This paper conducts a critical analysis on the political-economic situation of Poland and the current financial condition of the Polish local governments.
Poland was the only country in the EU that avoided recession in 2009, i.e. just after the financial crisis it the world in 2008. While a number of studies suggest that the strong exports and individual consumption expenditures have been supporting the economy, they tend to miss the crucial fact that local government finance in the country is relatively well-balanced, and it became one of the factors of the economic stability. Aiming at examining such curious steadiness of the Polish local governments, this paper first focuses on the political and economic situation in Poland to understand the background of the financial condition of the local governments. Secondly, the system of local autonomy and its changes will be reviewed. Thirdly, the paper outlines the current political situation of the country, particularly the outcome of the general election held in 2012. Different regional strategies of the major political parties will be analyzed as well. Finally, the condition of local government finance will be examined to clarify their problems and challenges.
From the analysis of this paper, the following points will be elucidated:
(1) The solid economic performance has been maintained in Poland even after the global economic crisis.
(2) The disparity of economic growth by prefecture and the disparity of the domestic product per capita by prefecture both show observable trend of its increase.
(3) There is a big difference in the regional policy between the two major political parties in the country. The ruling party, the Civic Platform (Platforma Obywatelska; PO), bases its policy on the EU cohesion fund and adopts the economic growth model, in which the economies of metropolises are the engine to lead the country’s economy. On the other hand, the main opposition party, Law and Justice (Prawo i Sprawiedliwość; PiS), sets the liquidation of domestic disparities based on the “Polish” policies as its main goal.
(4) The local government system of Poland is characterized by the great authority of commune (gmina) and the securing of tax revenue by the state. This model has been ensuring financial stability of the local government.
(5) Many state-owned real estates have been changed to come under local government ownership during the period of systemic transformation. The incomes from the real estates and gains upon their sale have been contributing to the stability of local government finance.
(6) Local governments have been one of the factors of Poland’s stable growth. However, many local governments recently started to fall into deficit. The causes of the deficit are as follows: a slowdown in tax revenues due to the recession; the falling real estate prices, the rising prices of construction materials for public works; the rising energy prices; and natural disasters that occur frequently in recent years.
(7) The reduction policy of the state budget, directly bound up with the tighter condition of local government finance, as well as the decrease of financial supports from the EU Cohesion Fund and its related cuts in budgets for public works, has a negative impact on the local economy. They consequently affect the growth of the Polish economy to cause its slowing down.