POLEXIT - is it a possible scenario for Poland?

Recently, the whole Europe has been observing the severely strained relations between EU and former socialist countries. Many critics claim that looking back at the history, the current situation in the Central Eastern and Southern European regions starts to resemble the times of the Iron Curtain when democratic principles on the territories controlled by the Soviet Union were constantly violated. Although it does not happen in exactly the same extent, many states have already introduced regulations which may be perceived as a threat to EU values. One of such representatives is Poland with its ruling party – Law and Justice (PiS)1.

In general, the organisation aims at strengthening of the national identity and Polish interests within the EU bloc. While defending the state sovereignty, it fosters such values as morality, openly criticizing EU for its liberal-left consensus that breaches Polish traditions. In spite of those spheres in which two parties clearly do not find the common ground, PiS ideology excludes the option of leaving EU focusing rather on implementation of much needed reforms of its policies. Indeed, there are some signals of the possible Polexit coming from the rightwing politicians, nevertheless Law and Justice does not back them. Taking all this into account, the question one could ask is – why, thus, is Polexit currently in the cards?

Following the UK pattern, several countries decided to verify the society’s preferences associated with the EU membership. In case of Poland, in June 2017 the pooling agency based in Warsaw – CBOS (Centre for Public Opinion Research), conducted a survey in which it discovered that up to 88% of respondents defined themselves as pro-EU2.

1

Thomas Roser, Eastern Europe: Democratic principles on the edge, 2017, <http://www.dw.com/en/eastern-europe-democratic-principles-on-the-edge/a-41974823> [Accessed 15 April 2018].

2 Aleks Szczerbiak, Should the EU be concerned about a possible ‘Polexit’?, 2017, <http://blogs.lse.ac.uk/europpblog/2017/09/08/should-the-eu-be-concerned-about-a-possiblepolexit/> [Accessed 15 April 2018].

Yet, slightly more than a half year later, according to Kazimierz Pulaski Foundation pool’s findings, third of Poles advocated the EU exit scenario. Such a discrepancy does not bode well for the future relations between Poland and EU3.

The origin of this drastic change may be found in months of simmering disputes between the Polish government and EU. In fact, it all started over two years ago with the initiated unprecedented investigation into Poland, conducted by the European Commission. The reason for that was the country’s slow drift towards an authoritarian system. Therefore, the Commission applied a three-step mechanism created in March 2014 as the pre-Article 7 procedure. According to it, the Commission firstly assessed the controversial issue, then, after consultation with the state, passed its own opinion, made general recommendations and last but not least – monitored compliance4.

The infographic below (Fig. 1) presents the Rule of Law Framework with the emphasis put on all above-mentioned steps and the possible scenarios resulting from them:

Sebastian Kettley, ‘Time to get out’ Will Poland leave the EU? Third of Poles demand EU Polexit, 2018, <https://www.express.co.uk/news/world/935620/Poland-EU-exit-Polexit-willPoland-leave-European-Union> [Accessed 15 April 2018].

4 Ginger Hervey, Emmet Livingstone, What is Article 7?, 2017, <https://www.politico.eu/article/hungary-eu-news-article-7-vote-poland-rule-of-law/> [Accessed 15 April 2018].

3

Figure 1. The Rule of Law Framework

Source: European Commission, Rule of Law: European Commission acts to defend judicial independence

in

Poland

[Press

release]

(Brussels,

20

December

<http://europa.eu/rapid/press-release_IP-17-5367_en.htm> [Accessed 16 April 2018].

2017),

The problem rapidly escalated in June 2017 after several reforms enacted in Poland. It is worth highlighting that what the Polish government proposed argues with the idea of the judicial system being independent of subjective views of people in charge of leading the country.

Stating it more precisely, it defined the role of the justice minister as the one who may decide on dismissal of presiding judges whenever he wishes to do so. It mainly means that the government pulls the strings in more spheres that the Constitution of the Republic of Poland – the supreme law of the state, allows for. Gaining control over judiciary has far-reaching consequences for functioning of the society and the country as a whole. Not only does it undermine the separation of powers, but it also breaches the EU core principle – the rule of law.

What is more, for quite some time, the government has been making the public-service TV stations conform to its own ideology removing all inconvenient contents from the public view.

Due to that, the freedom of expression became extremely limited which do not match EU policies. Since the democratic system in Poland, in the opinion of many, started to hang in the balance, it has not also escaped Brussels’ attention.

