photo: @boetter

The same seems true of the current reflections on the eurozone. The European Commission has prepared three concepts of euro-obligations. The discussion grows more and more lively on which one is the best. Germany has prepared other concept – we discuss about merits and faults and chances of introducing a given idea. And so forth, da capo al fine. But this fine is approaching regardless of the numbers of concepts and their quality.

And nobody has asked the otherwise simple question  –  W h y    d o    g o v e r n m e n t s     b o r r o w? After all, they do not have to! Theoretically speaking, they may reduce public expenses and stop borrowing, or borrow much less. Unfortunately, there are not many eager supporters of such policy (in Poland either!). So, why doesn’t the practice follow the theory?

Because then, we would have to admit to bankruptcy, not of the European idea as that is not the point at all, but to the bankruptcy of the welfare state in its present pathological shape, growing for over fifty years. There is no money for the welfare state of such kind and there will never be. The point is that no politician wants to say it (on this side as well as on the other side of the Atlantic!) because it means losing the coming election. It is safer to roll over the debts, to take out new ones, and to rail at banks and other financial institutions which, realizing that the risk is increasing fast, demand higher and higher interest for buying bonds from potential bankrupts.

Western countries have created so many expensive obligations that there is no chance  the tax money will suffice to discharge them. Also, the number of working people who can be taxed will decrease compared to the number of the welfare state’s beneficiaries.

Calculations are rather complicated but one of them, made by an American research organization, is worth giving thought to it and citing as a warning. The researchers reckoned up the value of the social security and pension obligations in Western European countries. And they estimated the capital that the social security system should have if it was the capital-based system (like OFE – Open Pension Funds in Poland) and not the system in which the employed participate in financing the pensioners.

About Greece, the results are really shocking. To finance the pensions for the Greek (amazingly generous in comparison with their pays) the capital-based system should have funds worth 875% of annual Greek GDP !!! And in case of Greece, these reflections are not of theoretical nature only. As there is no such money, the generosity of the Greek pension system has  a l r e a d y  been drastically reduced.

Because of this shortage of money, the following cuts have been introduced: the equal minimum pension (not so high) was established, and the remaining amount above the minimum is cut by 20-40%. But this in not the end. Their IKA (the Social Insurance Institute) still needs 13 billion euros!, which is state budget financed of course. While reflecting on the debt problems within the euro zone, it is worth keeping this case in mind.

translation: Jolanta Gładkowska

photo: WageIndicator - Paulien Osse

Most importantly, in the new pension system an early retirement signifies low pension! In the system where pension depends on amount of paid contributions and duration of professional activity, lower retirement age means lower funds divided by higher number of years. It applies in particular to women who now can retire 5 years earlier than men. Therefore, a higher retirement age should be in their interest, otherwise they will be doomed to poverty as pensioners.

A longer explanation is needed when dealing with the issue in context of the labour market. The opinion that oldies who departure from the labour market provide vacancies for youngster who join the workforce is still very strong. The socialist candidate in French presidential election, Hollande, voices exactly such opinion, calling for lowering retirement age threshold. The same logic pushed France to shorten a working week to 35 hours, which ultimately led to a significant loss in competitiveness of the French economy and growing unemployment. Working less for the same pay creates higher production cost relatively to other economies where working week is longer. Years later the French backed out – instead of helping people, 35-hour-working-week augmented unemployment. Such subtle implications are difficult to capture, as those who benefit from the shorter working week usually do not notice those who lose their jobs or cannot find it.

The same arguments apply to pensions. At the beginning of Polish transformation, retirement was considered to be a measure to reduce unemployment. When it turned out that within one year (1991) half million of people retired comparing to usual one hundred thousand retirements per year, additional source of income had to be found to cover dramatically growing public expenditures. Therefore, in first years of transition the government was forced to raise the social security contribution rate from 38% to 45%. Those who had already left the labour market were not affected by the raise, unlike employers who at that time allot money to the contribution. As a consequence of the raise, after some time companies had to limit future pay rises or make savings in other areas, including redundancies. For redundant employees the implication was hardly possible to capture.  High unemployment rate in the 1990s had its roots in good intentions of politicians involved in the social policy at the beginning of that decade. Mistakes can be excused when you are a pioneer of reforms. However, today it would be unwise not to draw conclusions from the past experience.

