VZCZCXYZ0006
OO RUEHWEB

DE RUEHWR #1786/01 2291406
ZNR UUUUU ZZH
O 171406Z AUG 07
FM AMEMBASSY WARSAW
TO SECSTATE WASHDC IMMEDIATE 5012

UNCLAS WARSAW 001786 
 
SIPDIS 
 
SIPDIS 
 
H FOR TRANSMISSION TO CODELS SHELBY, SPECTOR, SIRES, FRANKS 
 
E.O. 12958: N/A 
TAGS: PREL PGOV PINR ECON MARR PL
SUBJECT: SCENE-SETTER FOR CONGRESSIONAL VISITS TO POLAND 
 
¶1. Your visits to Warsaw come at a somewhat turbulent 
political time in Poland, with the governing Law and Justice 
(PiS) party leadership having just dissolved a fractious 
coalition with two extremist junior partners and declared 
they will seek elections in the fall.  The elections could be 
staved off by political maneuvering by PiS, but at the moment 
most observers think they will happen.  Elections and 
political infighting dominate the media here, but there is 
much more to the story.  Poland's economy is booming and 
unemployment dropping.  U.S. companies find Poland an 
attractive place to invest, putting the U.S. among the top 
foreign investors.  Poland remains one of our closest allies 
in Europe.  The U.S. and Poland are engaged in several 
important endeavors, including negotiating a Missile Defense 
basing agreement, working together in Iraq and Afghanistan, 
and cooperating to advance freedom in countries such as 
Belarus and Cuba, and to resolve regional problems.  Despite 
the close ties, Poles sometimes feel under-appreciated, 
wanting more military assistance in return for their loyalty 
in Iraq and Afghanistan, and hoping for entry into the Visa 
Waiver Program so that they can travel to the U.S. without a 
visa. 
 
¶2.  Political Overview:  The political scene has been 
turbulent since before the 2005 elections that gave PiS an 
unexpected double victory.  The party came in an unexpected 
first in the parliamentary elections, beating out centrist 
rivals Civic Platform (PO).  Then, Lech Kaczynski won the 
subsequent presidential elections.  Coalition negotiations 
with PO broke down over PiS's intention to dominate internal 
security and legal ministries (Justice, Interior, Special 
Services) as well as the presidency and prime minister's 
office.  After some months as a minority government, PiS 
formed an unexpected coalition with the agrarian populist 
Self Defense (SO) and Catholic nationalist League of Polish 
Families (LPR), all the while trying to woo away its 
partners' voters and members.  The coalition was in constant 
crisis with public infighting and embarrassing episodes 
dominating the news.  After a botched corruption 
investigation and the firing of the Minister of Interior, PiS 
ended the coalition in August and the Prime Minister declared 
he would seek early elections. 
 
¶3.  Economic Overview:  Despite the domestic political 
turbulence, the Polish economy is booming.  Economy Ministry 
analysts predict GDP growth in Poland for the whole of 2007 
will be 6.5 percent.  In the latest ranking of the Federation 
of European Employers, Poland was named the most attractive 
destination for investors in Europe.  Investors are drawn by 
a young, well-educated workforce.  For example, Dell 
Computers is building a massive facility in formerly 
down-at-heel Lodz. In the financial sector, the Polish press 
has reported that GE-Money Bank, the Polish-based subsidiary 
of GE Capital, has reached agreement with Italy,s Unicredito 
Bank regarding the purchase of Bank BPH, one of Unicredito,s 
two banking subsidiaries in Poland. The acquisition, if 
completed, would catapult GE-money bank into the top ranks of 
Poland,s banking industry, creating a bank with a combined 
workforce of roughly 6900.  The proposed transaction must 
still be approved by Poland,s Banking Supervision 
Commission.  Economic growth, coupled with strong migration 
since Poland joined the European Union, has brought down 
Poland's unemployment rate, formerly the highest in Europe. 
The official unemployment rate is now about 12 percent. 
Companies are reporting skilled labor shortages in some 
areas.  Wages increased 9 percent from July 2006 to July 
¶2007.  Wage pressure, coupled with record housing prices (and 
-- until the recent global credit scare -- a rising stock 
market), lead most observers to predict interest rate hikes 
in the near future to stave off inflation. 
 
¶4.  Military Cooperation:  Poland has remained a stalwart 
NATO ally of the United States, and is one of our best 
friends in Europe.  Poland joined Operation Iraqi Freedom at 
the start when their Special Forces swiftly captured critical 
oil rigs - intact.  Today, 900 Polish troops serve there 
preparing the Iraqis to take responsibility for Quadisiyah 
province.  Notably, when the surge in Baghdad pushed 
insurgents into outlying provinces, Poland responded with 
more aggressive patrolling to deny them safe-haven.  Poland 
also has about 1,000 troops in Afghanistan without "caveats." 
  Since 1995, we have given Poland over $320 million in 
Foreign Military Finance (FMF) funds to modernize their 
formerly Soviet-style military.  Among other things, they 
have used it to buy HMMWVs, refurbish C-130s, buy 
communications equipment and train pilots for the 48 F-16s 
they bought from the United States.  Today, Poland ranks as 
Europe's largest recipient of FMF dollars.  We give them 
about $30 million per year -- about 10% of what we give to 
Pakistan.  Poles appreciate a word of thanks for their 
loyalty, especially given public opposition to the 
deployments. 
 
¶5.  Missile Defense:  We are half-way thQugh missile defense 
negotiations with Poland and plan to base 10 interceptors on 
Polish soil as part of our effort to defend against missile 
launches from rogue states.  The next round of negotiations 
will take place in Poland the first week of September.  The 
negotiations involve several different documents, including a 
basing agreement, a Status of Forces (SOFA) agreement to 
supplement the NATO SOFA already in place, in addition to a 
general framework statement.  This will be the first time 
Poland has voluntarily agreed to the establishment of a 
bilateral foreign military installation.  Some voices are 
calling for Poland to "get something" in return for hosting 
the base.  Others want to make sure that Poland's air 
defenses are secure.  Poles have watched debates in the U.S. 
Congress over funding for the Polish Missile Defense site, 
and will almost certainly ask about support in Congress for 
Missile Defense. 
 
¶6.  Foreign Policy - The East:  Poland is also a partner in 
promoting regional stability and democracy in countries near 
and far--something it has done for several years, whether 
under a post-communist or conservative nationalist 
government.  For many years our ties with Poland were focused 
on solidifying Poland's democracy and transition to free 
market economy.  Now that Poland is a member of NATO and the 
European Union, we work with them on issues of concern around 
the world.  In particular, we often exchange ideas with the 
Polish leadership on the challenges posed by Russia's 
relations with its neighbors in Eastern Europe and the 
Caucasus.  Poland played a critical role in securing 
Ukraine's 2004 "Orange Revolution," resulting in free 
elections, and continues to consult on Ukraine's efforts to 
integrate into western institutions.  Poland promotes 
democracy in neighboring Belarus by supporting independent 
broadcasts, helping train and educate young people, and 
providing moral and other support to the democratic 
opposition.  Poland also provides important political support 
to Georgia, helping it meet its NATO aspirations. 
 
¶7.  Foreign Policy - Cuba: Across the spectrum, Poles support 
aspirations for freedom in Cuba.  Poland has successfully 
shaped EU policy, preventing an easing of official policy 
toward Cuba during discussions earlier this year.  Former 
president Lech Walesa has conducted conferences on Cuban 
freedom and a video conference with dissidents in Havana. 
Former president Aleksander Kwasniewski has supported the 
effort.  The current government and president, all veterans 
of the Solidarity movement that brought Poland its freedom, 
know the importance of outside moral support for struggling 
dissidents.  They appreciate thanks for their efforts, and 
need encouragement to continue to hold the line on efforts 
within the EU to ease EU limitations on official contacts 
with Cuba. 
 
¶8.  Foreign Policy - The EU, Russia and Energy: Poland has 
been somewhat less successful in managing its relations with 
Germany.  Polish leaders are angry over a pipeline deal 
signed between Germany and Russia which would bypass Poland; 
and they argued strongly for a more advantageous system of 
weighting votes in the EU in the newly proposed EU Treaty. 
The Prime Minister's claim that Poland's casualties in World 
War II should be taken into consideration in striking a 
balance rankled many Europeans.  We often stress the 
importance of good relations with Germany.  Like us, Poland 
has concerns about Russia's role in the region, particularly 
in light of Russia's reaction to the proposed Missile Defense 
deal, and Russia's manipulation of energy resources.  Poland 
looks to us to assist in diversifying its energy resources 
and we have had several discussions on improving its energy 
security through diversification. 
 
¶9.  Holocaust Issues:  The Embassy works closely with the 
government and a variety of American and Polish Jewish 
organizations to address a number of Holocaust-related 
issues.  Before World War II Poland was home to the largest 
Jewish population in Europe; only a remnant remained after 
the Holocaust.  Most Jewish-Americans can trace their roots 
to Poland.  A communal property restitution law has resulted 
in the return of many communal properties (synagogues and 
cemeteries, in particular) to the decimated Jewish community. 
 A number of American organizations and individual American 
citizens have worked in partnership with the Polish Jewish 
community and with local communities to clean up and restore 
a number of cemeteries, in particular.  However, Poland is 
one of the few remaining countries without a personal 
property restitution law.  Repeated efforts over the years 
have failed, largely because of the high cost of paying any 
such restitution.  A law currently under consideration would 
provide for compensation of 15% of the current value of any 
property, and it would apply to all those who were Polish 
citizens at the outbreak of World War II.  In January 2007 
the Prime Minister told a visiting delegation that he would 
support the bill, but it has gone nowhere.  We consistently 
urge the government and other political parties to pass this 
legislation while Holocaust survivors are still alive. 
 
¶10.  Visas:  Poles feel strongly that their country should be 
included in the Visa Waiver Program (VWP) given Poland's 
considerable commitment in Iraq and Afghanistan, its 2004 
accession to the European Union, and the fact that U.S. 
citizens do not need visas to enter Poland.  They also object 
to the 100 USD visa application fee not being refunded when 
their application is refused.  Nearly every Polish official 
can be counted on to raise this issue, and to ask what more 
Congress can do to facilitate Poland's entry into VWP. 
Poland's entry into the VWP depends on its ability to meet 
legislatively mandated requirements, the most problematic of 
which is a three percent or lower refusal rate for visitor 
visa applicants.  Even with the recently legislated waiver 
that will allow countries with visa refusal rates of not more 
than 10 percent to be considered for VWP status, Poland would 
not qualify.  The FY 2006 refusal rate for Polish nationals 
applying for visitor visas was 26 percent, in part a 
reflection of the country's still relatively high 
unemployment rate (currently officially 12%, but down from 
over 18% a few years ago).  Despite the opening of several EU 
labor markets to Polish workers (most notably in the UK and 
Ireland), historic familial ties to cities such as Chicago 
and New York continue to make unlawful employment in the U.S. 
attractive to Polish nationals.  A recent study conducted by 
post indicated that fully 25% of Poles issued visitors visas 
remain in the U.S. for more than five months, a strong 
indicator that they are working illegally.  Until this 
changes, the refusal rate for Poles in not likely to approach 
the threshold required for VWP membership. 
ASHE