Poland Strug­gles to Af­ford Its Gen­eros­ity �Dorota Bar­tyzel and Wo­j­ciech Moskwa

Pub­lic Pol­icy ▶ The new govern­ment wants to heav­ily sub­si­dize fam­i­lies ▶ “Peo­ple come to City Hall al­most ev­ery day to ask about the money” It Pays to Be a Par­ent in Poland

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In April the Pol­ish govern­ment will start pay­ing fam­i­lies 500 zloty ($127) a month for ev­ery child born af­ter their first. The Pol­ish hand­outs, meant to nar­row the in­equal­ity gap and re­verse an alarm­ing drop in the birthrate, will lift an av­er­age fam­ily of five’s in­come 25 per­cent. Nor­way pays a sim­i­lar amount, but av­er­age in­comes there are five times higher—al­most $5,000 a month.

The fam­ily sub­sidy is one of the first ac­tions taken by Poland’s rul­ing Law and Jus­tice Party, which in Oc­to­ber won the first par­lia­men­tary ma­jor­ity by any party since com­mu­nism ended in 1989. Founded by for­mer Premier Jaroslaw Kaczyn­ski and his late twin, Lech, a for­mer pres­i­dent, Law and Jus­tice won by pledg­ing to stand up for or­di­nary Poles and re­de­fine the na­tion’s role within the Euro­pean Union. Al­though Beata Szydlo is the prime min­is­ter, Kaczyn­ski, as chair­man and the most pow­er­ful mem­ber of the party, is craft­ing a regime that mixes Scan­di­na­vian lev­els of so­cial wel­fare with an au­thor­i­tar­ian style of govern­ment.

Buoyed by ex­pected eco­nomic growth of 3.5 per­cent this year and next, Law and Jus­tice plans to in­crease hourly pay for part-time work­ers, raise the amount of in­come that isn’t taxed, and lower the re­tire­ment age by five years for men and two years for women. In Fe­bru­ary the govern­ment an­nounced plans to in­vest 1 tril­lion zloty, al­most half of gross do­mes­tic prod­uct, in man­u­fac­tur­ing and in­no­va­tion to help the coun­try of 39 mil­lion peo­ple catch up with wealth­ier EU mem­bers. Plans in­clude the con­struc­tion of in­dus­try hubs for ship­build­ing, phar­ma­ceu­ti­cals, and avi­a­tion.

At the same time, the party, which last ran the govern­ment from 2005 to 2007, has tight­ened its grip on the con­sti­tu­tional court and state me­dia. It’s also given the se­cret ser­vices freer rein; they no longer need court ap­proval to put cit­i­zens un­der sur­veil­lance. The changes have prompted EU au­thor­i­ties to in­ves­ti­gate whether the rule of law is in jeop­ardy in Poland. Ryszard Petru, leader of the pro-mar­ket Nowoczesna party, is urg­ing peo­ple to take to the streets in War­saw on March 12 to pres­sure Law and Jus­tice to “re­spect Poland’s con­sti­tu­tion.” On Feb. 27-28, 100,000 Poles at­tended antigov­ern­ment ral­lies in the cap­i­tal and in Gdansk.

Crit­ics call the fam­ily sub­sidy a ploy to dis­tract vot­ers from an au­thor­i­tar­ian agenda. It’ll cost al­most half as much as the de­fense bud­get. “Peo­ple come to City Hall al­most ev­ery day to ask about the money that Law and Jus­tice has promised,” says Robert Biedron, the in­de­pen­dent mayor of Slupsk in northwest Poland. “They ap­pear to be will­ing to sell some of their free­doms for more fi­nan­cial com­fort.”

In Jan­uary, Stan­dard & Poor’s cut Poland’s debt rat­ing for the first time, cit­ing a dan­ger­ous weak­en­ing of checks and bal­ances. The zloty has weak­ened 3.2 per­cent against the euro since Law and Jus­tice took over, the most of any cur­rency in East­ern Europe af­ter the ru­ble. War­sawlisted stocks have dropped 13 per­cent since the elec­tion, com­pared with an 8.4 per­cent de­cline in the MSCI emerg­ing­mar­kets in­dex.

Al­most half the sum the govern­ment has promised to in­vest in man­u­fac­tur­ing and in­no­va­tion is pro­jected to come from the EU, with the rest from state com­pa­nies, bor­row­ing, and higher taxes on banks and re­tail­ers and, pos­si­bly, the gen­eral pub­lic. The Euro­pean Com­mis­sion has said the newchild pay­outs alone will help push Poland’s bud­get deficit to 3.4 per­cent of GDP next year, from an es­ti­mated 2.8 per­cent this year. This would breach the EU’S 3 per­cent cap and jeop­ar­dize bil­lions of euros in fund­ing from the 28-mem­ber bloc.

None of that will stop Law and Jus­tice’s ef­forts to chart a new path for the coun­try through the power of the purse, says An­drzej Ry­chard, a so­ci­ol­o­gist at the Pol­ish Academy of Sci­ences: “Nei­ther the op­po­si­tion nor the Euro­pean Union, it­self plagued with a slug­gish econ­omy and the [Arab] im­mi­gra­tion cri­sis, can out­bid the of­fer that Law and Jus­tice has put on the ta­ble for Pol­ish vot­ers.”

Mar­iusz Kosowski, 31, says the 2,500 zloty he brings home ev­ery month from his job at a ware­house 60 miles south­west of War­saw isn’t enough to pro­vide for his wife and three young boys, so his wife has to work part time for the ex­tra 1,000 zloty they need to scrape by.

For the Kosowskis, the child-sub­sidy pro­gram will mean an in­come boost of about a third, mak­ing the dif­fer­ence be­tween hav­ing a small fi­nan­cial cush­ion and none at all. “This is go­ing to be a se­ri­ous fi­nan­cial injection for my fam­ily,” Kosowski says, prais­ing Law and Jus­tice for be­ing the first party “to force peo­ple on the top” to think about the plight of the less for­tu­nate. “The in­equal­ity in this coun­try is so painful, how did the other par­ties not see it?”

Child-re­lated sub­si­dies as a per­cent­age of monthly av­er­age wage

Poland* Nor­way “Nei­ther the op­po­si­tion nor the Euro­pean Union ... can out­bid the of­fer that Law and Jus­tice has put on the ta­ble for Pol­ish vot­ers.” ——An­drzej Ry­chard, Pol­ish Academy of Sci­ences The bot­tom line An ex­pen­sive child sub­sidy is one of many moves by the Law and Jus­tice Party to raise in­comes and strengthen its grip on power.

Edited by Christo­pher Power Bloomberg.com

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