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Wyższa Szkoła Języków Obcych w Poznaniu

Higher National Diploma in Business

BTEC National Diploma in Business

Unit Title: EUROPEAN BUSINESS

Unit Tutor: mgr Jerzy Szelest

Assignment 1: The Effect of UE Membership on Poland’s Economic Policy

Statement of authenticity:

I certify that the work submitted for this assignment is my own. Where the work of others has been used to support my work then credit has been acknowledged.

Student’s signature: ................................... Date: ................................

Student Name: Piotr Półtorak

Group Code: Amhnd02nd01

Date: December 2th 2009

· Introduction

Being a part of the European Union has been a desire for Poland for quite a long time. Membership in the EU has been seen as a passageway to prosperity, a chance for a change and a boost for economy. No wonder that our country strived for the membership.

When Poland met all the requirements, we finally got accepted and became yet another nation in the prestigious group of the Union members. May 1st of 2004 – from that day on Poland as well as 9 other European countries exist as a part of the European Union.

Acquiring the membership brought on major influences on our country’s economy. Factors such as unemployment rate, inflation, economic growth and the value of the polish currency has been largely affected by the changes that the Union has brought.

· Unemployment Rate

The unemployment rate is one of those factors, in which the major change for the better can be observed with a naked eye. Before entering the Union, there were about 20% jobless people in Poland. Right after May 1st, the rate was decreasing every month. It hit the all-time low in October 2008, where it was standing at 8,80%. That is almost a 12% reduction in only 4 years. The change is illustrated on the chart below.

Such positive turn of events is connected with the fact that being a part of the European Union makes it extremely easy to travel abroad, thanks to boarders being opened. Many young Poles has taken the advantage of this and left the country to find jobs in England, France, Germany and many other foreign lands. Statistics hold up to this theory, as there were nearly 15 000 Polish immigrants moving to EU countries, while in 2006, for example, there were over 40 000 of them.

What also adds to the decline of unemployment rate are changes in regulations and EU funds, which make entrepreneurs’ life much easier. New businesses create new job opportunities and have a good effect on the economy in general.

· Inflation

When we compare the inflation rates from 2004 and 2009, we can state, that they didn’t change drastically. No major changes were noted so far.

·

Economic Growth

Since the gain of the EU membership, our economy has been developing in the upright direction. Numerous grants and financial support received from the Union provides the right conditions for Polish economy to expand. Many new foreign investments have been made, which also account for the economic growth. Although the rate has dropped slightly in previous months and is equal to the one in 2004 (5%), it can be assumed, that in overall the living conditions in Poland went up.

· Value of Złoty

The value of the Polish currency after the EU accession has dropped, which has both good (inflation) and negative (export is more expansive) effects. During Poland’s 5 year run in the union, the exchange of 100 Euros to Złotys has dropped over 1 złoty. It is because of the economic growth and new-gained popularity of our currency outside our country.

· Impact of Fiscal Policy

Taxation in Poland is relatively high in comparison to the other members of the

European Union, although EU gives our government a helping hand to reduce drawbacks of it. Taxation influences inflation; due to the fact the taxes are high. Unemployment rate is also affected. When taxes are high, so should be the number of jobless people, but the Union funds help us reduce the problem – the government creates new jobs by building new schools, roads and many other infrastructural projects. This provides many job opportunities for those seeking one. Funds from the European Union also keep the economic growth from dropping down. Even the value of the currency was higher for a moment, but it was a short-lived effect.

When the taxation is as high as it is, the government allows more money to be used for the economy. Getting more money on the market boosts up the inflation and keeps it stable. Unemployment goes down as well, as loads of money are used for building new schools, roads etc., thus creating many new job positions. Special funded programs and courses also account for people getting better qualifications and finding jobs. The economic growth goes up as well, raising the standard of living. Money is used to help companies modernize and increase their level of technology. This all also allows for the growth of the Polish currency, as there are vast amounts of capital on the market.

· Impact of Monetary Policy

Since Poland became one of the EU countries, the interest rate has turned out rather positively. The rate of 3,5 % enables us to have some sort of control over the inflation. Currently the inflation is stable, but low interest rates make the inflation go up, ultimately resulting in the increase of prices, which of course, is unwanted. Low interest rates have good effect on the unemployment, which is reduced by them. When the rates are low, people are more likely to take credits, and that results in them investing. More investments equal more work, which gives job opportunities to those, who are unemployed.. When the rates are low, Polish economy flourishes. The reason is simple; more money is available so development and innovations can be implemented. When there is such a situation, the value of the currency goes down by the drain.

The availability of the capital has risen since Poland’s acceptance in 2004. The financial resources of banks are doing well and the European funds are available. In this case, the inflation increases, but only very slightly. Again, the unemployment goes down for the similar reasons – people investing and thus creating new jobs. If money is easily available, the economic growth is promoted, as people are more likely to take loans and pump money into myriad of different investments. The currency in this case goes down with it’s value, as there is more capital floating around.

· Summary

To conclude, Polish accession to the European Union has been a great step for the nation. There are by far more merits than drawbacks and there should be more positive aspects visible in the future. Although it has only been 5 years, notable changes in unemployment, the value of the currency, inflation rate and economic growth prove, that saying “Yes” to the EU was a right choice.

Sources

http://tradingeconomics.com/Economics/Unemployment-rate.aspx?Symbol=PLN

http://tradingeconomics.com/Economics/Inflation-CPI.aspx?Symbol=PLN

http://europa.eu/index_en.htm

http://fxtraders.eu/article.php?id=18762http://ideas.repec.org/p/imf/imfwpa/07-41.html

http://www.ukie.gov.pl/raport2008

http://pl.wikipedia.org/wiki/Polska_w_Unii_Europejskiej

http://www.berlin.polemb.net/index.php?document=756