Is Poland winning with brinkmanship?

The government will tell you it is; European diplomats and legislators will tell you it’s digging itself deeper into an isolationist black hole

Over the past few months Poland has made itself infamous in the halls of Brussels for its outlandish brashness, it’s willingness to break deadline after deadline, its stubborn resistance in the face of the harshest EU threats, and its seeming desire to stand alone and spit in the face of 24 other member states. Ah, Europe. You didn’t know what you were getting when you signed on to Poland’s membership, did you?

The stances Poland has taken on two recent issues in particular have raised the hackles of European lawmakers, who are now beginning to think that every difficult EU negotiation from now on will come down to a standoff between Poland and the rest of Europe.

In the first case, Poland was the last holdout to approve a deal extending beyond 2005 the ability of ‘old’ EU member states to charge lower VAT rates on labor-intensive services such as shoemaking, window-washing and … selling home-improvement goods. The details can be found here.

In the end, Poland got what it wanted, the EU got what it wanted, but the Union was brought to the verge of crisis. Similar concessions were obtained by holdouts Cyprus and the Czech Republic, without such melodrama.

In the second case, Poland yesterday announced that if within three months UniCredit (formerly UniCredito Italiano and HVB) doesn’t sell the Polish branch of HVB it obtained when the companies merged last year, it will look to annul UniCredito’s original takeover of Polish Bank Pekao.

The issue here is that the government doesn’t want Pekao and HVB merging, because it would create a private bank larger than the state-controlled dominant player in the market, PKO BP. But UniCredit, realizing that owning the biggest bank in the biggest new EU member state might be a profitable asset, will never let go. Find the IHT report here.

How Poland could legally annul the earlier deal is a mystery, as experts call the idea “a fantasy”.

All EU institutions have cleared the UniCredito-HVB merger, as has every other EU member state – except Poland, who by itself is holding up consolidation in the EU’s banking market.

This has the rest of the EU fuming. They remember late December’s toil to reach a budget agreement the Poles would accept. They remember Prime Minister Marcinkiewicz, after finally winning the amount of promised structural funding he needed to finance his government’s plans, standing in front of the cameras and jubilantly exclaiming, “YES!” – clenched fist and all.

That’s beginning to lose Poland a lot of political capital in EU circles. Now, newer member states are becoming reluctant to stand by Poland in these disputes as they had earlier, and some suggest that Poland is risking its natural role as a power and regional leader in the Union with such abrasive tactics.

"Poland is missing a great opportunity. Instead of being one of the large members that give the direction to the European Union policy, the government is taking on a role of a defender of its own and others' interests, even against their will," Cornelius Ochmann of the Bertelsmann Foundation in Berlin told Reuters.

And that risk is perhaps the most dangerous: Without influence, Poland will be isolated and left out of decision-making, and lose the ability to defend its citizens’ interests. While a semi-win on EU VAT rates and a tough stance against mega-banks may give it the appearance at home of a scrappy mutt that won’t be bullied by the bigger dogs, in Europe, it is very fast becoming the runt of the litter.