partner’s earnings (35%), an increase in the number of orders/customers (19%), change of own or partner’s job (6%).
  • Satisfaction with life. Regardless of the assessment of one’s own material situation, the vast majority of entrepreneurs are satisfied with their lives and that level of satisfaction is not substantially different from that of Poles in general. As with Poles in general, also among entrepreneurs, those who are more satisfied with life tend to be older (over 55), better educated and have children.

Reasons for setting up own company and retrospective assessment of this decision

  • Independence, passion and challenges. A very strong motive for starting own business was the desire to be independent and to have a sense of freedom (37% of answers to the open question), as well as reluctance to work full-time for someone else (22%). For 59% of the entrepreneurs surveyed, these were two key factors that had influenced their decision to set up own business. The desire to pursue one’s passions was mentioned as a motivating factor for setting up own business by 31% of the respondents. 16% decided to set up their own business because they had discovered a niche in the market, while 7% wanted to implement an interesting project they had come up with. For 12%, setting up own business was a form of investment or a way to raise money.
  • Coercion or coincidence. 19% of the respondents set up their own business due to economic necessity or unemployment, while 11% did so at the suggestion of their former employer. It is interesting to note that 22% of the respondents declared that they had set up their own business as a result of a coincidence. Probably this factor, as well as the sense of compulsion to open own business felt by some contributed to some extent to the fact that a significant proportion of respondents, in retrospect, viewed their decision to start their own business negatively (12%), while a very high proportion (47%) of them would be more willing to work for someone else if they had the choice. What is particularly interesting is that one-third of young and uneducated respondents, working physically in production, would be more willing to work for a multinational corporation, possibly a private company, than to continue running their own businesses. This suggests that the group in question fares worst at running their own business.
  • Assessment of the decision to set up own business. In retrospect, 75% of those surveyed assessed their decision to set up own business positively and, given a choice, just over half (53%) would continue to run it. Particularly for those aged 55 and over (70%), with more than 10 years of experience in the market (59%), operating in the service sector (57%), combining manual and white-collar work (59%), not hiring employees (57%), with a university or post-secondary education (56%), continuing running own business remains the best option.

Obstacles and desire to continue running own business – summary

  • Labour costs and taxes. Entrepreneurs identified a great deal of barriers to running own business. These were linked to high costs, both due to rising fixed overheads (51%), high taxes (49%) or high labour costs (43%).
  • Law and bureaucracy. The second group of barriers was linked to the legal system and bureaucracy. Entrepreneurs frequently mentioned instability of the legal system (29%) and intricacies of the business law (20%), as well as excessive bureaucratic requirements (26%) and EU-imposed restrictions on the activity/development of companies and industries (13%).
  • The future of business. When thinking about the coming 12 months, only one-third of the respondents did not consider ending or suspending their business. The majority of the entrepreneurs surveyed (60%) did not think about the issue, while 11% admitted that it was likely that they would terminate or suspend their business. This proportion is significantly higher among entrepreneurs from medium-sized cities (20-99,000 inhabitants), those who have been on the market for 6-10 years and those with primary and basic education (it is worth noting that the latter are the group generally least satisfied with running their own business).
  • Reasons for continuing own business. The most frequently mentioned reason for continuing own business was its good condition. However, there were also less optimistic reasons, including lack of other alternatives (6%) or long-term commitments (4%). These answers indicate a certain bitterness about the situation, and may indicate that although running own business may not fulfil the expectations or aspirations of the entrepreneurs, at the moment some of them are bound by their choices and act in a sense ‘out of habit’, struggling to stay in the market.
  • Reasons for closing down business. Among the reasons forcing entrepreneurs to close or suspend their business the most frequently mentioned ones included the excessive cost of running a business, the amount of contributions and taxes paid (26%), as well as insufficient revenue to continue operations (13%). Other reasons mentioned included age (6%), lack of orders, customers (6%) and growth opportunities (4%).

