Grzegorz Kołodko was appointed as Poland's new Minister of Finance in July 2002. He has decided to cancel a part of the debts of large industrial companies in order to prevent them going into bankruptcy, thus helping to protect jobs in these firms. The Minister's proposals have been welcomed by trade unions, but heavily criticised by the organisations representing private employers.
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Grzegorz Kołodko was appointed as Poland's new Minister of Finance in July 2002. He has decided to cancel a part of the debts of large industrial companies in order to prevent them going into bankruptcy, thus helping to protect jobs in these firms. The Minister's proposals have been welcomed by trade unions, but heavily criticised by the organisations representing private employers.
In July 2002, a new Finance Minister (who doubles as the Deputy Prime Minister) was appointed, with Grzegorz Kołodko succeeding Marek Belka in the post. Professor Kołodko had previously been Finance Minister from 1994 to 1997, when the Polish economy had the highest growth and lowest unemployment of the whole period since the political and socio-economic transformation in 1989. His reappointment as Finance Minister takes place in a period of low economic growth, a high budget deficit, and extremely high unemployment (with a rate of up to 18% - PL0208101N).
In May 2002, Professor Kołodko published an article promoting a rigid economic policy based on the devaluation of Polish zloty (PLN), fixed exchange rates between the PLN and euro, the introduction of import tax, and the possibility of an increase in the inflation rate (by 1.5% to 2%). However, after succeeding as Finance Minister, Professor Kołodko has withdrawn his previous proposals, now aiming for a reduction in the budget deficit and low inflation. He has promulgated an 'anti-crisis package', whose main objective is a reduction in unemployment and an increase in production. On 23 July 2002, the government thus accepted drafts of bills on the clearing of large industrial companies' debts to the state - thus protecting jobs in these companies - bonuses for reliable tax-payers and tax relief for banks providing credit for enterprises on the verge of bankruptcy.
The cancellation of debts will be applied to those companies which offer hope of further development, in particular those enterprises which currently pay off their dues to the state but are burdened with past debts. Other enterprises will have their debts to the state cleared, provided that they submit an adequate plan for improvement and reforms. The process of debt clearing will be initiated if a company pays a sum equal to 15% of its debt to the state (or 1.5 % in the case of certain categories of enterprises included in sectoral restructuring programmes, as in the mining, railways and armaments industries). The Deputy Finance Minister, Irena Ożóg, has argued that the introduction of the proposed new legislation would not affect the state budget, as the debts to be cancelled are unrecoverable: 'the government’s aim is the improvement of the situation of companies, restoration of their financial liquidity and credit capacity, and their participation in tenders' (quoted in the Gazeta Wyborcza newspaper on 24 July 2002).
A second item of new legislation will introduce credits for small firms employing up to five workers, while a third seeks to encourage the banks to grant credits. The government proposes that the banks should be able to write off 20% of remitted credits from their tax base. Moreover, the government supports the idea of a 'tax amnesty' (no penalties for petty fiscal offences) for entrepreneurs that confess to have committed any tax crimes in the past. According to Deputy Minister Ożóg, the amnesty 'will eliminate this precariousness about conducting a business activity'- ie it will give those companies which so far have evaded taxes a feeling of security (PL0206102F). To support this idea, the Polish Ministry of Finance (Ministerstwo Finansów RP) refers to a similar tax amnesty introduced recently in Italy.
The government’s proposal has met with favourable opinions on the part of the trade unions, both the All-Poland Alliance of Trade Unions (Ogólnopolskie Porozumienie Związków Zawodowych, OPZZ), which is linked to the ruling coalition, and the opposition-linked Independent and Self-Governing Trade Union (Niezależny Samorządny Związek Zawodowy Solidarność, NSZZ Solidarność). Marian Krzaklewski, the leader of NSZZ 'Solidarność', has stated that 'we are keenly interested in the specific mechanisms of state interventionism as regards the economy, stipulated by Minister Kołodko [...] even though the author of these proposals is the leftist government, they remain for us interesting' (quoted in Tygodnik Solidarność on 26 July 2002).
On the other hand, economists and representatives of private employers’ organisations have been more sceptical about the government’s proposal. They have stated that the clearing of companies' debts should take place along with their privatisation, as otherwise 'in two years' time those enterprises can find themselves back in an identical situation – again deep in debt', according to Dariusz Rosati, a member of the Monetary Policy Council (Rada Polityki Pieniężnej, RPP) (quoted in Gazeta Wyborcza on 24 July 2002). Jerzy Małkowski, an expert at the Business Centre Club ( BCC) expert, has argued that the government proposal is 'just another sum of money sunk into corroded structures' (quoted in Rzeczpospolita on 24 July 2002). Moreover, experts have pointed to the fact that the government is determined to curb the mounting unemployment rate and that, although the measures proposed are likely to bring the expected effects, these effects might be short rather than long term.
Eurofound recommends citing this publication in the following way.
Eurofound (2002), New Minister of Finance seeks to protect jobs, article.
