Surging prices imperil Polish govt ahead of vote next year

Prices are surging in Poland, making it among the European Union nations with the highest inflation rates

With a backpack slung over his shoulder, Jacek Kryg walks down one row and then another of outdoor vegetable stands at Warsaw's historic Hala Mirowska market. The 72-year-old Kryg already knows which one has the best prices on carrots, broccoli, mushrooms and his other staples. But he is keenly aware of what he spends, so he double-checks all the prices.

His pension, after 30-plus years as a writer and teacher of Chinese metaphysics, is just 2,000 zlotys ($450) a month. Given how inflation has surged, he can't live on that. He's already stopped buying clothes, he travels home to Krakow less frequently to visit his wife and daughter and he needs to keep teaching his workshops.

Kryg expects the frugal habits he adopted under communism to get him through hard times. But he's deeply frustrated, and he blames Poland's populist right-wing government for the dramatic cost-of-living increases, which he believes could have been more contained.

“I see the rising prices at every step,” Kryg said. “All my favorite products are going up.”

While prices are accelerating across Europe, Poland is saddled with one of the continent's highest inflation rates — 17.5% in November compared with 12 months earlier, Poland's state statistics office said last week. That marked a slight easing from October's 17.9% rate, but it still exceeds the 11.1% average across the 27-member European Union.

It is a painful situation for people in a country like Poland, whose economy has boomed since the fall of communism in 1989 and its entry into the EU in 2004. Yet wages and other gauges of economic well-being still haven't caught up with measures of prosperity in the West.

Now, the rising cost of living is eroding hard-earned savings, squeezing people on limited incomes and causing the bankruptcy of some restaurants — a sector badly hit by spiking utility and food costs from the energy crisis caused by Russia's war against Ukraine.

As interest rates have risen, some distressed mortgage-holders have had to take second jobs. Many people in the emerging middle class are giving up holidays abroad, regular manicures or other pleasures.

Kryg says the number of students signing up for his Warsaw workshops on Feng Shui and astrology has dropped sharply.

Warsaw is trying to achieve savings by reducing the hours of the city's Christmas illuminations this year, even though it's using eco-friendly LED light bulbs.

The rising costs are a particular burden for the many Belarusians and much larger number of Ukrainians who fled their homes in recent years and found refuge in Poland.

With a large majority of Poles saying that inflation has harmed their quality of life, according to opinion polls, inflation has emerged as perhaps the greatest challenge to the ruling conservative party, Law and Justice, which has governed since 2015, as it heads into elections next fall.

The vote offers the pro-EU opposition its best chance in years to unseat the populist government. But even if it does, it will inherit heavy public debt in addition to the painfully high inflation.

The assessments of Poland's economic situation are often in line with political leanings. The socially liberal Gazeta Wyborcza newspaper, which is highly critical of the government, recently ran an interview with an economist, Boguslaw Grabowski, who suggested that the combination of high inflation, rising state debt and populist policies have made Poland's prospects bleak for many years to come.

“In the next decade or two," Grabowski said, “we will not return to the path of civilizational development that we were on before 2015."

Prime Minister Mateusz Morawiecki argues that the economic situation is as good as it could be given the crisis sparked by Russia's war against Ukraine. Until recently, he noted, Poland had enjoyed strong growth.

“The energy crisis, the war in Ukraine, and the global financial crisis — this is the reality of many countries, with many of them being in a much worse situation than Poland,” he said in an interview with the Sieci weekly.

His government has taken steps to try to ease the pain of rising prices. It has given mortgage holders a “credit holiday,” allowing them to suspend their payments for eight months, four this year and and four next year. It also suspended value-added taxes on food, gas and fertilizer as a way to soften the blow of rising prices.

Some economists have argued that the party's policies have themselves fueled inflation. They have pointed, in particular, to the party's flagship policy of 500 zloty ($113) monthly payments to families for each child under age 18, and additional transfers to senior citizens, a key constituency for a party that embraces conservative views and welfare spending.

The Law and Justice party, which is closely tied to the Catholic church, is conservative on social issues: It opposes abortion rights and same-sex unions. But it has also sought to reverse many of the market policies of earlier governments. It favors, for example, restoring greater welfare spending in hopes of narrowing economic inequality, a stance popular with older generations who remember the protections of the communist era.

Poland's central bank has also faced accusations of waiting too long to begin raising interest rates. Higher rates are a key tool to fight inflation. But they have also imposed higher payments on borrowers that could eventually trigger an economic slowdown.

A government standoff with the EU has exacerbated Poland's problems, freezing over 35 billion euros in pandemic recovery aid. The EU is withholding the money over changes to the judicial system which have tightened government control over judges in a way that the bloc says is an anti-democratic attack on judicial independence.

In the meantime, as some people struggle, some also find ways to survive in the harsh new reality.

Uladzimir Kurbatau, a 62-year-old Belarusian man who, with his family, fled political repression in his country and opened a small Warsaw restaurant six years ago, says that even with government tax relief, onions cost five times as much as they did then. Potatoes cost three to four times as much, and flour has tripled.

All those ingredients are vital to the most popular offering on their menu — pierogi, traditional Eastern European dumplings stuffed with savory fillings or fruit.

Kurbatau and his wife have managed to keep the business going by doing without several staffers they had before the pandemic, and doing most of the work themselves, which involves rolling out dough and stuffing the dumplings. With pierogi a Christmas staple in Poland, they have been extremely busy.

Kurbatau acknowledged that it's been a “very hard time,” but also says he is always mindful of the war in Ukraine and repressions of his homeland, and says he doesn't want to complain.

“When I think of what it's like in Ukraine, without electricity, I don’t see this as difficult," he said. "Here there is light, I have work. And I can make some money, so I can’t say that it’s difficult for me. I see that when the refugees from Ukraine come to me, they cry.”