 

See more: 11.04.2024 Financial situation, private income, and assets of Polish entrepreneurs

Extended Position Paper on the Extension of Autonomous Trade Measures for Ukraine

Brussels, 23 April 2024

Extended Position Paper on the Extension
of Autonomous Trade Measures for Ukraine

 

Union of Entrepreneurs and Employers and European Enterprise Alliance reaffirm our commitment to fostering economic cooperation between the EU and Ukraine. Amidst the ongoing invasion, the extension of Autonomous Trade Measures (ATMs) holds significant promise in bolstering Ukraine’s economic recovery. Nevertheless, the application of safeguard mechanisms must be approached with careful consideration to ensure they facilitate rather than hinder Ukraine’s progress.

Background

This week, during the plenary session in the European Parliament, the Regulation pertaining to the extension of Autonomous Trade Measures (ATMs) for Ukraine was voted on. This decision follows a series of pivotal events signaling the EU’s commitment to supporting Ukraine’s economic resilience. On February 23, the European Commission proposed to extend the regulation governing ATMs for another year. EU member states’ representatives (Coreper) confirmed the provisional deal reached earlier between the Council presidency and the European Parliament representatives to renew the suspension of import duties and quotas on Ukrainian exports on April 10, 2024. The next steps involve the adoption of the regulation by the Council, followed by its signing by the representatives of the Council and the European Parliament, and publication in the Official Journal, before entering into force on 6 June 2024.

While safeguard mechanisms are crucial for maintaining market stability, we advocate for a nuanced approach to their implementation, ensuring they support Ukraine’s economic recovery without imposing undue restrictions.

Safeguard Mechanisms

It is important to underline that currently not all of Ukraine’s import duties are reduced to zero through 2025, with certain agri-food tariffs subject to limited linear reductions. Specifically, goods such as dairy, eggs, sugar, animal oils, and fats will also undergo reductions ranging from 20% to 60%, with residual tariffs applied thereafter for sugars, poultry meat, and pork meat. A new automatic safeguard will also be added for certain sensitive products, such as poultry, eggs, sugar, oats, maize, groats, and honey.

The safeguard mechanism includes:

Regular Monitoring: The Commission will regularly monitor the impact of the Regulation on exports, imports, and prices in the Union market or the market of one or several Member States.

Assessment Procedure: The Commission will assess the situation of the Union market for like or directly competing products, considering factors such as import trends, production impacts, and market dynamics.

Provisional Safeguard Measures: In critical circumstances, the Commission may provisionally impose necessary measures if delay would cause irreparable damage. This provision requires a substantiated request from a Member State and imposes a time limit of 21 days for adoption.

Reintroduction of Tariff-Rate Quotas: if during the period 6 June to 31 December 2024, cumulative import volumes of either eggs, poultry, or sugar since 1 January 2024 reach the respective arithmetic mean of import volumes recorded in 2022 and 2023, the Commission shall, within 21 days and after informing the Committee on Safeguards established by Article 3(1) of Regulation (EU) 2015/478, reintroduce for that product the corresponding tariff-rate quota suspended by Article 1(1), point b, until 31 December 2024, and introduce from 1 January 2025 either a tariff-rate quota equal to five-twelfths of that arithmetic mean or the corresponding tariff-rate quota suspended by Article 1(1), point b, whichever is higher .

While the provision for provisional safeguard measures acknowledges the need for swift action in critical circumstances, it also introduces uncertainty for Ukrainian exporters. The requirement for a substantiated request from a Member State may delay the imposition of necessary measures, potentially exacerbating the impact of market disruptions on Ukraine’s agricultural sector. Therefore, it is imperative to streamline the process for adopting provisional safeguard measures, ensuring prompt response to emerging challenges without undue bureaucratic hurdles. Additionally, the reintroduction of tariff-rate quotas based on cumulative import volumes poses a significant risk to Ukraine’s export stability. By linking import thresholds to historical averages, the mechanism may fail to account for evolving market dynamics or seasonal variations in demand. This rigidity could restrict Ukrainian exporters’ access to the EU market, undermining the benefits of trade liberalization measures and hindering Ukraine’s economic recovery efforts.

While recognizing the necessity of safeguard measures outlined in the trade agreement, including tariff-rate quotas (TRQs) and entry-price systems for certain agricultural products, we stress the need for flexibility in their implementation. We urge policymakers to adopt a nuanced approach to safeguard measures, taking into account the evolving economic situation in Ukraine. Regular monitoring and impact assessments should guide the implementation of TRQs and other safeguard mechanisms, allowing for adjustments based on actual market dynamics. As Ukraine strives to rebuild its economy in the face of aggression, it is essential to strike a balance between solidarity with Ukraine and the economic realities of both parties. Collaborative efforts between the EU and Ukraine are crucial in ensuring that trade policies support economic stability and growth in both regions.

