Pawel Szalamacha, Poland's Finance Minister HARDtalk

Coming up next, it's time for HARDtalk.

Welcome to HARDtalk.

I'm Sarah Montague.

I'm on the shores of Italy's Lake Como, at the Ambrosetti

Forum.

It is a chance for the world's great and good to meet and talk

about global problems.

For years, Poland has been the poster child of the EU.

Not any more.

Its new government has introduced sweeping changes to its constitution

and laws, changes that the EU says threaten its own democracy.

In return, Poland has said that its economy is too

dependent on foreigners.

My guest today is Poland's finance minister, Pawel Szalamacha.

Is Poland set on turning inwards and away from the EU?

Pawel Szalamacha welcome to HARDtalk.

Now, Poland has been the fastest-growing economy

in Europe for the best part of a decade.

The European Union has served Poland well, hasn't it?

Well, sort of.

There are positive sides of being within the EU,

and a little bit of negative as well.

So the entire picture is a little bit more complex than just

yes or no.

But when you look back at just what has happened to the Polish

economy - and it is phenomenal.

It is now the sixth largest country in Europe.

How much credit do you give to the European Union

and its position in that, and indeed the policies of previous

governments within Poland?

Well, the fact is, it's true that we have not experienced

anything like the recession during previous years.

Even during the hardest times of 2009 and 2010,

the country developed.

In the worst year for Europe, we grew by 2.6%, so I would say

that, on the whole, the picture looks bright.

I think the average GDP growth is just under 5%...

How much of that is attributable to being a part of the EU

is obviously another story.

How much do you think is attributable?

Look, we had our own instruments of our own policy.

For examples, we didn't adopt the common currency.

We didn't adopt the euro.

And there's a strong opinion within the country that that was one

of the reasons for which we grew.

But there are so many more things, and so many things that you have

changed since taking power last November,

that have made people question whether this is a deliberate turn

inwards, and away from EU ideals.

I would say...

Look, there's lots of rhetoric about change which took place

in my country.

The fact is, for the first time in modern history,

the government is formed by one party only.

We won the elections, and for good reasons.

The previous two successive Liberal governments,

they had this relative economic success, but they made mistakes

as well, obviously.

I would say that we are formulating our own growth agenda,

and our own policy within Europe on matters like the migration

crisis, on matters like common policy in terms of growth,

in terms of competitiveness, and the treatment of our region

and Poland by some of the decisions, some of the controversial decisions

by the EU Commission in the past.

So we are more assertive.

We are more outspoken.

But I would not say that the changes are critical, as you just said.

You said that, actually, with the UK voting to leave the EU,

that it had a demystifying effect, and it's shown that the EU is no

longer the only choice for the nations of Europe.

You even suggested that there may be other countries that leave.

Who were you thinking of?

I would say that there are just other options on the table.

The nations of Europe, the member states, are discussing

more freely the relative benefits and disadvantages

of the European Union.

And it opened the discussion.

Some of the countries have a stronger sense of identity,

or a stronger sense of their own value -

the Nordic countries and Scandinavia.

They have also expressed their opinions, sometimes critical.

And Poland?

Do you include Poland in that, as a country with a strong

sense of identity?

Yes, I would say so.

That is part of our agenda.

We just...

Our opinion, that is, of the present government,

the party which forms the government, was that

the interests of the few countries only within the European Union

dominated entire policy, and that the German-Franco tandem

decided, and everyone else had to accept, sooner or later.

And this is what created negative feelings, including in the UK.

Now, the Deputy Prime Minister, the Economic Development Minister,

Mateusz Morawiecki, said, "The economy is too

dependent on foreigners."

What does that mean?

Well, it means that when we privatised almost our entire

economy in the 90s, we did it in a very,

shall I say, hectic manner.

We went from wholly controlled state economy to its privatisation,

and quite naturally, because there was no Polish capital

there, this opening meant that preferred

buyers were multinationals.

