Sunday, 29 June 2014

The German break

As promised, some succinct impressions from the recent holiday trip to Poland’s western neighbour… Then giving way to has been going on in domestic politics.

The Lufthansa
Was my first encounter to the German airline and the impression is very positive. The class of its own, as my friend accurately summarised the operations of the company. I reserved the flights more than three months in advance and, tipped off by another friend that flights between Warsaw and Frankfurt am Main are served interchangeably by PLL LOT and Lufthansa and each flight has a pool of tickets offered by each of the airlines, settle for the German airline. Oddly enough, PLL LOT tickets are sold-out much earlier, Lufthansa tickets are much cheaper (I flew there and back for mere 512 PLN!), on top of that PLL LOT is loss-making, while Lufthansa fetches some, indeed meagre, yet still, profits. And chances of passengers clapping their hands after successful touchdown are marginal. On my way there some folks sitting in a row behind, in economy class as well, were weighing in clapping, but eventually gave up on their plan. Whoever has come up with such custom, has left me bemused. Even if the touchdown is impressively gentle, applause after an ordinary part of a pilot’s job implies lack of trust in pilot’s skills…

The airport
My colleagues who fly frequently tried to frighten me by telling the airport is dreadfully huge and it is easy to get lost. Utter rubbish. The airport is indeed dauntingly spacious, but signage is excellent and losing one’s way is virtually impossible, especially in arrival or transfer zones. The airport follows the trend of letting the passengers serve themselves to the extent which it is possible. Large number of self check-in kiosks and luggage drop-off counters combined with few open check-in desks and huge queues to them encourage passengers to do the check-in themselves. Before my return flight the whole procedure (check-in, shipping luggage and going through security) lasted mere four and a half minutes. Then I could enjoy the sight of bars of chocolates for dirt cheap EUR 8.90 – a snip, in the duty-free. The only drawback of the airport, serving vast number of flights are long times of waiting for the take-off or touch-down… Its other huge advantages are the proximity to the centre of Frankfurt am Main and admirable links to the local and country-wide railway networks.

The country
Once ‘The Economist’ described the German stance in EU politics as “stolid”. This epithet resounded in my mind throughout my journeys. It superbly fits the mark Germany leaves on a foreigner, no matter which visit to the country it is (mine was fourth). This very time I have grown weary of predictability and repeatability of the landscape, architecture, etc. Each town and city having a similar central train station, church, old town, sometimes castle, similar houses and block of flats. 
Little could impress me (such is my general mindset that fewer and fewer things can impress me – a disturbing sign?) and little would take my breath away, as the view from castle hill in Heidelberg (to the right) did. If any more is to be visited in this country, it is definitely Berlin (have ventured there so far, enough for a 3-day weekend and reachable by car or train), Munich and Bavaria land (a trip for a more extended weekend and it is more advisable to get there by plane).

Meanwhile in Poland…
On account of roaming around abroad I have missed out on the eavesdropping scandal unfolding. I have quickly caught up with both recordings of conversations between politicians (and businesspeople) and subsequent commentaries.

Michael in his post pleads he is outraged at the content and mostly form of dialogues between politicians and the nation is shocked by the released materials. I cannot renounce the feeling of indignation upon listening to the recordings, but I have not been taken aback by them. I could actually safely bet similar conversations have been held by politicians of PiS and SLD in times they were in charge of the country. What has been revealed is just the backstage of making politics, the murky underbelly no one would like to see. I would hazard a comparison to the most down-to-earth stuff – each and every one of us has to defecate, but no one would like to see a fellow man defecating. Politics consists of official part which can be witnessed by the public and of several unofficial talks that facilitate pursuing it. The other story is how the private and public spheres mix up, since if meetings and conversations are ‘private’ and the dinner during which they are held is paid from ‘public’ purse, something is amiss.

Michael is also disgusted by the foul language used by statesmen he considered gentlemen. Maybe this is a matter of upbringing, but I, born and bred in Poland, have long taken it for granted folks from all walks of life swear in Poland. Swear words flow from mouths of politicians, businessmen, scholars, doctors, rank-and-files and coarse drunkards. The old and the young, women and men, in the sticks and at the heart of capital, almost everyone swears. The matter of culture is only refraining from being foul-mouth when necessary. I pledge to avoid foul language when women are around, when I talk to a person I know does not swear, in official situations, but my more-or-less official or strictly private conservations with some of my workmates or friends sound similarly abhorrently as those eavesdropped in Warsaw’s posh restaurants. If my conscience is not crystal clear, I may not feel entitled to condemn anyone for using foul language. The prime minister Tusk who has once also pledged to swear like a trooper is not going to hold anyone accountable for the form of language used.

Now dear readers, I will stoop as low, as eavesdropped members of the government did and enjoy the off-the-record part of the posting. Needless to say, minister Sikorski is an ordinary lout (zwyczajny cham) who, no one can deny it to him, just mastered to perfection the art of feigned politeness. Overwhelming majority of my interlocutors with who I have discussed the issue, share my view that impeccable manners of Mr Sikorski are grossly overrated. What matters is how you behave and what you say casually, while what you pretend to do in public just reflects upon how good your acting skills are. Mr Sikorski definitely can skilfully play out a well-brought-up gentleman. Nevertheless, the recorded conversation between him and Mr Rostowski casts favourable light on his shrewdness and political wisdom and actually he scored a point with me for realpolitik-grounded view on Poland’s relations with the United States. The words of “worthless alliance between Poland and the United States” and us doing a blow-job to Americans are home truth. The very situation bears out, again, diplomacy is the art of lying and reaction of the US diplomats who reaffirmed strength of the strategic alliance with Poland also confirms this old adage. I seriously doubt Mr Sikorski’s revealed conservation will noticeably spoil relations between the US and Poland, I would not be even stunned to learn Mr Sikorski would have gained some esteem with his US counterparts for not being a starry-eyed sucker.

