The macro data prove that the Polish economy is slowing down. Strong zloty hinders exports and production, employment does not grow as fast as last year. Inflation is high. Leszek Balcerowicz tells “PB” how to reform economy in the changing environment.
He believes that a reform of the pension system is the first thing which needs to be done.
“Contrary to what majority of people think, the biggest budget spending is not administration. Six time more money are spent for social contributions”, Leszek Balcerowicz said.
He believes that earlier retirement should be possible only in specific jobs.
The second thing to do is to limit the public deficit.
“The government plans to limit it to 1 percent in 2010. It is important for the economic growth and I believe what the minister of finance says that the reform will be conducted even if the GDP growth is lower than assumed”, ex-head of central bank added.
He also hopes that the healthcare system will be reformed stopping further debts of hospitals.
“Research shows that transforming a company with keeping the state as the owner does not provide the results expected. The key is the change of the owner”, Mr. Balcerowicz believed.
Another issue is the insurance system for farmers, the so called KRUS. Farmers do not pay for this, which discourages from starting other businesses. Faster privatization is another priority.
“Companies whose privatization was being delayed, shrank and went bankrupt very often, sometimes were subject to wild privatization. It’s a myth that privatization causes unemployment. Restructuring ends in smaller lay-offs than a bankruptcy”, Leszek Balcerowicz stressed.
In his opinion, KGHM, PGNiG or airports should no longer stay state-owned enterprises.
Professor Balcerowicz is also a strong supported of flat tax.
“Today, budget spending amounts to 45 percent of GDP. All Asian tigers had 20 percent, while in Baltic countries it amounts to 30 percent. Flat tax is a tax encouraging people to work and invest. Besides, it is simple. That’s why it is implemented by countries which have much to catch up with, including Baltic countries, Slovakia, Bulgaria, Russia, Ukraine, Romania or the Czech Republic. We are one of the very few countries in the region which don’t have the flat tax in full range. But it is the whole tax system which needs reform”, Leszek Balcerowicz concluded.