As the European Enterprise Alliance and Union of Entrepreneurs and Employers, we emphasize the importance of fostering a cooperative and mutually beneficial relationship between the EU and Ukraine. While safeguard measures are integral to maintaining market stability, they must be implemented with flexibility and consideration for Ukraine’s economic recovery and growth.

See more: 23.04.2024 Extended Position Paper on the Extension of Autonomous Trade Measures for Ukraine

EU Competitiveness in a Global Arena: Charting the Path Forward – Debate Summary

Brussels, 11 April 2024

EU Competitiveness in a Global Arena: Charting the Path Forward – Debate Summary

 

On Wednesday, 10 April 2024, the European Enterprise Alliance and Union of Entrepreneurs and Employers held a working lunch titled “EU Competitiveness in a Global Arena: Charting the Path Forward” in partnership with SME Connect at Sofitel Europe in Brussels. The opening remarks were delivered by Dr Horst Heitz, Chair of the Steering Committee of SME Connect followed by the keynote presentations given by Agata Boutanos, Director of the Representation to the European Union, Union of Entrepreneurs and Employers & Seyide Direk, Policy Analyst at the European Enterprise Alliance. The panel discussion showcased Dr. Laurent Maurin, Head of the Economic Studies Division at the European Investment Bank, followed by Dr. Tudor Petru Fabian, Policy Advisor to Iuliu Winkler MEP; Coordinator of the Working Group on Trade with SME Europe of the EPP, Dr. Daniel Wennick, Policy Director at Orgalim, Harald Past, Head of International Trade & Taxation at EuroCommerce, Michael Jäger, President of the European Taxpayers Association, Ralph Kamphöner, Head of Brussels Office at textil+mode; moderated by Dr. Horst Heitz, Chair of the Steering Committee of SME Connect.

Agata Boutanos, Director of the Representation to the European Union for the Union of Entrepreneurs and Employers, presented the ZPP report on “EU Competitiveness in a Global Perspective.” She emphasized the need for direct regulation over directives to ensure faster and more effective implementation, citing discrepancies in implementation across EU member states. Boutanos highlighted the importance of clarity in regulatory environments, particularly for the tech industry, to foster innovation and the development of future solutions. To enhance competitiveness, Boutanos advocated for equal and free market access for all EU members and the simplification of regulations to promote fair competition. She stressed the need to empower smaller states, including those in Central and Eastern Europe, and called for coherence in regulations across the EU. Boutanos suggested measures such as introducing e-declarations and standardizing procedures to facilitate compliance for small businesses. Moreover, she underscored the significance of strengthening transatlantic ties and cooperation in the tech sector to learn from other regions and develop together. Boutanos emphasized the importance of regulatory alignment and collaboration to ensure that the EU remains competitive and able to keep pace with global technological advancements.

Seyide Direk, Policy Analyst at the European Enterprise Alliance, presented the report titled “Underrepresentation of Central and Eastern European (CEE) Region in EU Institutions.” Direk emphasized the significance of ensuring that the voices of these regions are heard in the institutions. Equal representation is not only a matter of fairness and inclusivity but also essential for effectively tackling the multifaceted challenges encountered by the EU. The report highlighted concerning trends in leadership positions, with Western and Southern Europe dominating appointments while the Central and Eastern European region is marginalized. For example, Poland’s overall representation percentage in EU institutions remains low despite notable appointments. Several factors contribute to this underrepresentation, including political dynamics, population demographics, and economic disparities. In conclusion, Direk provided recommendations for creating a more inclusive environment to ensure equal representation in policymaking within the EU institutions.