So do you plan to undo that?

Is the plan of the new government to try to...?

There is a sense that we no longer are in charge of our destiny,

of the development agenda in our country, that everything

is decided somewhere outside of Polish borders,

in Europe, in Brussels, for that matter.

And this creates some kind of resentment, or a sense of not

being the host in your own country.

So what do you plan to do about it?

Look, we will stimulate more our own resources.

We did say so, that we think that privatisation as such is over.

The few of the assets which the Polish government

still owns, like the energy companies, like the oil company,

the biggest insurance company in Central Europe,

they will not be offered for sale, and that we will create more

conditions for the growth of the Polish medium-sized

businesses, so that they will expand.

And that is foreign money, that's foreign investment

that is in the country.

That's fine.

Is it welcome?

Let them grow, let them show what they do.

But it's that time where you could do very good,

sweet deals in the past - it's done.

But it's more than that, isn't it?

You just said then, "Let them grow."

But we know, of the changes that have happened, which include a tax

on bank assets, there is also a tax about to come

in on large retail groups.

Yes.

Foreign ones.

It's down to the large ones, but it is the foreign ones

which are going to be hit.

A new tax.

1.4% on sales.

And that is just being seen as something that is discriminatory.

Let's take each of them in turn.

The UK levies a tax on banks.

There is the banking levy in the UK, and more than ten jurisdictions

within the European Union.

So we are doing nothing extraordinary in this respect.

And the biggest taxpayer here, the biggest company which faced

a banking levy is the Polish bank controlled by the government.

The government is the biggest shareholder - PKOBP.

The bank listed on the Warsaw stock exchange, and they are paying

the biggest amount of money.

There is no discrimination here against foreign...

OK.

There are different criticisms of the bank one, but of the retail

one, you will know that the chair of the Polish Association

of Commerce and Distribution, Renata Juszkiewicz, said,

"This is absolutely discrimination, and not a positive step for us.

And she represents big foreign and...

Of course.

I would be very astonished if she said something else.

She's down there in the sector.

But if you take that retail tax, it is designed to help Polish

retailers, isn't it?

The tax is a relatively small burden in terms of the total revenue

which we intend to raise.

It isn't a small burden on supermarkets who have

very small margins.

It is totally with intent to raise 400 million euros per year.

Would you say that is a huge burden?

Moody's say it will wipe out the operating profit of Tesco

and Carrefour in Poland.

Look...

Is the credit rating agency wrong?

Companies like that are perfectly, shall I say, optimised

for the purposes of not paying corporate income tax in Poland.

For years.

And they are very skilful at doing that.

So perhaps with this new measure, they will at least pay a little bit

of their profits generated in the country.

They've been growing very well, and paying hardly any tax

to the government of the host country.

Do you not think that is a fair sharing of the burden?

They have this business opportunity.

They have access to the market.

That's good.

And then perhaps a little bit of a tax revenue should also be left

in Poland as well.

So if it does wipe out their operating profit,

that's fine, because they should be paying taxes, and they should be

paying taxes at this level?

Well, I don't think it wipes out their operating profits.

I think that is false.

You say that the bank tax isn't discriminatory,

but what people have said about the bank tax is that it

will damage the economy.

It is something that has been picked up by the IMF,

their mission chief in Poland, who said, "By our calculations,

growth could be reduced by as much as 0.4 percentage points

because of this distortionary tax."

Do you accept that?

I had this discussion with these people, first asking about why

they use "distortionary", the word.

They were not very clear about this.

They just don't like it.

Perhaps because they are perhaps, mentally, somehow, connected

with the banking sector.

As I said, numerous countries, numerous countries levy this tax.

It is not a Polish invention.

It's not, but you are levying it at a higher rate

than other countries.

And there is a situation where we know it was brought

in in February.

In March, when the figures came out, it showed it had had

an effect on lending.

