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Cablegate: Scene-Setter for Congressional Visits to Poland

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

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