In the interview, Balcerowicz says the civil society is crucial to avoid bad policies. “Politicians should not be left to themselves.”
The Polish economist says countries need to complete reforms before entering the euro-zone, or else they could end like Greece, pointing out that the euro in itself is not a guarantee for economic success.
In the first part of the interview, published last week, Balcerowicz said the Ukraine-Russia conflict is a European problem and Putin’s actions should not be ignored even if serious economic sanctions could lead to a new economic crisis.
This is the second part of the interview:
Mediafax: You spoke about the reforms and the need to reform. What did the eastern European countries learn from the economic crisis started six years ago, and what should they still do?
Leszek Balcerowicz: The situation of the respective countries in the EU has been different depending on their previous policies. If one looks at the euro-zone, one sees that countries like Germany and Austria had not suffered very much compared with Greece or Spain. What explains these differences? Largely, different policies: in Greece they were spending, and spending, and spending at the cost of growing public debt and finally they paid the price. Germany has benefitted from the reforms introduced ten years earlier by Schroder, so the main lesson I think is that bad policy is punished, sooner or later, also in the euro-zone. The best protection is to have a good policy. For a good policy in a democracy, you need a constant monitoring of a government by people who believe in the ideas of freedom and limited government. So, the civil society is crucial to avoid bad policies. Politicians should not be left to themselves.
Mediafax: Do you think all eastern European countries have learned that?
Leszek Balcerowicz: Governments and politicians are always pressed by various interest groups who demand more spending or more regulations and they are active everywhere, not only in central and eastern Europe. If these pressure groups prevail then the governments introduce bad policies. What is the solution? The solution is to build a stronger counterweight within the society.
Mediafax: Should eastern European countries hurry to enter the euro-zone or they should better wait a few more years?
Leszek Balcerowicz: They should hurry to complete reforms, because if you enter the euro-zone without much reform you end like Greece. So the lesson is–let me repeat that–bad policies are bad in the longer term because you end in stagnation like Italy, or in crisis like Greece, and to have good policies is the best protection, but good policies in democracy require a monitoring of politicians by the civil society. And this is why there are you have only a few countries which are constantly successful.
Mediafax: But the euro-zone has its own problems, as you have mentioned, such as the situation is Greece.
Leszek Balcerowicz: There are problems in some countries of the euro-zone, like there are problems in some countries outside the euro-zone. For example Great Britain has boomed and busted and had quite a deep recession because it allowed the credit and fiscal bubble to develop. It’s not the euro-zone to be blamed directly for the bad policies in Greece.
Mediafax: Do you believe in the euro? What should the monetary union improve?
Leszek Balcerowicz: Let me repeat that having euro in itself does not guarantee economic success. Having euro helps countries that are strong, in the sense of being reformed, but having euro with bad policies can get you some benefits in the short run and problems in the longer run. So there is no European guarantee for good national policies. You have to do your work; every country has to do its own work.
Mediafax: The union has something to improve, tighten or loosen the policies?
Leszek Balcerowicz: You are talking now of the European Central Bank, which is the one European institution that is in charge with the euro-zone policies. I don’t think that emulating or imitating Fed policies is a good solution in the longer run. I don’t think that one can solve structural problems with easy money, you can postpone the problems but not solve them, and you even make them more difficult.
Mediafax: Maybe the criteria for joining the euro area should be tightened in the aftermath of the Greece problems?
Leszek Balcerowicz: As you know, Greece was admitted for political reasons. So political reasons should not prevail over economic rationality. If countries meet convincingly economic criteria and want to join the euro-zone they should not be prevented from. Estonia and Latvia recently have joined because they had good policies in place.
Professor Doctor Leszek Balcerowicz is a highly renowned economist, legendary politician who is regarded as the architect of Poland’s market reforms initiated in 1989, after the collapse of communism. With truly remarkable achievements, he has been a dominant figure in the country’s developments and economic strategy between 1989 and 2007.
Leszek Balcerowicz is a keynote speaker at “The Coface Country Risk Conference,” organized on April 9 by Coface and Mediafax at the Athenee Palace Hilton Hotel in Bucharest.
The Coface Country Risk Conference, currently at its 10th edition, has become a traditional risk management event in Romania, a catalyst of ideas and debates within the national business community.
Throughout the years, the conference has acquired the statute of one of the most prestigious business events in Romania. The event experienced an accelerated growth from one year to another in terms of number of attending specialists and representativeness of the business environment.
In 2014, the event will bring together 300 participants, country risk experts, academic and banking specialists and Romanian and foreign investors.
In order to register for the Coface Country Risk Conference 2014, please complete the registration form on the website: http://www.mediafaxtalks.ro/risc-tara-coface/inregistrare-en.htm
You can find additional information about the conference on the event website: http://www.mediafaxtalks.ro/risc-tara-coface/index-en.htm