Employees in their 50s pushed out of the workforce make another issue to be taken into account in the debate. Some politicians use the following argument to support a low retirement age – let’s say if somebody aged 50 cannot find work, how could we force him to be unemployed until the age of 67. But the truth is somewhat more complicated. Namely, problems of employees in their 50s result from pre-retirement protection period, which discourage companies to hire persons who cannot be fired if necessary. Companies do not make redundancies willingly, but flexibility is indispensable when dealing with changes of market conditions, e.g. crisis of 2009. Not to be restricted by law, employer prefers to hire somebody in his 40s than a man ten years older. After increasing a retirement age threshold, problems on the labour market are set back. The best solution would be to abolish the protection period, yet it requires additional information action.

It is worth bearing in mind that vacancies left by sixty-year-old employees are not yearned for by the young people. The situation was different when physical job prevailed against high qualified work. Today employee in his 60s is replaced by the one a decade younger. Work for the people entering the workforce requires totally different skills. Good education, IT skills, foreign languages and ability to achieve goals are preferred to long professional experience, when talking about job offers nowadays. Therefore, substitutability between twenty-year-old worker and his gray-haired colleague proves to be a myth.

Longer professional activity produces not only additional income generated from contributions but also greater demand on the market, which creates new jobs and higher GDP. That’s why the pension system reform is so important for the economy.

As I mentioned before, the majority of arguments is non-intuitive, thus it requires a calm discussion and calculations instead of referendums and political fights. As society we live longer, so naturally we have to work longer for our pensions to be sufficient. Increasing  a retirement age threshold seems to be a matter of time. And it is better to realise that the time has come, otherwise we will be forced by the crisis to do a shock therapy.

Translation: Lucyna Stępień

photo: epSos.de

Crisis forces reforms both of companies and of countries. However, they have not been implemented in recent years. In this sense the crisis is salutary, though painful to those who got accustomed to the old way of living. Undoubtedly, the example of Greece is extreme – the improvement of living standards of an average Greek was a long-term effect of living on credit and accepting the lack of competition, which resulted in growing current account overdraft. In other words, development of Greece was more and more dependent on foreign capital which made it possible for the Greeks to purchase more goods and services from abroad. So long as the world accepted this situation, the permanent improvement of the living standards of the Greeks was possible. Now, however, the country is suffering due to the correction of the growth that has lasted for the last two decades. In such an extreme case as the Greek one, it is one of the main causes of the recession that has lasted for yet another year. An additional factor destroying the Greek economy is its fiscal therapy consisting in raising taxes.

Unfortunately, the so-called “economical actions” are said to be to blame for the Greek slowdown, which is a huge generalization. Firstly, because the current growth correction results from living on credit during the previous decade and secondly, because the saving therapy boils down mainly to raising taxes, which always has the anti-growth effect. Nonetheless, it is easier to raise taxes, at least temporarily, than to introduce saving policies which will always meet with opposition from the affected social groups. Such a strategy, however, sanctions numerous accrued social rights which are simply unaffordable to a country at such level of development as Greece actually is at. It is hard to explain it to the society but if it is not done during the next decades, Greece will be doomed to slow pace of development and low competition due to high economy taxation.

A different way has been chosen by Italy, one of the richest countries in the world. Obviously, the economic situation of this country cannot be compared to the one of Greece. The latter is bankrupt, whereas the former risks losing liquidity. Nonetheless, both countries share some of the features, low competition in particular. Some of the steps undertaken lately by the prime ministerial government of Mario Monti aim at regaining competition advantage by liberalization of the access to occupations or of trade restrictions. The first effects of that can already be observed – some of the shops in Italy open on Sundays.