The constantly repeated violations of EU fundamental principles, as well as the lack of initiative to reinstate them have given rise to official warnings directed at the Polish government5.

The crucial moment arrived in December 2017 when the European Commission triggered the Article 7 procedure due to a threat of Poland violating democratic principles6. Such a mechanism ensures that the values stated in the Treaty on European Union are protected:

5

Roser, Eastern Europe.

EU affairs, Rule of law concerns in Poland: how the Article 7 procedure would work, (27 February 2018), <http://www.europarl.europa.eu/news/en/headlines/euaffairs/20180222STO98434/rule-of-law-concerns-in-poland-how-the-article-7-procedurewould-work> [Accessed 16 April 2018].

6

„The Union is founded on the values of respect for human dignity, freedom, democracy, equality, the rule of law and respect for human rights, including the rights of persons belonging to minorities. These values are common to the Member States in a society in which pluralism, nondiscrimination, tolerance, justice, solidarity and equality between women and men prevail.”

Article 2 of the Treaty on European Union7

The Article 7 was introduced by the Amsterdam Treaty coming into force in 1999, as a response to possible human rights infringements in those countries which experienced such a phenomenon in the past8. What seems interesting is the fact that till now it has never been applied. It comprises two separate mechanisms, first of which is called preventive measures, used in a case of a risk of breaching EU values by a member state and the second named sanctions mechanism is adopted when a serious violation of EU values has already occurred.

The European Commission has been trying to hold a constructive, continuous dialogue with Polish authorities issuing four Rule of Law Recommendations respectively on 27 July 2016, 21 December 2016, 27 July 2017 and 20 December 2017. It expressed its concerns several times in order to alert Poland to the gravity of the situation. The Commission has kept the European Parliament and Council constantly informed about the course of events in Poland.

Nevertheless, the Polish government has not taken any actions suggested by the Commission which made it apply further steps to solve the problem. As it explained in the press release from 20 December 2017, “despite repeated efforts, for almost two years, […] the Commission has today concluded that there is a clear risk of a serious breach of the rule of law in Poland”.

7

The Lisbon Treaty (Lisbon, 2007), <http://www.lisbon-treaty.org/wcm/the-lisbontreaty/treaty-on-european-union-and-comments/title-1-common-provisions/2-article-2.html> [Accessed 15 April 2018].

8 Hervey, Livingstone, What is Article 7?.

Such a statement was a response for 13 newly passed laws concerning the judiciary in Poland.

The Commission listed all institutions affected by them, including not only ordinary courts but even the Supreme Court and the Constitutional Tribunal of Poland. It emphasized the threat of political interference in the judicial system, impacting the distribution of powers in the state in the spotlight, but also the functioning of the judicial branch there and in the Union as a whole.

If legal certainty and independence of judiciary are at stake in one member country, it automatically impacts the others, since it undermines the established concept of European democracy. Numerous member states as well as representatives of the judicial branch in Europe, such as the Venice Commission, the United Nations Human Rights Committee or the Network of Presidents of the Supreme Judicial Courts of the European Union have shown concerns over all infringements occurred9.

As the Article 7 procedure began, it is worth noting that in this particular case, the Commission resorted to the preventing mechanism, which is fully described below:

â&#x20AC;&#x17E;On a reasoned proposal by one third of the Member States, by the European Parliament or by the European Commission, the Council, acting by a majority of four fifths of its members after obtaining the consent of the European Parliament, may determine that there is a clear risk of a serious breach by a Member State of the values referred to in Article 2. Before making such a determination, the Council shall hear the Member State in question and may address recommendations to it, acting in accordance with the same procedure. The Council shall regularly verify that the grounds on which such a determination was made continue to apply.â&#x20AC;?

9

European Commission, Rule of law.

Article 7.1 of the Treaty of Amsterdam10

In general, it means that 22 out of 27 member states, except from the country concerned, have to support the decision on passing the discussed mechanism, which later may result in suspension of Poland’s voting rights both in the European Council and in the Council, as well as cutting off the country from the EU funds.