But there is a danger it could hobble the economy.

We were watching this carefully.

It has been in place for only half of the year,

bringing stable revenue.

We have not seen significant negative results on banking

activity.

The profits of the banking sector during the first half of the year

have increased, so this result on lending activity...

I know they said that we will not be able to finance proper businesses

and consumers and so on.

They must wait and observe the full results of the fiscal

year, and then...

I declared it at the very beginning.

We will be with an open mind, and by the way, the impact

of the tax on the economy.

The rating agencies, Standard Poor's and Moody's,

have downgraded Poland.

For Standard Poor's, it is the first time they've

downgraded since 1996.

Are they moving too early, their worries about the Polish

economy?

Should they not be worried?

Standard Poor's have made a decision in January.

And they've downgraded Poland with express arguments

supporting their decision being a political situation

and the so-called political court dispute.

So it was driven by political motives.

So it was driven by political motives.

You mention the crisis over the Constitutional Court.

Now that has only got worse.

We have a situation where, as a result of changes

made by your government to the Constitutional Court,

both in the appointment of judges and in amendments to the way it

works, where you have an outcry from people all over

the world and in Poland...

Let's go for a head-on collision on that, because I love this issue.

I love to discuss this issue, although it is our domestic issue.

It's our domestic problem.

We knew that the country was changing.

The previous government was expecting to lose, and lose badly.

And they changed a law during the summer the previous year,

which allowed them to elect five members of the Constitutional Court

before expiry of the term, and they did it.

They first moved to change the law, and put deputies on the bench.

And what do you think we did with that?

We didn't appoint it.

So what we did was to...

Appoint your own five?

No, no.

And change the rule.

We outvoted these five.

We outvoted these five, because if democracy means anything,

it means that when the term of office of a government person

expires, the vacancy should be filled by the next house.

Otherwise, they could elect the people for

the next ten years.

Mr Szalamacha.

We have a situation where your own former president,

the Nobel Prize winner, Lech Walesa, said of the changes,

"It could lead to a civil war.

This could act against Poland, against our achievements, freedom,

democracy, not to mention the fact that it ridicules as in the world.

I'm ashamed to travel abroad."

Come on.

Again, Mr Walesa dislikes us very, very much.

I would say "dislike" is a word which is a gross

understatement on my part.

So he's only saying that because it's your party,

not because of what you've done?

Yeah.

It's a very intense personal struggle domestic lead lasting ever

since the early 90s.

So the European Parliament President, Martin Schulz,

who says it has the characteristics of a coup, it is a dangerous

Putinisation of...

Of course.

The European Parliament is governed by two major factions.

The EPP and the socialist Social Democrats.

Martin Schulz is putting forward the opinions

of the interest on that.

It is a shameful act, actually, because they are taking sides.

We are not intervening in German domestic policy.

We are not telling German people who should be in charge

of the country, whether it should be Social Democrats

or Christian Democrats.

Martin Schulz takes the freedom - and he's doing this

in respect of Poland.

Shame on him.

Except it's not just Martin Schulz.

It's also a whole list of people who are critical of this,

not least Frans Timmerman, who is the Vice President

of the European Commission.

He says that the changes pose a systemic risk to the rule of law.

And he says about the idea that this is just Brussels interfering

where it shouldn't, he says he was being "dispassionate

and legal, because the Commission has a duty

to uphold the rule of law.

It's a collective responsibility of all member states

and all EU institutions."

Frans Timmerman is exceeding the powers he is given

under EU treaties.

OK?

They have no jurisdiction over the case, and they are taking sides

in a purely domestic political dispute.

And this kind of hyperactivity leads to the situation like,

and I quote, like the result of your EU referendum.

You mean if this carries on, Poland is prepared to leave the EU?

This kind of hyperactivity on the part of people

in Brussels is the broad hyperactive interpretation

of the powers they have.