Other countries, such as Spain and Portugal, have their holidays reduced, which has a similar effect to the liberalization of Italian trade. Personally, I support supply reforms which increase vocational activity, concurrently increasing economy’s potential. Since if we concentrate the efforts on raising taxes and we call it reform, what we will get is not improvement but lethargy.

Poland takes full advantage of the backwardness allowance. We have admittedly run out of simple reserves but the technological, infrastructural and know-how backwardness is still rather substantial in comparison to the world leaders. It still gives a huge potential of growth in the prospect of the new decade. However, each year the influence of these factors will decrease. Therefore, it is important to draw upon the experiences of others and, in particular, to learn from mistakes – not necessarily of Greeks’ but particularly from the mistakes of those countries which few years ago were not generally thought of as Europe’s difficult cases, that is Italy, Spain or Ireland. For that reason, raising taxes should be done carefully and the pace of raising the retirement age should be more dynamic. Do not succumb to the magic of state capitalism and do not be afraid to revise state holidays with the aim of reducing them. This is the lesson to be learned from the current stage of the economic crisis, which is not the crisis of Euro but merely of the Eurozone countries which have lead an irresponsible economic policy.

Translation: Marta Gajda

photo: chrstphre

It is good, however, from time to time, to forget about dreams of that bright future and take a sober look at the background: international, social, and economic. Nothing yet we won, and many we may lose, if we do not deal with these matters in a prudent manner. Thus, the international background for shale investment in Europe is hazy and full of various dangers. France has imposed a ban on fracking – the extraction of shale gas. One can wonder why it has happened. Ecologists – fortunately for the French – were never too strong there. Therefore, it is not their influence that was the reason for the ban. Rather, it was the power of semi-state nuclear industry, which sees a potential competitor in shale gas.

Here, a pro domo sua note: you can also expect a French anti-shale propaganda in our country, because the French authorities and companies can think that the development of shale gas production may discourage Poland from building up nuclear power plants. From our perspective, it would be, indeed, a serious mistake, as the diversification of electricity production should be an important element of economic policy of the country.

International affairs combine with the internal ones. In the extraction of shale gas, Gazprom sees a huge threat to its position in Europe. Even the resignation of liquefied natural gas imports by the United States has reduced prices on the world market.  Shale gas fracking on a larger scale in Europe would dramatically reduce sale of Russian gas to countries of our continent.

Therefore, you should expect a rather exotic alliance of Russian state-owned corporations and ecologists sweet-talked by them, and scared (as usual) of the technological consequences – this time connected with fracking. You can always count that neo-Luddites will protest against any technology (excluding windmills and other very expensive utopias).

However, as long as the European Union will not interfere, it is not a case difficult to defend. Unfortunately, the level of imbecility of western bureaucracy – every kind of, not only international – is extremely high. One should keep in mind that the EU has huge advantages (common customs area and common market), doubtful offers (the euro zone in its present form) that are also undoubtedly harmful. The vast majority of regulations from Brussels do more harm than good in helping out the economies of member countries. One must be able to move around in this jungle.

Meanwhile, even if in Europe, the economic (not political or ideological) approach to shale gas wins, it can do us harm. Maybe the politicians should be more aware of the fact that the value of business comes not only with how much tax can be put on a company or companies. In most European countries, there are royalties laws – fees for the use of mineral resources of that country. We are now only pushing through something like that (it is in the form considered by experts to be harmful!).

Instead, they made something similar to a rally of the nomads on the rural population from the past, in the form of a tax on one company (KGHM Polish Copper). A fatal solution that tells commodity firms that we are not predictable. Not only external threats, a propaganda war against shale in the country, but also our own, very unfortunate war dances around shales may undermine prospects for shale boom, when it comes to Europe.