The European Commission is ready to reconsider its proposal once the Polish government implements its recommendations in full. However, the former Polish Prime Minister, Beata Szydło, clearly stated that it is the EU Commission which has to “respect the lawfulness of the EU’s member states, of transparency and dialogue”.11

Although the Law and Justice-backed President of Poland, Andrzej Duda, surprisingly vetoed two of the new laws, the ruling party still claims its actions are directly related to the domestic affairs of the state which cannot be fully controlled by EU, thus defining EU accusations as biased. Moreover, in case the Commission chooses the sanctions mechanism, it needs unanimous voting from all the member states. Yet, the Hungarian government has already declared its support for Poland so this option seems impossible to happen.12

10

The Amsterdam Treaty (Amsterdam, 1997), <http://www.lisbon-treaty.org/wcm/the-lisbontreaty/treaty-on-european-union-and-comments/title-1-common-provisions/7-article-7.html> [Accessed 15 April 2018].

11 Sebastian Kettley, What is Article 7? Will the EU resort to the ‘nuclear option’ to force Poland out?, 2017, <https://www.express.co.uk/news/world/895259/eu-what-is-article-7european-union-use-against-poland-nuclear-option-polexit> [Accessed 16 April 2018].

12 Szczerbiak, Should the EU be concerned about a possible ‘Polexit’?.

On the other hand, the former Polish Prime Minister, Donald Tusk, previously leading the opposition party, currently being the EU President admitted that "in Brussels there's still a huge surplus of hope — […] not […] trust, that unfortunately vanished already — that Poland will nevertheless remain in the EU".13

What seems interesting is a rather fresh reshuffle of the Polish government which can change the image created so far by the national-conservative Law and Justice. The new Prime Minister, Mateusz Morawiecki, may be perceived as a sign of a thaw in relations between Poland and EU.14

How is it all going to end? Does Poland with its slightly hostile attitude move towards leaving the EU bloc? Or maybe it is only a temporary row and such an option is out of the question?

The proper cost-benefit analysis is what is actually needed in order to assess whether the country should opt for the possible Polexit or so-called Polstay. Let us look at these two possible scenarios.

Polexit

The economic downturn experienced by the world since 2008, as well as the debt and the public finance crisis in the Eurozone, have led to voices in some countries questioning the value of further membership in the European Union. Political tensions in Poland rise the voices for Polexit. The knowledge about the effects (both positive and negative) is overwhelmingly small.

So what would happen if Poland decide to leave EU?

13 Is

‘Polexit’ in the cards? Tusk warns Poland may quit EU, 2018, <http://www.dw.com/en/ispolexit-in-the-cards-tusk-warns-poland-may-quit-eu/a-42099863> [Accessed 16 April 2018].

14 Bartosz Dudek, Is Poland’s new government a PR stunt or an actual change?, 2018, <http://www.dw.com/en/is-polands-new-government-a-pr-stunt-or-an-actual-change/a42087786> [Accessed 16 April 2018].

First of all, the exit of Poland from the Union will definitely not be treated as the exit of Great Britain. The United Kingdom is a net payer of the Union15, a country with a strong economy and modern army. It was a very strong player in the EU, which in practice meant it also have to take a great responsibility in solving economic and migration crises. Poland, in turn, has been collecting EU funds for economic development over the years. It is difficult for Poles to compete with the majority of countries in terms of trade potential or innovation. In addition, Poland has gained infamous reputation among EU bodies as a country that has a problem with respecting member obligations. Polexit, in contrast to Brexit, would not raise the concern, but more likely the indignation of the EU countries, which for more than a decade have made a good contribution to the Polish budget. According to the provisions of the Treaty of Lisbon16, if a country wants to leave the Union there is a need for two-year negotiations with the EU authorities. Moreover, exiting country is obliged to return of all EU subsidies, but of course, there is no question of the return of membership fees by the Union. In practice, Poland would probably be forced to give back a solid part of the EU funds plus it would not have the chance to negotiate favorable conditions for leaving the Union. It is very likely that, due to the tightened trade or visa policy and the need to repay the Union, the country would return to the state it was at the early nineties.

The biggest advantage of the European Union is the free flow of goods, services and capital.

The EU creates a common market among member countries, but at the same time free trade does not exist in the case of exchanges between an EU country and a non-EU country, if there is no bilateral free trade agreement signed. What is the biggest advantage for EU member state is also the most serious disadvantages that the state

15 J. Haas and E. Rubio, Brexit and the EU Budget: Threat or Opportunity, Jacques Delors Institute Policy Paper, no. 183, 2017, p.p. 1-4.

