Polish Elections: Government Scandals Spark Renewed Opposition Energy

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Good morning! European Commission President Ursula von der Leyen and European Parliament President Roberta Metsola are embarking on a symbolic visit to Israel today. Their purpose is to show solidarity with the victims of the Hamas terrorist attacks and to meet with Israeli leadership.

Today, our correspondent in Warsaw gives us a preview of the upcoming and crucially significant election in Poland. Meanwhile, our trade expert reveals another achievement resulting from the upcoming US-EU summit.

Have a wonderful weekend and brace yourselves for the unexpected!

Get Ready for Surprises

A series of recent policy reversals and scandals involving the Polish government have breathed new life into the opposition right before Sunday’s parliamentary elections, says Raphael Minder.

Context: The ruling Law and Justice (PiS) party in Poland is seeking a third term in office this weekend. They are up against former Prime Minister Donald Tusk, who has been trailing in the polls. However, recent developments have reshaped the narrative of the PiS campaign.

One of the most significant issues is the dispute between Warsaw and Kyiv, which began with a disagreement over grain trade and escalated into a blame game last month. This has undermined the government’s claim of being Ukraine’s strongest supporter.

Furthermore, a scandal involving visa-for-cash exchanges has made it difficult for the government to project a strong stance against irregular migration. Additionally, recent fuel shortages at state-controlled Orlen gas stations have weakened PiS’s promise of ensuring energy security.

Perhaps the most troubling for PiS is the sudden resignation of two high-ranking army commanders on Tuesday. This has cast doubt on the party’s ability to protect citizens from security threats, especially those posed by Russia. Tusk further fueled the tension by claiming that at least 10 other officers had resigned, although the army stated that they were normal retirements.

In the final days of the campaign, polls show Tusk’s Civic Platform narrowing the gap with PiS to approximately 5 percentage points. However, the outcome will also depend on the performance of potential coalition partners, as neither of the major parties is expected to secure an absolute majority. According to the think-tank Eurasia Group, there is a 55% chance of a hung parliament after Sunday’s elections. This would not only leave Polish politics in a state of uncertainty but could also lead the losing side to question the results, especially if the margin is narrow.

Civic Platform has repeatedly expressed concern over potential manipulation of the election orchestrated by the state, especially after the government added a referendum to the parliamentary elections. Voters will be asked four questions on topics favored by PiS, including migration and border security. Conspiracy theories are already spreading on social media about top military officials leaving to avoid potential orders to intervene if PiS loses. In an already toxic campaign, this threat has done little to ease tensions and reassure voters.

Chart of the day: The Apocalypse is Near

Severe droughts occurring in Europe are a warning sign of things to come. The World Meteorological Organization predicts that climate change will lead to a more volatile water cycle, with extreme flooding and drought becoming increasingly common.

A Stealthy Approach

The US is prepared to drop its objections to the EU’s new carbon border tax during discussions at the upcoming meeting between the two powers. The meeting will also focus on establishing a green steel club, according to Andy Bounds.

Context: The US and EU have been engaged in a trade dispute since Donald Trump imposed tariffs on steel in 2018. The tariffs were suspended in 2021, and both sides are currently negotiating a permanent resolution to the conflict. As part of these negotiations, the green steel club is being established to prevent cheap and carbon-intensive metal imports from China.

If an agreement is not reached by January 1, 2022, the US will reimpose tariffs on EU imports (25% on steel and 10% on aluminum), and the EU will reinstate its retaliatory measures on products like bourbon whiskey from the US.

To avoid another escalation in tariffs, Brussels has committed to taking a tougher stance on Chinese products, a demand the US has made. However, it remains to be seen whether an anti-subsidy investigation into Chinese steel will satisfy US President Joe Biden. Encouragingly, the signs suggest that the US is willing to accept the bloc’s Carbon Border Adjustment Mechanism (CBAM), which will require overseas producers to pay for their carbon emissions.

According to a draft agreement seen by the FT, the US should accept the scheme while talks continue until 2026. Starting from 2026, the EU will begin imposing carbon charges on imported steel, aluminum, and other products. Washington initially sought an exemption from CBAM but appears to have come to terms with the scheme. However, it’s uncertain whether US steel exporters will still be exempt from paying the levies in the final days of negotiations. Additionally, as both sides note, a lot can change before 2026.

What to Watch Today:

– EU foreign policy chief Josep Borrell and Chinese foreign minister Wang Yi co-chair EU-China strategic dialogue.
– UN Security Council meets to discuss the conflict between Israel and Hamas.

Now Read These:

Free Lunch — Your guide to the global economic policy debate. Sign up here.

Trade Secrets — A must-read on the changing face of international trade and globalization. Sign up here.

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