Translation: Martyna Kozik

photo: Stuart Caie

The vision of „shale Poland” is a beautiful one, and it appeals to me personally. The problem is that this is a typically political vision. Unfortunately very often stunning political visions prove to be economically ineffective. That is why we have replaced socialistic economy with capitalistic economy, in which it is no longer the politician, who makes the call about the key economic processes, but the income-oriented and economically efficient business owners.

Unfortunately it does not apply to all industry branches. Polish energy sector, potentially interested in shale gas excavation remains state owned. To what effect? Driven by political agenda the  government and the minister ‘motivates’- the term being an understatement- state owned companies to invest heavily in shale gas exploration and excavation arrangements. According to last issues of Newsweek and Polityka this motivation boils down to an ultimatum given by Minister Budzanowski – shale gas or the chair. Soon, we may pay the price for delays in privatization. Experience in the state management of economic processes shows that a great opportunity can turn out to be huge economic failure, the moment the chairmen fearing for their jobs, are forced to execute the beautiful political vision, without calculating profits against losses.

To make myself clear, I do think that shale gas is potentially a great opportunity for  Poland. It should be used wisely, though. Instead of forcing state owned companies into investing, a transparent investment law should be enacted, potential royalties income should be secured, private shale gas investments should be made easier. It should be companies, not Prime Minister Tusk, making the rational, based on an economic calculation, decision about when, where and what to invest in. Otherwise, our big, Polish opportunity may be wasted after two or three epic economic failures of state imposed shale gas investments.

Translation: Agnieszka Ścieszka

photo: Images_of_Money

The dynamics of the economic growth will be rather slow in comparison to the time of prosperity in the early 21st century. It must be remembered, however, that the abovementioned increase was based on low interest rates and overemphasized boom on the real estate market. Recent situation is far more serious. Firstly, the government debt is substantially higher. It must be repaid. The debt-to-GDP ratio must also be lowered. Secondly, the conclusions drawn from the financial crisis are clear – when the interest rates remain too low, the price of assets increases and another crisis begins. If such optimism is proved by the macro data, the FED will not allow the monetary loosening. Moreover, it is likely that the interest rates will not be changed until 2014. The optimism in question is not only the result of the latest data on the job market. It is also the consequence of the data on GDP as well as LEI. Nevertheless, we must wait a couple of months in order to assume that the tendency is strong.

The FED’s objection to loosening the monetary policy and the decision not to change the interest rates would be understood as essential factors that influence the market parameters. The USA would become the most attractive market with increasing interest rates as well as the hard currency. Such upturn would also help Europe. The relative competitiveness could be increased then. What is more, European entrepreneurs, who desperately want any positive sign, could express some optimism.

Upturns in American economy have always been a good sign for Europe. One could assume then that some cause for optimism would be given if the situation in the USA influenced future data. Unfortunately, when we compare American economy with European one, Europe is undoubtedly presented in a bad light. The major reason for this is not the EBC, which does not undertake as many actions as the FED. The compelling reason stems from the fact that American banking sector has been restructured and recapitalized. European countries have just begun the process. Moreover, we still struggle with indebtedness. Although the EBC reduced the possibility of a credit crunch, the crisis in Greece or Portugal is hanging over our heads like the sword of Damocles. The experts cite the example of current negotiations with Greek government that aim to reduce indebtedness to private entrepreneurs. Even such agreement may not help Greece, which is up to their ears in recession. The indebtedness will grow there because the state is focused on the increase of taxes. Taking into account that the taxes have been substantially increasing for at least ten years, the Greek will not forget about the crisis. Having considered the pace of decision-making, Europe is not likely to overcome the recession in 2012.

2012 will be crucial for European politics due to key elections. France serves as one of the examples. I am worried, however, that decision-making processes will remain slow and Europe will not overcome the crisis as fast as the USA. It should be emphasized here that the entrepreneurs observe politicians. If they notice helplessness, chaos and inconsistent strategies, no sound investments are made.

The optimistic data on American economy is a good sign anyhow. Nevertheless, it will take time before the situation in Europe gives some cause for such optimism. It will not happen in 2012 without any doubt. The impact can be softened by the hope that future decisions may bring positive results.

