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Poland's confrontation with the European Union

Photo: Shutterstock

Photo: Shutterstock

Back in October 2015, the Law and Justice Party, abbreviated to PiS, won Poland’s parliamentary election by a huge majority.

Three months into their governing, PiS passed a legislative amendment that gave them the right to choose the replacement of five constitutional court judges. Following this, the president signed legislation that imposed the head of constitutional court to include the five constitutional judges chosen by PiS.

The European Union (EU) initiated an inquiry into whether Poland’s government has breached the EU’s democratic standards by taking greater control of the judiciary and public media.

Andrzej Duda, being the current president of Poland, signed a law passed by Poland’s parliament in December 2017, which forced out around two-fifths of the Supreme Court Judges and gave power to the PiS dominated parliament to select a National Council of the judiciary. The aim of this council is to recommend the nominations of judges.

In March 2018, the parliament used its recent powers and selected a new national council, in contrast to previous councils which were appointed mostly by judges rather than parliament.

Following this, in July 2018, the European Commission, being the EU’s executive arm, launched a new case against Poland over the reorganisation of the Supreme Court.

According to the Venice Commission, being an advisory of the EU council, the law enacted by Poland seriously jeopardised independence of “all parts of the Polish judiciary”.

The Supreme Law passed by Poland lowered the retirement age of judges to 65 from 70 and this resulted in 27 judges to forcibly retire. After battling with Poland for two years the EU Commission enacted Article 7, which is sometimes referred to as the EU’s “nuclear option”, as it is a serious political sanction that result in suspending a member country’s right to vote on EU decisions.

Albeit, such strict measure has virtually no chance of success because of Poland’s allies, predominantly Hungary, which have pledged to block such procedure.

With the EU imposing Article 7, it has the means to apply sanctions on Poland. Furthermore, as tensions between Poland and the EU continue to escalate, the EU is considering limiting development funds in the post-2020 budget.

This can adversely hit Poland considering it is the major net beneficiary of the EU’s budget, which may total 1.28 trillion euro in the period 2021 to 2027. Such funds have been an assistance in fuelling Poland’s economic growth.

Poland’s response to the EU’s interference, is for the EU to mind its own business. With the leader of the ruling party Jaroslaw Kaczynski saying that such threats “won’t break” Poland’s government determination to continue the judicial overhaul.

Despite the robustness and continuous performance in Poland’s economic growth, the current tensions with the EU can adversely affect the zloty, being Poland’s currency.

As proven in previous times the zloty is susceptible to escalating conflicts, resulting in threatening both potential and current investments in Poland.

Disclaimer: This article was issued by Rowen Bonello, research analyst at Calamatta Cuschieri. For more information visit, www.cc.com.mt. The information, view and opinions provided in this article are being provided solely for educational and informational purposes and should not be construed as investment advice, advice concerning particular investments or investment decisions, or tax or legal advice.

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