Yet even in Poland growth is slowing. The euro crisis has hit exports, two-thirds of which go to the euro zone. A weakening euro does not help. Poland's unemployment is about 13%, around a five-year high. In April the purchasing managers' index fell. Yet Poles continue to spend freely. Inflation was 4% in April, above the central bank upper limit of 3.5%. In response, the central bank has raised its benchmark interest rate to 4.75%, having held it at 4.5% for ten months. Foreign investors remain keen. Poland (like the Czech Republic) pays less for ten-year government bonds than Italy and Spain (see chart). Jacek Rostowski, the finance minister, hopes to cut the budget deficit to 2.9% of GDP this year; the public debt may fall to 55% of GDP.
More reform would help. The labour-participation rate is low. Big firms suffer a workplace curse: it is normal to call in sick on Monday and come back on Friday because of a slight cold. Fraudulent incapacity claims are endemic. Doctors are complicit. Small businesses waste thousands of hours completing forms, visiting state offices and paying expensive lawyers and accountants. “We need to prevent growth slowing more than it has to, by deregulating the economy,” concludes Marcin Mroz, chief economist at BNP Paribas in Warsaw. “Every political party has promised to do this, but none has ever done it.”
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