Attracting inward investments and implementing structural reforms should be considered high priority by eurozone countries, according to former finance minister, central bank governor and deputy prime minister of Poland Leszek Balcerowicz. In an exclusive interview with fDi Magazine, Mr Balcerowicz – the economist behind a series of reforms that helped end hyperinflation and transform the Polish economy in the 1990s – discussed the possible solutions to the eurozone crisis. 

According to Mr Balcerowicz, attracting more crossborder investment is a proven way to enhance the long-term economic outlook of a country. “This is what we did in central and eastern Europe [CEE]. Opening our economies, and more importantly keeping them open for investments, is not only a way to attract much-needed funds but also to obtain technology transfer,” he said.

Mr Balcerowicz also stipulated that the importance of FDI differs depending on the maturity of the economy. “Over time, the role of domestic companies increases, as they gain know-how and resources,” he said. In the case of western European economies, Mr Balcerowicz said that there is no solution other than reform. “If a country continues with excessive spending [and] if its labour market is rigid, it needs to be deregulated,” he said.

So far, solutions to the eurozone crisis have been too focused on bailouts and not enough on implementing viable reforms, which would be more widely accepted. “Reforms should be encouraged, not forced. The right momentum is needed and [this] has to come from the public,” said Mr Balcerowicz. Bailout packages, which come with certain obligations and restrictions, can lead to turmoil of the sort seen in Greece in the past few months.

Mr Balcerowicz also warned that the crisis in the eurozone will harm the eurozone's main trading partners, namely those in the CEE. “If the main partners are slipping in the recession, it obviously [has a] spillover effect. [When this happens] there is no other way of fighting problems than to improve the business climate and try to be more competitive,” he said.