“Europe leads in green technology, boosting its economy and future competitiveness. As renewable energy dominates, electricity costs drop, driving manufacturing power. With strong democratic and social policies, Europe offers ample support and subsidies.”Laurent Maurin, Head of Economic Studies Division, European Investment Bank

Dr. Laurent Maurin, Head of the Economic Studies Division at the European Investment Bank, emphasized the need to take a positive outlook on economic developments, considering the unexpected strength of the recovery despite challenges such as high energy costs and monetary policy tightening. Maurin then shifted to discuss the long-term trends in European growth, expressing concerns about demographic changes, lack of innovation, and the retention of innovators within Europe. He stressed the importance of implementing new policies to address these challenges and ensure Europe can maintain pace with the U.S. economy. Maurin highlighted strategic challenges such as securing European supply chains and enhancing territorial defense capabilities, suggesting these issues should be on the agenda of the new European Commission. Drawing from corporate surveys conducted by the European Investment Bank, Maurin noted that companies in the EU are more concerned about regulatory issues and skills shortages than financial conditions. Despite these challenges, Maurin highlighted Europe’s strengths in green technology and social policies, suggesting they could contribute to future competitiveness. He concluded by emphasizing the importance of raising the potential growth of the European Union through coordinated policy efforts.

“Companies face heightened exposure while implementing regulations, blurring lines between business and politics globally. Increased investment in ongoing geopolitical risk assessments is imperative for both European and American companies.”Dr. Tudor Petru Fabian, Policy Advisor to Iuliu Winkler MEP; Coordinator of the Working Group on Trade with SME Europe of the EPP.

Dr. Tudor Petru Fabian, Policy Advisor to Iuliu Winkler MEP and Coordinator of the Working Group on Trade with SME Europe of the EPP, discussed EU competitiveness in the global arena, reflecting on insights from a Responsible Business Conference in the U.S. He highlighted companies’ proactive initiatives in sustainability and supply chain mapping, driven by the EU’s value-based policy push. Fabian noted companies’ concerns about regulatory coherence across the EU, U.S., and globally, particularly regarding compliance and the pace of regulatory changes. He emphasized the impact of China-related regulations on global supply chains and the need for greater investment in geopolitical risk assessments. Fabian stressed the interdependence of business and politics, calling for increased cooperation between public and private sectors. He highlighted trust disparities between government and companies and advocated for strategic alignment and cumulative impact assessments to ensure the feasibility of regulatory frameworks. In navigating the green and digital transitions, Fabian underscored the importance of aligning legal and statistical frameworks with the practical needs of businesses. He cautioned against both excessive speed and insufficient assessment of regulatory impacts, emphasizing the need for a balanced approach to policymaking.

Dr. Daniel Wennick, Policy Director at Orgalim, emphasized the competitiveness of the EU, highlighting challenges in competition against the US and China. He pointed out the impact of factors such as regulations, innovation, and high energy prices on competitiveness. Wennick underscored the need for a market-driven framework to achieve climate goals, stable policies, and equitable taxation. He called for new legislation to ensure market conformity assessment processes and addressed geopolitical challenges regarding international and European standards. Wennick also stressed the importance of reducing trade barriers and strengthening partnerships with countries like the US, Switzerland, Australia, and the UK. In the long term, he advocated for funding support for sectors and enhancing public-private partnerships.

Ralf Kampöner, Head of the Brussels office at the Confederation of the German Textile and Fashion Industry, highlighted the complexity of the textile sector and its role in innovation. He emphasized the sector’s reliance on small to medium-sized companies and the need for a conducive policy environment for competitiveness. Kampöner discussed the importance of global value chains and cautioned against protectionist measures, advocating for collaboration instead. He underscored the challenges of navigating international trade agreements and the risks of regulatory complexity, particularly for small businesses. Kampöner stressed the importance of considering the entrepreneurial perspective in policymaking to avoid unintended consequences and fragmentation of the internal market. Kampöner urged policymakers to prioritize the creation of a level playing field across the EU to avoid further fragmentation. He emphasized the need for coordinated efforts to strengthen Europe’s economic position globally.

Harald Past, Head of International Trade & Taxation, at EuroCommerce, highlighted the challenges facing the retail and hotel sector in Europe, particularly emphasizing the digital, green, and skills transformations. He stressed the need for significant investment, estimating up to 600 billion euros by 2030, to address these challenges effectively. Past also pointed out the neglect of global competitiveness in the EU’s agenda, citing the disproportionate impact of certain measures on SMEs. He called for a more workable framework for small companies to succeed globally, emphasizing the importance of trade relations and urging the EU to take a more proactive approach in tackling global challenges like the green transition. Additionally, Past expressed concerns about potential barriers for smaller companies, particularly in customs reforms, and advocated for measures that would facilitate their ability to compete on the global stage.

