Source: New York Times

Not far from Warsaw’s bustling city center is an oasis where cars are few and lawns are deep green. It is here, on Zbyszka Cybulskiego Street, that the stately headquarters of Lewiatan, the Polish Confederation of Private Employers, is based.

After the decades of Poland’s isolation from Western Europe during Communist rule, one would imagine that the president of Lewiatan would be delighted with the influence Polish foreign and security policy now has in the European Union.

But Henryka Bochniarz does not pull her punches.

“The Polish economy is out of sync with Poland’s foreign policy,” Ms. Bochniarz said in an interview in Lewiatan’s handsome villa. “Polish foreign policy could hit a wall unless there are big changes made to the economy.”

At first sight, there seems to be little ground for such fears. In Warsaw and other cities, there have been huge improvements made to the public transport infrastructure. Highways are being built with financial support from the Union’s structural funds.

Poland, which has not yet adopted the euro currency, is one of the few European countries that — until recently — seemed to have emerged unscathed from the global financial crisis and the euro zone crisis. This was due to the strength of its banking sector and its monetary and fiscal policies.

“The banks were not undercapitalized. This was important for Poland’s credibility when it came to introducing financial and monetary stimuli during both crises,” said Rachel Ziemba, director for Global Emerging Markets at Roubini Global Economics.

But Ms. Bochniarz said Poland had taken growth for granted. “We should have used the good years of growth to introduce reforms in order to boost growth and competitiveness. We didn’t.”

Prime Minister Donald Tusk’s center-right coalition had a mandate to push through changes after his coalition was elected for a second term in 2011. This was a first for a Polish government since the collapse of the Communist regime in 1989.

Despite some improvements, the labor market remains strictly regulated, contributing to an unemployment rate stuck at 13.5 percent. Ms. Bochniarz said that small private companies should be allowed to hire and dismiss with greater ease. That could create more jobs. And the government should introduce an apprenticeship scheme that would allow companies to train a skilled work force, similar to the German system, she added.

As for education, the government has been squabbling over the primary school system. Children begin attending at the age of 7. Not only does this mean a late start to their education, it also keeps women from re-entering the labor market sooner.

Now the euro crisis is hitting home because Poland is so dependent on E.U. countries for its exports. Growth has dropped to an expected 1.3 percent this year from 4 percent, according to a recent report by the World Bank.

The report also shows how low-income earners are being particularly hard hit. If that trend continues it could benefit the opposition, the conservative and euroskeptic Law and Justice Party. So why hasn’t the Tusk government matched its energetic foreign policy with more domestic reforms?

“In Poland, it’s very difficult for any political leader to press ahead with more reforms,” Ms. Ziemba said.

Poles already underwent the “shock therapy” of radical economic and structural changes introduced in the early 1990s and then the enormous efforts Poland made to join the European Union in 2004. “That meant a lot of pain,” Ms. Ziemba said. Other analysts say the Tusk government, for political reasons, is too cautious about confronting the unions.

But if Poland wants to become a serious player in Europe, that means having a competitive economy and adopting the euro. The Poles, however, are far from enthusiastic about joining the euro, according to opinion polls. They see how living standards have plummeted in the indebted euro zone countries as a result of government-implemented austerity.

And if Warsaw did adopt the currency, it would have to support these indebted countries, too — in addition to losing its independence in setting monetary and fiscal policies. Above all, the true competitiveness of the Polish economy would be exposed.

Convincing Poles of the benefits of adopting the euro would be a hard political sell for Mr. Tusk, but should that stop him from trying?

“The issue is clear: concerning the economy, Poland cannot waste time if it wants to underpin its foreign policy agenda,” Ms. Bochniarz said.

This article was originally published in the New York Times.