16 E. Poptcheva , Article 50 TEU: Withdrawal of a Member State from the EU. Briefing, European Parliamentary Research Service, 2016.

may have to face in case of leaving the Union. This will be the imposition of a duty on trade and impediments at borders as well as while staying in EU countries.

Citizens of the Union can travel within its borders without a passport. It is also easier for them to get a job and settle in EU countries. Poland's exit from the EU means, among other things, that thousands of Poles who, for example, find the job and settled in other EU countries, will be forced to return to their homeland.

Moreover, the lack of duty imposed on trade is in practice one of the greatest advantages of being a member of the EU. After leaving the Union, all exports and imports will be more expensive and – with higher duty and VAT and more constricted, as it will have to go through customs clearance. In practice, this can be circumvented - Norway uses the EU trade zone, without being in the Union. However, this solution also generates the obligation to contribute to EU funds, without having any influence on the Union17.

According to Polish Central

Statistical Office18, Polish exports in 2017 amounted to EUR 203.7 billion, of which EUR 162.4 billion is export to European Union countries. A similarly high share of trade with EU countries takes place in the case of imports: it totaled over EUR 203.3 billion, of which almost EUR 125.1 billion are imports from EU countries. The numbers clearly, shows that if Poland decide to exit EU this may hardly influence its balance of trade, if it will not be prepared to solve abovementioned issues

17 E.

Eriksen and J. Fossum, The European Union’s Non-Members: Independence Under Hegemony?, Routledge, 2015, p.p. 78-80.

18 Polish Central Statistical Office, Obroty towarowe handlu zagranicznego ogółem i według krajów w okresie styczeń – grudzień 2017, Retrived from: http://stat.gov.pl/files/gfx/portalinformacyjny/pl/defaultaktualnosci/5466/1/65/1/obroty_towarowe_handlu_zagranicznego_styczen_grud zien_2017.pdf (access date: 14.04.2018).

The possible model of cooperation with the Union and for Poland may be so-called the Swiss model, which is based on the agreement on the European Free Trade Association (EFTA)19. The terms of trade with the Union are regulated by Switzerland on the basis of approximately 120 bilateral agreements covering some but not all areas of trade. They do apply to the banking sector and other parts of the services sector, which account for a large part of the Polish economy. This model also seems to have its drawbacks, because it requires long-term negotiations with former EU partners, which may lead the loss of investment and jobs. The adoption of the Swiss model by Poland may also mean an increase in administrative and customs costs for Polish exporters. Yet Poland has significant benefits due to its geopolitical location - it is located in the center of Europe with an easy access to many markets. However, Switzerland as well as Norway has to make payments to the EU budget in return for partial access to the single market, but they are lower than in the case of a Norwegian type agreement.

The biggest benefits of leaving the Union are: greater control of emigration and immigration, greater independence of the state and removal of expectations from the country regarding the resolution of the economic crisis. These three factors speak also for Polexit. However, at that moment, it is hard to assess how much this aspects will be measurable benefits, and not just a momentary satisfaction. Whether Poland is in or outside the EU, the EU will be an exceptionally important trading partner, and the possible crisis will not miss Poland simply because it will leave the Union itself.

To play an important role in the international arena, Poland should have the same potential as its partners, which it does not yet have. If Poland want to take a more significant position among other countries, it need to strengthen and develop its economy, GDP, the ability to build lasting alliances. These basics requirements must be met before Poland even starts

19 S. Dhingra, The costs and benefits of leaving the EU: trade effects. Economic Policy, no. 32 (92), 2017, p.p. 651-705.

thinking about leaving EU as membership in NATO alone is not enough, because the pact protects us against military threats, and does not protect against economic war and political domination.

Polstay

Poland will not leave, simply because the country will never be able to pay back the money received – that is one of the strongest arguments presented when only the possibility of Polexit is discussed. According to Mr Becker, the editor of global economic publication OWC “Polish economy would collapse in the event of "Polexit" if the country was forced to repay the €92.6bn it has received since joining the bloc in 2004.”20 Surely, the country which received a significant amount of money which they now do not have as it was invested or spent is not in a favorable position to leave – thus, here is the first argument for Poland to stay.

The other very important factor in the discussion is the perception of Poles, who might be in disagreement with EU’s polices and set of values. Going a step futher, they might feel in the opposition to the West in general . As Steven Erlanger and Marc Santora of The Times wrote, Law and Justice has thrived on contrasting a “conservative, Catholic Poland and its family values with a godless, freethinking, gender-bending Western Europe.”