Translation: Aleksandra Kozłowska

In health care a wish of a new year to be as good as its beginning would be a curse. The new year has begun with dramatically late release on reimbursed drug list out of which 800 items has been removed and another similarly late publication – just before Christmas, on 16th December – on regulations concerning contracts between pharmacists and National Health Fund that were to be concluded by 1st January 2012. Without the later the pharmacists would not be allowed to sell reimbursed drugs, therefore, the contracts were being concluded hastily between Christmas and New Year’s Day. Moreover, the beginning of the year brought a day-to-day change in rules of drug payments and doctors’ protest against individual responsibility for writing prescriptions for reimbursed drugs. In this context politicians speak righteously about a revolution  – it is the revolution, with its unpredictability, feverish excitement, chaos and fundamental changes devoid of any plans, that comes to mind. However, the legislation process should not resemble revolution but rather a good management, where any changes are planned, assessed in terms of possible outcomes; where interested parties are informed in proper advance.

source: e-MagineArt.com

The basic fault of the reimbursement law is its late implementation in a way that surprised patients, hospitals, doctors, pharmacists and pharmaceutical companies. However, sins of negligence do not concern the reimbursement act solely, the process of its establishment is also flawed. The reimbursement act changing fundamental rules of drug funding – those sold in drug stores and those administered in hospitals, e.g. oncological treatment – was enacted with a disregard for the public, meaning that the interested individuals and experts as well as critical voices coming from Office of Competition and Consumer Protection and the Bureau of Research of Sejm were ignored. All of them were raising the alarm about the act being unlawful in terms of rigid prices and a ban imposed on drug store advertisements. The enacting process of the reimbursement act was aptly described in “Rzeczpospolita” from 5th January. The public party had only three days for public consultations and when the bill ended up in parliamentary commission the only amendments that were taken into consideration where the ones the governmental representatives approved of. The public party was totally overlooked.

The law enacting process which from the identification of the problem should lead to its resolving, that should expect participation of public parties and experts being heard out as well as an assessment of possible outcomes carried out, turned into a process of forcing through the governmental solutions at all costs and against everyone. Unfortunately, expressions coined by Minister Arłukowicz describing works carried out on the refund drugs list (works “behind closed door”, “cordoned off”) render perfectly the atmosphere accompanying proceedings on reimbursement act. Discourse of fight and siege prevailed over cooperation and agreement. It comes inconsistent with the noble rules of carrying out the legislation process proclaimed by the government and developed by Minister Michał Boni.

Nevertheless, the characteristic trait of the enacting process of the reimbursement law was, unfortunately, the lack of media’s interest in changes of crucial importance to the health care system. Passage of the law in May 2011 did not reverberate widely until doctors’ protest that put the reimbursement law on the spot. If not for the protests, the act would meet fate of other, numerous over the past years, breakthrough laws on public health care (including the Act on Medical Activity passed in April 2011). Because health care is usually treated as too complicated, difficult and not very exciting domain.

It is hard to deny that public health care is complicated – for the multiplicity of concerned interests and importance of goods being involved, for instance. The role of the Minister of Health is exceptionally tough, he is forced to manage limited resources in such a way to ensure execution of constitutional right to health protection. The Minister has some liberty, admittedly, but at the same time, in accordance with Constitutional Tribunal jurisdiction, he ought to ensure that the constitutional right to health protection is real, not fictional (K 14/03 ruling). Therefore, the basic difficulty of being a Minister of Health is selection – a choice of benefits which would fit into the guaranteed health benefit basket. In the meantime, selection of health care benefits is neither mentally nor politically easy. Whether reimburse common but cheap benefits which most patients can afford anyway, such as nose drops as a treatment for rhinitis, or on the contrary pay only for the most expensive, technologically advanced therapies, e.g. cancer treatment? Whether reimburse very expensive drugs which may slightly extend a life span at the expense of other benefits? How to put a price on days of patients’ lives?