If it was not greed but lack of fear which caused the financial crisis, it was not lust for power but lack of humility which was a nail to the coffin of Mr Nowak’s political career which has now come to a bitter and irretrievable end. May his example serve as a forewarning for all young, up-and-coming guys lured to shiny world of politics, tempted by visions of expensive dinners, slick suits and official taxpayer-funded trips to distant places. The temptations to use political connections to pursue one’s own interests and to feather one’s nest are strong, yet we must not forget a politician is a public servant. Growing complacent and losing self-preservation instinct is the first step towards dragging oneself down, no matter if you are a top-rank politician or a rank-and-file worker in a corporation…

The one whose reputation came out probably the most burnt and bruised from the scandal is the governor of the central bank, Marek Belka. In the light of prevalence of the foul language in Poland, I can only draw a veil over frequency of using swear words by him. Deplorably, the substance of some parts of the conversation resembles a chat between tanked-up fifteen-year-old lads. I would never suspect Mr Belka of discussing lengths of several men’s penises…

Whose penis is shorter and whose longer is a matter of minor importance, although some claim those who have small penises tend to drive bigger cars ;-) The pivot of the conversation between the head of central bank and minister of internal affairs, highlighted in the scripts that first leaked to the media, had been the discussion how the central bank could help the government finance the budget deficit before the parliamentary election in 2015 and prevent victory of PiS. Cross my heart, from what I have read I cannot make out what the men meant and how the central bank could help out the government. The discussion, unclear, casual and full of understatements, has turned water to the mill of several journalists and politicians, many of who, as I noticed, not necessarily comprehend the heart of the problem. From my perspective, if we are to assess whether potential violation of law occurred, we have to take into considerations three situations when a central bank can have government bonds on its balance sheet. Here we go with a crash course!

Firstly, budget deficit financing may take place if the central bank buys government bonds on primary market, i.e. the central bank comes in when government bonds are auctioned off and purchases them while they are issued. Such reprehensible moves in all civilised economies are prohibited by law and known as debt monetisation. The central bank, as the only issuer of money, increases supply of money which is not accompanied by rise in output, hence expanded monetary base results in increased inflation and decreases real value of government debt. Upshot: the government is better off, everyone else is worse off and double-crossed by the central bank and the government.

Secondly, the central bank can purchase bonds on secondary market from commercial banks. From the government the operation means a change of creditor and does not directly aid the government. Such actions are kind of controversial, but have been widely undertaken by the Fed, the ECB (to the right, the building, where those bastards who slashed deposit rate below zero have their headquarters, fenced off to prevent bad people from trespassing the decision-making space), the Bank of England. The purpose of such moves is to remove from banks balance sheets securities and convert them into cash in order to enhance liquidity or encourage banks to lend money. The side effect of such operations is that increased demand for treasury securities from the central bank decreases yields and hence brings down borrowing costs for the government. Securities bought up usually have long maturities (more than 10 years) in order to avoid the roll-over (refinancing) risk, as if it materialised, the situation would easily evolve into variant one.
Incidentally, the ECB will soon move to a new, posher skyscraper, top-centre on the photo to the right, seen from the viewing platform at the top of Main Tower… If anyone is to ask where they had the money from to build such huge edifice, the answer is simple – as an exclusive money issuer they have printed it. Printing money is a very serious task, hence it requires appropriate premises…

Thirdly, the central bank may engage in Repo transactions with commercial banks. This manoeuvre is from a borrower’s (commercial bank’s) perspective a purely collateralised loan – i.e. a central bank lends money against government bonds, although technically it buys securities from commercial banks (spot leg) and agrees to sell them back at a later date (forward leg). Repo transactions are aimed at regulating liquidity in the banking sector and have nothing to do with financing government debt.

I gather the first variant is out of question, the second is a contentious measure, while the third does not require any further attention.

The excuse for mentioning the plausible aid of the central bank was the threat of PiS winning the election and subsequent economic disaster… I am far from supporting PiS and also not think their victory would be best for Poland but this is a step too far. We live in democracy and make-up of the parliament lies in the hands of voters. If they decide PiS is to glean the highest number of seats in the parliament, their choice deserves due respect! The very victory of PiS will not be a disaster. It is not the case which party is in power (although perception among investors does matter), what really matters are decisions it takes.

For the very end, let’s dissect the line of defence the prime minister Tusk has taken. He will not dismiss any of the eavesdropped officials nor will hold anyone accountable for use of foul language. All the recorded government members in unison claim the Polish state has been attacked by an “organised criminal group” and it will not succumb to it. The public is thus to be focused on culprits who recorded the dismal talks in restaurants, not on the substance of allegedly private conversations (which by the way show Mr Belka, Mr Sienkiewicz, Mr Sikorski and other ‘victims’ are just regular guys, behaving like ordinary Poles when they get drunk). The timing of releasing the recordings is puzzling. Euro-election is over, local elections are due in half a year, holiday season sets in. Are the recent government’s plan to prop up ailing coal mines in Poland by curbing imports of cheap coal from Russia the real reason? I firmly believe the waiters who admitted to have installed bugs have just grabbed the opportunity to cash in on knowledge they could come into possession thanks to microphones in VIP rooms. They are just cogs in a larger machine and the plan is masterminded by someone much more cunning that people who make the headlines these days. The only problem is that the purpose for which the machine is running, remains unknown…

No comments: