Economic tests for new Polish regime

Old industries need to restructure or close

Polish president Aleksander Kwasniewski will formally approve a new coalition government on Friday, following elections in September.

The coalition will consist of members of the ex-communist Democratic Left Alliance (SLD), the socialist Labour Union (UP) and the Polish Peasant Party (PSL).

Voters angered by botched reforms and sleaze scandals, ejected the previous Solidarity government from parliament in September.

The new government must now tackle slowing economic growth, soaring unemployment, poverty and an unwieldy farm sector.

EU controversy

The SLD leader Leszek Miller has promised to make life better for average Poles left behind in the country's post-communist boom.

However, he also has to complete reforms necessary for Poland to qualify for membership of the European Union (EU) - a move opposed by some coalition partners and likely to result in further economic pain.

The president said that Poland's new leaders faced a task no less great than the transition from communism to democracy in preparing to join the EU.

Poland is the largest of a dozen mainly eastern European candidates in talks on joining the western bloc, which hopes to expand its membership from 2004 onwards.

"Thanks to the makeup of the new parliament, the debate on Poland's place in Europe will be more controversial," Mr Kwasniewski said.

The new finance minister will be Marek Belka, who is already highly respected within the financial community and enjoys a strong relationship with the prime minister and president.

While the austere package of reforms he proposes is similar to that of his predecessor, his political mandate is much stronger.

Grievance

Many Polish farmers nurture grievances against the European Union policy, which has seen the country's agricultural exports fall.

"They want subsidies so they can compete on equal terms for trade with Russia," Andrzej Swidlicki, Business Editor of the World Service Polish Section, told World Business Report.

Farmers also now face the challenge of specialisation. Until now, each farmer had a pig, a cow, an orchard and a field of grain.

"They did that to minimise the risk," Mr Swidlicki explained.

"If a pig was ill, they still had their grain, and if the harvest failed, they still had their animals."

Many industrial workers have also had a tough time adapting to the new economic times.

Many of Poland's older industries, such as steel and coal, have closed, restructured and merged.

The hope is that the perceived advantages of EU membership and the growing entrepreneurial culture in Poland, will increase the willingness to accept difficult financial measures.