The specific gravity of choices made in the Ministry of Health is unquestionable, yet it should be a reason for greater not lesser cooperation with interested parties and independent experts. In the meanwhile, the Ministry of Health is thought to be the most shut and unwilling to cooperate, treating the public party as dangerous lobbyist instead of potential source of valuable knowledge.

The Reimbursement Act is burdened mostly with faults resulting from such attitude of administrative bodies dealing with health protection. Admittedly, one cannot say that the Act on Reimbursement does not introduces positive changes, yet some of the solutions are directed at the patients and free competition.

A beam of sunshine on a rainy day?

What is positive about the act is that it gathers all regulations concerning drugs reimbursement and way of establishing of their official prices in one document. Previously they were scattered about various acts (mainly in the Act on Prices and the Act on Publicly Funded Healthcare Benefits), coinciding with each other and partially inconsistent. Extremely important and long awaited, although very late, was an implementation of Council Directive No. 89/105 from 21st December 1988 concerning transparency of prices regulations on medicinal products designed for people and incorporation of those regulations into public health insurance system (commonly known as the Directive on Transparency). 89/105 Directive establishes general determination rules of price-reimbursement drug status and requires to do so in a course of indictable and controllable administrative decision making process that is to be evaluated on grounds of objective and verifiable criteria. Yet, the price-reimbursement status of drugs in Poland, before the act came into effect, was established by decrees of the Minister of Health, thus, by legislative and not administrative acts which were difficult to be referred to court as well as made on the basis of unclear and unverifiable criteria. For many years Poland was threatened by possible legal action taken by the Court of Justice for violation of European law. The implementation of the 89/105 Directive was an anticipated essential change. Finally, another beneficial solutions that came off well are those aiming at budget retrenchment previously applied in other European states. One of the advantageous mechanisms is so called pay back. It is a duty imposed upon pharmaceutical company to repay some of the reimbursed amount of money in case of expenses covered by the National Health Fund surpass 17 per cent of all the expenses allotted to overall guaranteed benefits in a given year (guaranteed health care benefits, besides drugs, includes: hospital care, primary health care services or outpatient secondary care, therapeutic rehabilitation – all categories mentioned in art. 15 of the Act on Publicly Funded Healthcare Benefits). Another solution is made of so called risk division instruments – that are mechanisms obliging pharmaceutical companies to take over some of the costs related to a treatment with its medicinal product. Such instruments may take various forms, for example they may make company’s repayment for the therapy conditional on drug’s therapeutic efficiency or they may oblige the company to pay for certain cycles of therapy. The initial project also included a proposal to establish so called Garattini’s tax, a fee amounting to 3 per cent of company’s annual turnover, but the idea was rejected during legislative proceedings.

Anti-patient and anti-market solutions

Sadly, the reimbursement act includes many other changes that strike at patients and competition. Their leitmotiv is shifting reimbursement costs onto patients or eliminating competition in the drug circulation market. What is particularly appalling about those changes is that politicians claim those changes protect patients’ interest while they have nothing to do with it.

Prices becoming rigid

The most damaging solution proposed in the Reimbursement Act is surely the introduction, on 1st January 2012, of rigid prices set on reimbursed drugs. Hitherto prevailing prices of reimbursed drugs were maximum, therefore, only the upper limit was rigid while prices set in drug stores could be lower. And often they were.

It was particularly important for the patients because they were the ones, not the National Health Fund, to cover differences between the reimbursement limit and actual price set in a drug store. Unlike other countries, such as Germany or Great Britain where patients pay fixed price not dependant on actual price of a given drug, in Poland the fixed price is covered by National Health Fund (in a part of the limit) and patients cover the remaining part of the price. By eliminating the possibility of price reduction, the new solution strikes directly at patients.

It is worth elaborating on principles of co-paying for drugs as they are the essence of reimbursement system. Without these principles it would be hard to understand the actual results of introduction of rigid prices. Despite their significance, public awareness of the principles of co-paying is horribly low.

