Embassy of the Czech Republic in Warsaw

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Good neighbor policy

Jan Sechter the Czech Republic's ambassador to Poland, talks to WBJ about the strategic partnership between the two countries, their tactical coalition for defending the next EU budget and mutual economic relations

Ewa Boniecka: The traditionally close and friendly relationship between Poland and the Czech Republic now has the status of a strategic partnership. What does this mean in practice?

Ambassador Jan Sechter: It is a synthesis of our common or very similar attitudes towards various problems, of defending our interests and strengthening our position in European forums and other international institutions. I want to underline the importance of elevating our mutual relations to the strategic level by pointing out that the Czech Republic has a strategic partnership with only two countries: Poland and Germany.

Poland and the Czech Republic are presently active in building a coalition to defend the budget proposals presented by the European Commission for the 2014-2020 period, which are opposed by some EU members. How do you see those efforts?

The Czech-Polish strategic partnership has a broader context, because it encompasses not only our mutual efforts for achieving our aims but also our cooperation with countries with which we have shared interests. So, along with other members from Central and Eastern Europe (CEE), we are trying to build a coalition for the defense of the European Commission’s budget proposals. We are also looking for support from Western countries. It is high time for such action, because there are strong pressures coming from the EU’s biggest net payers, and tough discussions going on throughout the bloc.

The EU is in a process of change and this is also reflected in attitudes towards shaping the budget. In such a difficult and volatile situation, our countries have to defend the principle of cohesion policy, which is one of the most important for members from our region, as our level of development must catch up with that of richer EU members. We see this as a fundamental principle of solidarity, a vehicle for the development and integration of the whole European Union.

From which Western countries and interests are you looking for support in the battle of the budget?

It is not so that a particular country has only one interest. When the Czech Philharmonic Orchestra performs it plays various instruments, so in looking for support in conducting our policy we too have to use various instruments. While the policy of German Chancellor Angela Merkel is to make cuts in the next budget, there are powerful economic groups in Germany that have an interest in preserving the EU’s cohesion policy, as we do.

This policy means a lot for German business, which invests heavily in Poland, as well as for the Czech Republic and other CEE countries. German businesses want to see infrastructure improved in eastern countries in which they invest, so they will exert pressure to ensure the next EU budget is kept at an adequate level.

We have to play instruments that could help us obtain support from countries such as Germany, Austria and some Scandinavian countries, which invest a lot in our region and therefore have an interest in seeing money transferred in the next EU budget to our part of Europe. Among other things, this money will be used to improve transport infrastructure in CEE. The European economy is interconnected in all aspects and the economic interests of EU members are sometimes stronger than the political calculations of their governments.

To what extent has the financial crisis in Europe affected the Czech economy, where most banks are in the hands of Western owners?

Our economy is heavily dependent on exports, so certain elements of the crisis have been imported to the Czech Republic. But generally we are managing to get through the crisis: our GDP growth is positive and we hope that it will amount to 2.02 percent next year.

The Czech National Bank is carefully monitoring our banking system, which, many years ago, was privatized in full and sold to foreign banks. Now the branches of those banks in our country are doing better than their foreign parent companies and, for instance, the Czech Commercial Bank has the best results in the whole [Société Générale] Group.

The Czech government did not sign the European fiscal treaty, as Poland did, making you the only member apart from the UK not to sign. What are your reasons for that decision?

We are not blocking anyone who wants to sign the fiscal pact. The British announced at the very beginning their objections to the pact, we did it in a different way. We did not criticize the fiscal pact, we simply did not sign it. We think that we still have time to adopt the euro and we are managing our finances just fine, so we do not need EU institutions to monitor them. Our debt is only around 40 percent of GDP and in principle we do not want anyone to control our finances just for the reason that there is now a financial crisis in the EU.

Do you expect coordination in the future between the Czech Republic and Poland in setting a time for both our countries to join the euro zone?

