Editor's Note: This assessment is part of a series of analyses supporting Stratfor's upcoming 2019 Fourth-Quarter Forecast. These assessments are designed to provide more context and in-depth analysis of key developments over the next quarter.
The final quarter of 2019 will be eventful in Poland and Romania, the two largest countries on the European Union's eastern border. On Oct. 13, Poland will hold a general election that will test the popularity of the conservative Law and Justice party, which has been in power since 2015. Then on Nov. 10, Romania will hold a presidential election, where conservative President Klaus Iohannis is seeking reelection. (The second round is scheduled for Nov. 24.) These votes are unlikely to result in meaningful changes in foreign policy for Poland and Romania, which will remain committed to EU and NATO membership. But they will shape domestic events in a way that, over time, could influence Poland's and Romania's relations with their foreign partners.
Poland and Romania share similar geopolitical priorities, as both see membership in the European Union and NATO and close ties with the United States as key elements of their foreign policies. But domestic developments in recent years have led to disputes with their foreign allies, particularly the European Union, that are likely to continue after the upcoming general election in Poland and the presidential election in Romania.
Two Geopolitically Relevant Countries
Poland and Romania are former communist countries that, after the collapse of the Soviet Union, sought to align themselves with the European Union and NATO. Bucharest, and particularly Warsaw, see membership in these international alliances as protection against potential Russian aggression. They both push for a greater NATO presence in Eastern Europe, while they also defend the development of infrastructure projects to reduce the region's dependence on Russian natural gas. Because of their shared interests, they are both members of regional cooperation projects such as the Three Seas Initiative, which seeks to develop closer political and economic ties in the region and to build a better energy infrastructure connecting the Baltic, Black and Adriatic seas.
Poland and Romania also share similar interests when it comes to EU membership, in the sense that they are net receivers of the bloc's development and agricultural funds. And while Warsaw and Bucharest have expressed interest in adopting the euro, their moves to actually abandon their national currencies have been modest (which, ironically, somewhat protected them from the eurozone crises in recent years). But Poland and Romania share another element when it comes to the European Union: Brussels has expressed concern about the status of the rule of law in both countries. In recent years, the Law and Justice government in Poland and the Social Democratic Party government in Romania have introduced reforms to increase government oversight of the judiciary which, according to the European Commission, have weakened the judiciary's independence.
While Warsaw and Bucharest have watered down some of these reforms under pressure from EU institutions, the European Commission is still not satisfied with the way things are going in Poland and Romania and has threatened to sever their funding unless the two countries fully comply with EU rules. Some governments, particularly France, have gone so far as to say that the process of EU integration should deepen for those "core" countries that are willing to play by the rules, while countries with a weak rule of law should be left behind. American criticism of Poland and Romania has been much milder, but U.S. officials have sporadically warned about corruption, particularly in Romania.
This presents an important threat to Poland and Romania because their foreign policies will continue to seek alignment with the European Union and NATO, but their domestic policies may make it harder for them to do so, particularly when it comes to the European Union. The threat to connect the disbursement of EU funds to respecting EU rules has been on the table for years, but the idea will be discussed again during the upcoming negotiations for the EU budget for 2021-2027. Should the European Union eliminate or significantly reduce its funding for Poland and Romania, their economies would be severely affected, and should the European Union deepen its two-speed integration process (in which some members expand their cooperation while others are not involved), then Warsaw and Bucharest could see their strategic goals threatened. In Romania's case, lingering concerns about the rule of law among EU institutions and key governments like Germany and France would continue preventing Bucharest from joining the passport-free Schengen area.
Naturally, these are not decisions the European Union will take lightly. After all, the bloc is interested in having prosperous, stable and politically transparent countries on its eastern border. Germany, in particular, will resist any attempts to weaken the institutional and economic ties with those countries that Berlin considers to be in its backyard. But while Poland and Romania seemed to be enthusiastic supporters of EU integration during their first decade in the bloc, recent events suggest that internal political developments are creating problems in their relations with Brussels. And that's why the upcoming elections matter for both.
Since winning the general election in 2015, Law and Justice has delivered on most of its campaign promises to increase public spending on social welfare programs. This has made the party popular among those sectors of the population that felt neglected by previous governments. So far, criticism (both domestic and foreign) over the reforms in the judiciary or the situation of minority groups in Poland has not damaged the party's popularity. Moreover, a large sector of the electorate fears that a victory by the opposition could lead to a reduction in these spending programs.
