The leaders of most E.U. members all too aware that European integration must move forward if it is to avoid moving backward, but are reluctant to take the plunge. Poland, by contrast, suffers no such angst. For while it weathered the E.U. recession and the euro crisis with aplomb, it's well understood that the country's long term prospects for economic convergence with its far more affluent neighbors to the west are closely tied to European integration. (The Polish Prime Minster Donald Tusk is pictured above at the Nobel Prize ceremony with German Chancellor Angela Merkel and French President Francois Holland.)
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To understand where Poland wants to go, consider where it's been for the past few decades. Long gone are the days of post-communist trauma, when shock therapy transformed the centrally-planned economy to a free market model. Poland was the only country in the European Union to avoid recession altogether in 2008-2009. The economy grew by 12 percent between the third quarter of 2008 and the first quarter of 2012 -- a striking contrast to zero growth in the European Union as a whole. Polish exports did take a knock in the peak year of the crisis, falling 16 percent in 2009. But in 2010 they rebounded by 23 percent, then settled down to a healthy 12 percent growth rate in 2011.
Poland's economic stability, moreover, is recognized by the capital markets. The yield on Poland's euro-denominated 10-year government bonds is now hovering around 2.5 percent. Comparable Spanish bonds yield 5.8 percent, while Hungary is paying 7 percent.
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Poland's bright record is due to several factors -- chief among them are good governance, the structure of its economy and pure luck. Poland developed enviable macroeconomic tools long (and the will to use them well) long before they proved essential. A ceiling on public debt was written into the constitution adopted in 1997. Meanwhile, post-communist reforms left the economy with efficient bank supervision and a relatively flexible labor market.
Arguably most important, when the crisis hit, Polish authorities came up with the appropriate level of fiscal stimulus to cushion the shock without leaving a legacy of waste or inflation. Outlays on planned infrastructure projects (co-funded by the European Union) were frontloaded to offset falling demand from recession-hobbled trade partners.
As for the second factor -- the structure of the economy -- Poland is fortunate to have a relatively large internal market with a well-developed ecology of small and medium-sized enterprises that reduce the economy's dependence on exports. Moreover, the Polish labor force is highly mobile (some two million Poles work elsewhere in Europe), which reduced cyclic pressure on local markets. Finally, Polish exporters have proved remarkably adaptable: While sales to the eurozone grew by a modest nine percent in 2011 (a reflection of eurozone fiscal austerity), exports to Russia, Ukraine and other post-soviet republics jumped by 18 percent.
Then there's the aforementioned element of luck: As an outsider to the eurozone, Poland was able to buffer the impact of external events through sharp depreciation of its currency in 2009. There was an element of luck, too, in the fact that Poles did not indulge in the consumption credit bubble that left most Europeans overleveraged and deeply in debt when the bubble burst in 2008.
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