21

There is an ambiguity of this

statement while looking at reality. If Poles would really feel in such an opposition they would never move to western countries to work, yet more than 2,8 milion Poles work and live abroad22. Why would they and how could they do so if the difference would be so strong and

20

https://www.express.co.uk/news/politics/893953/poland-exit-polexit-from-europeanunion-would-bankrupt-country-expert-warns 21 https://www.nytimes.com/2018/02/28/opinion/eu-polish-nationalism.html 22 https://www.money.pl/gospodarka/wiadomosci/artykul/emigracja-wyjazd-dopracy,4,0,2389252.html

they would feel in clear oppostion to western values? That would not be possible, thus the image which is created is not always the one which in the real one. While asked about possibly of Polexit , Milan Nic, the Eastern Europe expert said: “No, that's impossible. The Poles are among the most EU-friendly nations in the Union.”23 This states for itself, being EU-friendly is a clear point that Poland will stay in EU instead of leaving because people living in Poland what it to be so.

Another point to mention is a huge debate about Poland not accepting refugees and this is one of the strongest arguments in the debate – the EU imposing laws which according to the ruling party should be decided on national level due to the security of the borders.24 This card is used often and higher number of terrorist attacks in the countries which accepted refugees put Poles in opposition to EU because of the security reasons. An ethnically homogenous nation battles EU efforts to distribute

asylum seekers.

25

If Poland will be forced to accept refugees no right to refuse that would

indeed rise a questions to leave the EU. The reason is because Poles would simply be afraid – 74 % of Poles (in 2105) disagree to accept refugees26. We would have to spend a lot of time to find other reason then fear but important to mention is that it can be caused by misinformation – without wider perspective and debate is still on, so there is no incentives to leave EU now.

23

http://www.dw.com/en/poland-how-feasible-is-a-polexit/a-41779535 http://confrontations.org/la-revue-en/will-poland-leave-the-eu/?lang=en 25 https://www.politico.eu/article/politics-nationalism-and-religion-explain-why-polanddoesnt-want-refugees/ 26 https://www.cbos.pl/SPISKOM.POL/2017/K_044_17.PDF 24

Conclusion.

While summing up and answering the question of a possible scenario of Polexit it is clear that a country which is pro EU but have the government which actions can sometimes question the fundamental values for which EU stands, it is then more a question of EUâ&#x20AC;&#x2122;s actions. The possible threat of applying Article 7 of the Union Treaty is the first ever mentioned option for a member state which can have catastrophic consequences for Poland. As, for Poles they surely do not want that. The national survey showed Poles do not want Polexit as they do recognise how much help they get from European Union and how the country developed since 2004. What only caused disagreements was the question of internal security and both side must take measurements in order to find a common position in the case of accepting refugees. So is Polexit a possible scenario? For now, surely it is not.

About the authors: Justyna Nazaruk – a double degree graduate of Bachelor of International Business Administration at Montpellier Business School in France and International Economic Relations at Cracow University of Economics (CUE), twice awarded the scholarship for scientific excellence; currently a master’s student of International Business at CUE. In 2015-2016 she was an active member of the Foreign Trade Student Research Group at CUE and a co-organiser of several projects run that time, such as the 5th Foreign Trade Forum. Her detail-oriented nature contributed to the development of her genuine passion for the luxury industry, which she has lately focused on in both of her theses.

Agata Maria Sambor – a bachelor degree graduate from Cracow University of Economics in field of International Economic Relations with International Business Specialisation. In the same time, graduate from French business school ESC Troyes located in Champagne region, where she studied International Business Administration. Now she is doing her master in International Business in Cracow University of Economics and studying Diplomacy at Academy of Young Diplomats in Warsaw. She is an activist in different fields always serving higher purposes, currently a Content Manager of Spring Agora Kraków 2018 organized by AEGEE Kraków.

Aleksandra Tyszkowska - a first-year master degree student of International Business at the Cracow University of Economics, where she also successfully completed her bachelor in the same field. Since 2015 she is an active member of a global youth-led organization – AIESEC, where she developed her leadership skills as Head of Talent Management in Local Committee in Kraków.

She participated and organized many local and national conferences, which she also facilitated.

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