Reimbursed drugs are gathered in co called limit groups which constitute therapeutic equivalents. Drugs within these groups should be interchangeable for given therapy. Such grouping is a standardized procedure of reimbursement policy in many countries anyway. Of course, drug equivalence within a group depends on criteria of their incorporation into the group. The worst case scenario for patients and at the same time the best one for pubic payer is when the limit group is broadly fixed, broader than actual therapeutic equivalency. Since essentially it means that reimbursement limit – that is the basic amount of money for co-payments obliging the National Health Fund and simultaneously its upper limit, is established on the level of the cheapest or one of the cheapest drugs within the group; it is established on the level of a fairly inexpensive drug. Having a big group it is easy to assume that there are more inexpensive drugs. At the same time, such broad grouping means that less expensive equivalent may not be available for a given patient at all, only because it is a reimbursement equivalent and not the therapeutic one. Unfortunately, that is the case with the Act on Reimbursement. Doctors and pharmacists who scrutinized the first list of reimbursed drugs are warning about it.

The price of every reimbursed drug sold in a drug store is covered jointly by the National Health Fund and by the patient in following proportions: the patient covers the part of the price resulting from drugs’ payment categories – at present in Poland these are: 30% and 50% of drug’s price; there is also a lump sum amounting to PLN 3.20 and a category of drugs free of charge. But these categories relate to the price of a drug that sets a limit, the patient pays 30% of price of that drug and not the one actually being purchased. The remaining amount, only up to the limit, is paid by the National Health Fund. Until the implementation of the Act on Reimbursement the limit was set on the level of the least expensive drug within a group. Currently the limit is fixed on the basis of the highest price among the lowest wholesale prices of a drug that completes 15% of quantitative turnover. Therefore, if we take drugs A, B, C and D where A, B and C are the least expensive, A – the least expensive one, has a turnover amounting to 5%; B – next in line – with a turnover of 11%, then the price limit is set on the basis of wholesale price of drug B. The amount of money above the limit is paid by the patient. It means that drugs with lump sum prices or the ones free of charge are often very expensive in reality because “lump sum” or “freedom of charge” are set only up to the limit and the price above the limit is paid by the patient. Thus, the categories are extremely misleading but, from 1st January 2012 according to a new decree on prescriptions, they will be written in on those. A patient who reads a prescription saying “free of charge drug” or “drug with a lump sum price” will be absolutely astonished hearing the actual price he is supposed to pay for a purchased drug.

Thus, summing up, the patient pays two parts of an actual price of a drug – one resulting from the payment category within the limit and the other part reaching above the limit. Because the National Health Fund always pays one constant price resulting from the limit, making the prices rigid do not change anything from its point of view. Whereas it is of great importance to the patient who no longer has the possibility of buying a drug at a lower price than this indicated by the drug reimbursed list.

And even when the maximum prices were in effect, Poland was the country where patients’ co-payment was exceptionally high. The patients paid 34% of the price of reimbursed drugs on average, while the level of co-payment reaching 30% of a drug price is considered by WHO to be limiting availability of drugs. Poland – along with the United States, Canada and Turkey – was also placed in a group of four shameful exceptions among OECD state members where private payment for drugs (both reimbursed and not reimbursed) exceeded public ones. While in Canada and the US private payment came mostly from private health insurance, in Poland and Turkey it came straight from a patient’s pocket.

Since rigid prices are not profitable neither for patients nor the National Health Fund then, one may wonder, who might be possibly pleased by them? Introduction of rigid prices was supported by those pharmacists who wanted to eliminate price competition between pharmacies. Polish producers of generic drugs were interested in such solution as well, since lower prices of reimbursed drugs are not so problematic for them as for international producers who rely on changes brought about in foreign markets. The prices enclosed on Polish reimbursement lists are referential for other countries, therefore, they are taken into consideration during a process of establishing administrative prices in other states. Price reduction on drugs begins (unlike in pharmacies) a helix of price levels heading downwards in all markets. Such outcome does not threaten Polish producers who do not participate in international markets. Besides, reduction of drug prices initiated by international producers may cause an outflow of Polish drugs abroad (so called parallel export), a phenomenon which already happened over past years frequently in Poland, like when it occurred that antithrombotic drugs are several times more expensive over the Oder River as compared to Polish drugs. A few wholesale companies and pharmacies has been punished by the Main Pharmaceutical Inspector for taking part in an exportation procedure.