In the Czech Republic we do not have a set date for joining the euro. It is natural that Czech and Polish banks cooperate with each other and we are looking for close coordination of our countries’ activities on financial markets. So it is a logical conclusion that we will also coordinate further steps. But the matter of joining the euro is a political decision. We know what happened in Slovakia, which did not meet the real – I am not talking here about formal – conditions for joining the euro. The political ambitions for it joining outweighed a realistic assessment of the situation.

Slovakia joined the euro zone and, after some initial turbulence, is managing relatively well in comparison with some other countries, but every case is different. When I take a look at the scope of Czech-Polish economic and trade relations, and the size of our mutual investments, I see a need for harmonizing our decision and timing when it comes to joining the euro zone, with this based on a cool-headed assessment.

The trade turnover between our two countries has risen five-fold over the last 10 years. What are the main reasons for this spectacular growth?

We are pleased to see such a spectacular development of our mutual trade. The value of our two countries’ current trade turnover is E14 billion, with the Czech Republic having a small surplus. Poland is our seventh-largest trade partner, while we are Poland’s sixth-largest. Our economies are complementary and this is reflected in the fact that we make mutual investments.

Our production portfolios complement each other and our final products compete very little in foreign markets, while we cooperate in production. A good example of this is our joint investment and production in the car industry. A consolidation of the Central and Eastern European market is currently underway, in which Czech and Polish firms are playing an important role. Their position in the region is growing and they are better prepared for further expansion to the east and southeast.

Who are the biggest Czech investors in Poland and the biggest Polish investors in the Czech Republic?

Our biggest investors are in the Polish coal and energy sectors, led by our giants – CEZ and EPH. We also have a number of construction firms and companies specializing in renewable energy operating in Poland, as well as firms from a range of other sectors. Poland’s biggest investor in the Czech Republic is PKN Orlen, which has been present in the market for six years and now operates gas stations under its own brand. There are also Polish investors in the Czech food industry, such as Mlekovita and Mokate.

How does the Czech Republic’s connection to the Nord Stream gas pipeline shape its energy policy?

We have sold our whole gas sector to German company RWE, so it cannot be said that the Czech Republic has joined the Nord Stream pipeline, because it is through RWE that gas from Nord Stream will come to our country. Our state has no shares in Nord Stream. We are trying to diversify our supplies, sourcing gas from Russia through the Yamal pipeline and gas from the Nord Stream pipeline. This strengthens our position [and is] due to our government’s decision to liberalize gas supplies and to have both private suppliers and recipients of gas.

Yet you still use Russian gas …

But we buy gas from the private German firm RWE, and its deal with Nord Stream is not our problem. Twenty-five percent of our gas comes from Norway. So having two suppliers makes us much less dependent and our gas situation is better than it used to be. Our energy policy is independent from our politics, so our energy security is not prone to the influences of current policy. We want to be more dependent on the market and less dependent on geopolitics. We know that it works … [and] we believe in having the market system separated from geopolitics. And we think that such a solution is possible in Europe. For this reason the Czech Republic and Poland continue to be very active within the European Union in promoting the liberalization of energy policy, making energy suppliers act transparently and according to the rules of the market. We want energy security for all EU members.

How do you see the situation developing now that Poland has vetoed EU proposals to increase CO2 emissions reduction targets? What is your country’s stance on the issue?

The Czech Republic is against a drastic reduction of CO2 emissions in such a short period of time. We are in the same situation as Poland: in some regions we have 100 percent dependence on coal for energy production. Unfortunately, the Danish presidency of the Council of the EU and the EU Commission did not want to agree with the Polish position that such restrictive EU policy [on CO2 emissions reduction] would harm countries whose economies are dependent on coal. We think – like Poland – that it is an effort to remove from the market resources that help our economies compete.

Our two countries are not questioning the long-term EU aim of reducing carbon emissions, but climate protection will be the subject of global discussions in 2015. So, while our minister of environment did not join the veto, we oppose the isolation of Poland by others.

From Warsaw Business Journal