LATEST REPORTS ON ECONOMIC DEVELOPMENT

In Poland Prime Minister Jaroslaw Kaczynski said he would push for early elections in an attempt to bring to an end the rising discord in his coalition government. A crisis began when a junior parliamentary member, the Self-Defense Party, removed one of its members from the government. Without this junior party, the ruling Law and Justice Party could not sustain a parliamentary majority.

While Poland’s ties to the US’ plan for an anti-ballistic missile shield remain firm, its relationships with the EU soured during the past two weeks as the European Commission insisted that work be stopped on the Via Baltica, a planned highway that would cross Poland and lead through the Baltic States to Helsinki, Finland. Poland has ceased work for the time being out of regard for the Commission’s environmental concerns, but hopes to resume the highway in the future. The highway was first planned to ease congestion and traffic noise in Poland’s small towns, which lie along existent, now outdated roadways

Additional EU concerns centered around the organization’s objections to current Polish laws which restrict foreign supermarkets to a certain size. This law might be seen as a breach of EU law and is due to be further examined by the Commission. Some Polish business groups have also objected saying that the law, originally sponsored by agriculturalists with ties to markets, could hinder Polish retail businesses with large showrooms. The law was passed by the Polish government on July 11, 2007 and aims at hindering the expansion of foreign hypermarket chains whose size might harm local retailers. It is possible that the European Commission may regard the law as anti-competitive.

Other laws passed by the current governing coalition include an easing of visa restrictions on workers from Ukraine, Belarus, and Russia. It is estimated that since 2004, the year Poland joined the EU, over 800,000 Poles have emigrated to the UK, Ireland, and Sweden. Ease of entry from other eastern European nations originated in an attempt to compensate for growing labor shortages in both the construction and agricultural sectors of the Polish economy.

Poland has yet to decide whether to remain in Iraq, where it has 900 troops and leads a multinational force located south of Baghdad. The current government has said that its Iraqi mission, centered largely around the training of security forces, depends on progress in that country and on further relations with the US. It is not yet known whether the dissolution of the present government and the early elections that are expected to follow, will bring a shift in Poland’s Iraqi commitment.

Recent political news from Ukraine focused on the WTO’s support for a transition period in the country’s agricultural sector, and therefore for Ukrainian plans for WTO accession. The Ukrainian Defense Ministry announced that if Russia abandoned its participation in the Treaty on Conventional Armed Forces in Europe (CFE), the Ukraine would take steps to provide for its security, including a participation in some form of collective response.

Ukraine’s ties to neighboring nations increased during the past few weeks. President Viktor Yushchenko traveled to Hungary for a serious of meetings and to attend an arts exhibition. Ukraine has acted to increase its energy connections with Hungary throughout 2007—a policy that has brought frequent visits and meetings among both leading politicians of the two countries and information exchanges among engineering specialists.

Ukraine is exploring the idea of constructing a Caspian Sea energy corridor that would link the Ukraine and European via transport networks that bypass Russia. Recent official meetings have underscored a need to secure an independent agenda in light of Russia’s shutdown of gas transportation through Ukrainian grids the first three days of January, 2005. At least 25% of the EU’s energy supply relies on overland transport routes linked to Ukrainian networks. Energy strategies, including multinational partnerships between the public and private sector, are becoming more frequent, as recognition of exploration difficulties and scarcity issues become increasingly recognized as factors in energy security planning.

Estonia seeks recognition of all three Baltic states as separate countries with particular problems. However, joint efforts that include Poland, now encompass the development of a nuclear energy generator in Lithuania, which is expected to reduce independence on external energy resources in the future.

Taxes and sovereign ratings received attention throughout Eastern Europe as the Czech parliament approved a cut ion the corporate tax rate from 24% to 21% in 2008, and then to 20% between 2009 and 2010.

Standard and Poor’s, the financial rating company, assigned a series of foreign currency long-term ratings to Belarus, including a BB local-currency rating that continued to reflect a centralized system that dominates the national economy. Standard and Poor’s, however, noted higher levels of wealth and development, a low general government debt, an ability to honor borrowing commitments, and Belarus’ successful production of an educated labor force. These characteristics are expected to lead to an increase in foreign investment in the future.

Belarusian National Bank published monetary guidelines for the coming year, indicating it plans to decouple the Belarusian ruble from the Russian ruble and peg the currency to the US dollar instead. Russian analysts noted a need for Belarus to orient its currency broadly towards its primary partners, the US, EU, and Russia. However, Belarusian commitments to peg its exchange rate to the US currency is seen as a necessary mechanism to curb inflation at home. An additional reason is that a majority of foreign transactions occur in US dollar calculations.