This puts Law and Justice's rivals in a difficult situation. To begin with, they have to decide whether to run together in the general election. The main opposition party, the center-right Civic Platform, led a coalition of anti-government forces in the elections for the European Parliament in May, a strategy that failed because the result was another strong victory by Law and Justice. Facing the general election in October, the Civic Platform and the rest of the opposition will have to decide whether they stand a better chance of defeating Law and Justice if they run separately. The fact that the opposition lacks a charismatic leader who could unite the anti-Law and Justice vote behind them complicates things further. More important, the opposition will struggle to find an attractive proposal to campaign on, as Law and Justice is already strong on issues such as welfare spending and national identity. The opposition will try to present itself as pro-European Union, as opposed to Law and Justice's Euroskeptic positions, but this alone probably will not be enough to win the election.
Even if Law and Justice stays in power, it will face challenges of its own. The Polish economy is still expanding at a fast pace because of growing domestic demand, relatively low production costs and an attractive market for foreign investment. But the economies of many of Poland's trade partners, particularly Germany, are slowing down, while Brexit creates significant uncertainty for companies and investors in Europe. This could make the government's high spending programs hard to sustain. On a longer timeframe, high rates of emigration and an aging population will also create labor shortages that will make it hard for Poland to continue growing at its current rates.
When it comes to foreign policy, Poland is unlikely to make any moves that would threaten its membership in the European Union. But Warsaw is also unlikely to make any moves to deepen its cooperation. As EU membership constantly forces states to decide between national sovereignty and federal integration, a new Law and Justice government is likely to continue prioritizing the former, which could lead to new disputes with the European Union's supranational institutions and potentially threaten its access to EU funds. Facing this dilemma, Law and Justice is likely to continue seeking the closest possible ties with the United States, which it sees as a counterbalance to its often-tense relations with Brussels.
Romania: Turbulence Ahead
On the surface, the presidential election should have a modest impact on Romania's domestic policies, because while the president has the power to veto legislation and conducts Romania's foreign policy, most policy issues are controlled by the prime minister and the Cabinet. But the presidential election happens at a time when the center-left government led by Prime Minister Viorica Dancila is in a fragile situation. In recent months, people have taken to the streets in Bucharest and other cities to protest reforms in the judiciary and the criminal code that they claim have weakened the fight against corruption. In May, the former leader of the governing Social Democratic Party (PSD), Liviu Dragnea, was jailed for corruption, and in August the Alliance of Liberals and Democrats, the junior member of the ruling coalition, quit the government. This has left Dancila in charge of a minority government that could be ousted if there were a no-confidence motion against it.
To make things more complicated, Dancila plans to represent the PSD in the presidential election and has promised to resign if she doesn't make it to the second round. It's possible Dancila regrets this promise because opinion polls suggest she will not advance to the runoff election between the two top vote-getters. Should the PSD perform poorly in the presidential election pressure on Dancila to resign will grow. The PSD may try to appoint a new prime minister and avoid a general election, but this could prove difficult considering that the party does not control a majority of seats in parliament and seems to have run out of allies to remain in power.
This will add to political uncertainty in Romania at a time when the country will be under growing pressure from the European Union to reduce its deficit. In recent years, Romania has sought to boost domestic consumption by increasing public spending and cutting taxes. But this effort has led to a higher deficit that, according to Romania's Fiscal Council, could breach the European Union's 3 percent of GDP threshold in 2019. The government insists that it will meet its target of a deficit of 2.7 percent of GDP this year, but to do so it may resort to unexpected tax hikes or one-off fiscal measures that could make the economic environment more uncertain for domestic and foreign companies operating in the country.
The East-West Divide in the EU
The upcoming elections in Poland and Romania will not drastically redefine their relations with the European Union. However, a victory by Law and Justice and prolonged political turbulence in Romania could make it harder for Warsaw and Bucharest to cooperate with Brussels and, more important, to comply with its demands on issues ranging from the rule of law to fiscal policy.
At the same time, some countries in Western Europe are increasingly willing to defend a two-speed approach to European integration. This approach already exists, as, for example, some EU members are part of the eurozone while others (like Poland and Romania) are not. But the EU's official goal is that all its members will eventually converge and that economic and institutional differences will be eroded. A combination of growing Euroskepticism, a weakening rule of law, lingering political instability and, in particular, what seems to be a mutual disappointment between the bloc's old and new member states could make the existing East-West divide within the European Union even broader.