Michael Jäger, President of the European Taxpayers, highlighted concerns regarding EU competitiveness, particularly in the context of the green transition. He expressed reservations about the centralized approach to addressing challenges and emphasized the need for market-driven solutions and innovation. Jäger called for deeper engagement with entrepreneurs and stakeholders to ensure sustainable growth and advocated for a stronger voice for entrepreneurs in policymaking. He stressed the importance of effective communication and dialogue to address collective challenges and promote EU competitiveness.

Pauline Weil, Economist, Bruegel presented research into the macroeconomic situation two years into the Russian aggression against Ukraine. She emphasized the significant role of the UK and Russia in the globally traded food supply, highlighting challenges in both production and logistics arising from the aggression. Weil expressed global concern over historically high food prices, noting the potential for heightened food insecurity, reminiscent of events like the Arab Spring. However, she mentioned that prices have eased since April 2022 due to strong harvests, declining shipping costs, and more affordable energy and fertilizer prices. Weil discussed the impact felt at local levels in the UK, EU, and Ukraine, particularly the disruptions in grain exports from Ukraine through the Black Sea. She highlighted the EU’s financial support package and measures to address import restrictions, emphasizing the enduring local impacts and the need to address competition distortions amid trade liberalization in the food sector.

Report ZPP Brussels |Focus on Europe| – Underrepresentation of CEE Region in the EU Institutions

Brussels, 11 April 2024

Report ZPP Brussels |Focus on Europe|
Underrepresentation of CEE Region in the EU Institutions

The European Union (EU), a complex mosaic of nations and policies, has continually shifted its contours to accommodate evolving geopolitical and internal dynamics. Central and Eastern Europe (CEE), with its rich historical tapestry, cultural diversity, and burgeoning economies, stands as a pivotal pillar in this European narrative. However, a palpable and persistent underrepresentation of the CEE region within the upper echelons of EU institutions has surfaced as a salient concern, particularly underscored by the 2019 European Elections where CEE countries found themselves conspicuously absent from high-level positions. This absence is not merely statistical but resonates with broader systemic challenges, geopolitical shifts, and policy implications, including the increasing economic importance of CEE in driving and sustaining the EU’s economic growth.

Events such as Russia’s invasion of Ukraine have amplified the strategic importance of the CEE region, underscoring its proactive role and contributions on the European stage. Yet, the glaring disparity in representation within key EU roles impedes the region’s ability to advocate effectively for its interests, shape policy agendas, and contribute meaningfully to EU-wide decision-making processes. This report delves into the intricate backdrop of this underrepresentation, navigating through historical paradigms, geopolitical intricacies, and systemic biases that have perpetuated this imbalance. It underscores the complexities of EU appointment mechanisms, influenced by negotiations, party politics, and historical legacies, which have inadvertently resulted in a disproportionate emphasis on Western European representation.

 

See more: 10.04.2024 Report by the Union of Entrepreneurs and Employers: Underrepresentation of CEE Region in the EU institutions

Report ZPP Brussels |Focus on Europe| – EU Competitiveness in a global perspective

Brussels, 11 April 2024

Report ZPP Brussels |Focus on Europe|
EU Competitiveness in a global perspective

For decades, the pillar of European integration was economic cooperation (in particular, the creation of the customs union and the establishment of a common market based on the elimination of barriers to the movement of people, services, goods, and capital). This approach, along with further enlargement of the Community to include new Member States, has brought major economic benefits to the European Union, as evidenced by the fact that between 1970 and 1980, the European Union’s GDP grew significantly and reached a level higher than that of the United States.

After 2008, the European Union’s GDP in nominal terms fell significantly and did not return to its value of that year until 2021, while at the same time both the U.S. and Chinese economies were growing steadily. The lack of significant expansion of the common market to new countries (only Bulgaria, Romania, and Croatia joined the EU at the time) and the focus on pursuing a unified policy on many non-economic issues did not produce good economic results for the EU.

 

See more: 10.04.2024 Report by the Union of Entrepreneurs and Employers: EU Competitiveness in a Global Perspective

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