Learning from abroad: Don’t forget Poland

Posted: December 18, 2012 in economy
Tags: , ,

WHILE it gets less attention that India or China, Poland has been one of the world’s great development success stories of the past two decades. This is due in no small part to the policies it pursued after the end of Communist rule. One of the architects of those policies, Leszek Balcerowicz, was the subject of a long interview in this weekend’s Wall Street Journal. The article is worth reading, although Mr Balcerowicz’s narrative of Poland’s success and its applicability to the beleaguered nations of the euro area leaves something to be desired.If you want to understand why Poland had a good crisis, you need to understand three things. First, you need to know that Poland’s currency, the zloty, was never pegged to the euro. This was immensely helpful both on the upside and on the downside. From 2004-2008, credit sloshed into the new member states of the European Union from Western European banks. The biggest victims were those that borrowed in currencies they could not print: euros, Swiss francs, and Swedish kronor. Worst hit were the Baltics, which had rigidly pegged their currencies to the euro since the early 2000s. Private credit doubled in those countries and all three endured punishing recessions afterwards.Private credit growth was much slower in Poland, although it was still pretty rapid. Some of this was because of Poland’s history with corporate nonperforming …

via Economic Crisis http://www.economist.com/blogs/freeexchange/2012/12/learning-abroad?fsrc=rss

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