It leaves the situation where the member countries,

and lots of their citizens, feel that they are not

in charge of their country, and that causes contrary action.

And it is negative.

These actions on the part of Mr Timmermans and Mr Schultz

are detrimental for Europe.

But the difficulty is, though, that plenty of people say that

what you are doing is not just about legislation.

This is about basic constitutional checks on the government,

which is why you have the professor of Law at Gdansk University,

who says that this law signals the deathknell for the court.

It will make it impossible for the court to be

an effective chamber.

I can provide you with more and more quotations like that,

using words like "Soviet", "fascist", "dictatorial",

"autocracy", and so on and so forth.

They went mad.

They just did not accept that they might use elections,

and that they should wait a full four years for the second chance.

It is not up to the Constitutional Court itself to decide who will be

sitting on the bench.

Let's move to the question of immigration, because over

the last few weeks, we have seen, yet again, thousands of refugees

crossing the Mediterranean, trying to get into the European Union.

In May, the leader of your party, Jaroslaw Kaczynski, said Poland

wouldn't be accepting a single refugee because there is no

mechanism that would ensure the safety of Poland.

And he was commenting after attacks in Brussels and Paris.

Is it still the case that Poland won't take any migrants?

That's the position as it is now.

We don't think the mandatory mechanisms for relocating

the migrants will solve the problem.

It will aggravate the problem.

It will encourage more and more people to come to Europe.

The problem should be addressed down there in Libya or in Syria,

and this was our position ever since the beginning.

We said that first - and we were not the country

which opened Syria or Libya, meaning aggressive

towards their governments - but the security situation

should be stabilised.

The international community, including my country,

should put up more money for the refugees down there,

to Jordan, to Turkey, and we are paying our share.

You know that Greece and Italy are facing huge difficulties

as a result of those arriving.

Do you not have some sense of responsibility to those

fellow EU members to help?

First, if you need to, if you genuinely want to address

the issue, then the border of the European Union should be

effectively monitored, and we have the feeling

that it's not being done on the Aegean Sea by Greece.

So it's the first step, that the EU effectively

controls its external border.

And we will help.

We are sending our personnel.

We are sending the border guards to these countries.

To send them back into the sea?

No, no, no.

To stop them from crossing the border.

The difficulty is that many people see...

That this is not about numbers.

It is about something else.

Because in October last year, at the time of the election,

the leader of your party said,

"Migrants carry all sorts of parasites and protozoa,

which, while not dangerous in the organisms of these people,

could be dangerous here."

Do you think that's true?

I don't know.

I should ask the medical records.

Do you consider that it could even be true?

Pardon?

The idea that those people, migrants, any form of migrant,

is carrying parasites?

I'm afraid it might be true, if they are coming from the regions

where there is a war, where there is a famine,

where there is a state of hygiene and all kinds of problems.

Therefore, we are saying...

And we are putting up money, to help Jordan, to help

Lebanon, to help Turkey.

That the issue was addressed down there with the people coming,

where the refugees are, helping in these areas.

But can you see why people would have found it distasteful

to talk about these people carrying parasites and protozoa?

Of course.

And that's why we say that both Syria and the countries

which I mentioned should be helped to resolve the issue down

there, where it emerges, where it's created,

where the issue is generated.

And the Catholic Church in Poland says that, actually,

people who are coming from Syria should be treated

with brotherhood and respect.

They are far more sympathetic to the idea

of Poland accepting people.

Right.

The Catholic church is in charge of leading people

to its salvation of the souls.

The government is in charge of the security of the country.

And we have division between the church

and state in Poland.

Believe it or not, we do.

Pawel Szalamacha, thank you very much

for coming on HARDtalk.

Thank you.

Good morning.

This week has the potential to bring us some pretty high temperatures.

Potential that has not been unlocked yet.

Largely because of all the cloud draped across the country.

Monday was a rather cloudy day.

We saw one or two sunny breaks developing particularly

by the afternoon.