Weak EU economy forces new members to dust off old friendships
By Christian Lowe and Marcin Goettig
WARSAW (Reuters) - Poland's embassy in Algiers is not the grandest posting - the diplomats share the building with their Swedish colleagues to keep costs down - but last year it oversaw the fastest growth in trade of any Polish mission.
Ex-Communist countries in eastern Europe are building up economic links with far-flung places because the euro zone economy has floundered.
When Poland joined the European Union a decade ago, it believed it had found its path to prosperity. Now it is reviving Communist-era ties with developing countries, such as Algeria, that it thought it had left behind.
That Poland and its peers in eastern Europe - until recently the most enthusiastic of EU members - are now looking elsewhere for business is evidence of how six years of debt crisis and recession have eroded the euro zone's allure.
"Poland is benefiting a lot from the EU common market and European funds," said Katarzyna Kacperczyk, under-secretary of state at the Polish foreign ministry. "However, the fact that you are inside the EU does not guarantee your success.
"For the last 2-3 years we have seen a growing interest to go further, to non-European markets."
To be sure, the EU is still the principal trading partner for eastern European member states, and this is not likely to change. But trade with countries outside the bloc is growing - as is the Polish economy.
Since 2007, just before the financial crisis, Poland's exports to non-EU emerging markets have risen by 109 percent to $17.8 billion (11 billion pounds) in 2013. Over the same period, Polish exports to the euro zone rose 42 percent to $103 billion.
The neighbouring Czech Republic's exports to developing economies have risen 67 percent since 2007 to $10.1 billion last year, while exports to the euro zone rose 26 percent to $102 billion.
In Poland, a foreign ministry review of staffing in embassies will probably lead to jobs being shifted out of EU missions and into new markets, said Kacperczyk.
Czech Prime Minister Bohuslav Sobotka told Reuters in an interview his government was pushing trade with China, and would look next at India, Latin America, and Turkey. In August, the Czech trade agency opened offices in Colombia, Chile and Azerbaijan.
COMPETITIVE EDGE
Hungary's government has gone furthest, pursuing what it calls an "eastern opening" to improve ties with ex-Soviet states and Asia.
Some EU diplomats say Prime Minister Viktor Orban has gone too far, accusing him of cosying up to the Kremlin when the rest of the bloc is isolating Russia over its intervention in Ukraine. Budapest says it is being pragmatic.
Orban told Hungarian diplomats in August that about 20 percent of exports go outside the EU now but he wants that to become a third by 2018, and eventually around half.
"You can see that the EU's competitiveness in the world in decreasing and if we export to a market which is narrowing ... that will put us on a declining path as well, sooner or later," he said.
Eastern European states are finding that ties forged during the Cold War give them a competitive advantage in some markets.
In the 1980s, Poland took in thousands of students from fellow Communist Vietnam. Now, its trade missions to Vietnam deal with Polish-speaking Vietnamese business people.
As for Algeria, Communist-era Poland had close ties with its Socialist leadership after independence from France in 1962. Links include the Polish wife of Rachid Benaissa, until last year Algeria's agriculture minister; the father of Polish President Bronislaw Komorowski, who worked as a university professor in the Algerian city of Oran; and a diplomat now serving at Poland's embassy in Algiers who was born in Algeria because his Polish parents went there to work.
(Corrects spelling of Colombia in 11th paragraph)
(Additional reporting by Robert Muller and Jan Lopatka in Prague and Krisztina Than in Budapest; Editing by Ruth Pitchford)