Introduction of rigid prices will unquestionably worsen the patients’ situation. It has been confirmed by expert analyses (such as IMS Health or PharmaExpert) presented both before implementation of the Act on Reimbursement and after publication of first drug list. Immediately after the publication of first reimbursement list depleted of 800 items when compared to previous list, IMS Health – an institution that carries out researches of pharmaceutical market – calculated that the co-payments that are to be made by patients has increased from 34% to 38%.

A peculiar fatalism hanging over the idea of rigid prices became anecdotal. The idea has a long history; it was coming back repeatedly with successive projects of reforms concerning reimbursement law. Successive Ministers of Health, including both Ewa Kopacz and Bartosz Arłukowicz, as long as they were common members of parliament were against the idea. As soon as they got into the Ministry, they changed their minds.

The responsibility of doctors and chemists for prescriptions

Solutions prepared for doctors and chemists have the similar – budget supporting – purpose. When there were old regulations, both occupational groups have already heavily suffered, because of strict interpretation of regulations by National Health Fund. Not only doctors, but also pharmacists were obliged to return the sum of reimbursement in case of patients unauthorized to a specific medicine. It applied also when there was something missing in medical documents (doctors) or the medicine was dispensed in spite of mistakes in prescriptions (chemists). The both problems presented situation typical for “Catch 22”: doctors were punished for writing prescriptions for uninsured people, but they could not check thoroughly the insurance, because they did not have access to the register of insured people, which was in hands of… supervisor, National Health Fund. On the other hand, the pharmacists were held responsible for the most detailed errors in prescriptions, such as the number on the wrong side, although they did not commit these mistakes and they could not refuse to dispense the medicine to patients, in such case.

The Reimbursement Act has increased this responsibility and strengthened the position of National Health Fund. Initially, it concerned not only chemists, but also doctors. Both groups were supposed to make individual agreements concerning filling in and writing prescription for reimbursed drugs. Earlier, pharmacists did not conclude such agreements at all, while doctors concluded them only, when they were not employed by subjects, which concluded the agreement for benefits financed from public resources of National Health Fund. However, the project was changed in the Senate and the old rules governing agreements with doctors were brought back. It means that only some doctors were supposed to make agreements for reimbursed drugs. Furthermore, there is individual responsibility of all doctors for prescription of medicine introduced – in amount of inappropriate reimbursement. Protest “against prescriptions” of doctors is not surprising, in sight of very strict control of National Health Fund. Doctors still do not have access to the register of insured people and the term “documented medical reasons” (which is the base for prescriptions) is very flexible and extensively interpreted by National Health Fund. No one has probably considered the role of patient in this system and whether the doctor should control the insurance of the patient.

Prohibition of pharmacy advertising and prohibition of encouragement
The Reimbursement Act introduces two very anti-market solutions: total prohibition of pharmacy advertising and prohibition of encouragement (used by anyone) of reimbursed drugs. Both prohibitions, even if they are justified to the certain extent, have potentially huge area of influence and they can threaten not only the freedom of economic activity, but also limit all the positive actions in benefit of the patient.

The total prohibition of pharmacy advertising completely replacing previous “fragmentary” prohibition addressed only to reimbursed drugs was introduced on the initiative of the Polish professional association for pharmacists. This prohibition is formulated in such a way that it is unknown whether the pharmacy can deliver any information except for information on localization and opening hours. It is strengthened by high cash indemnity and the bodies of Pharmaceutical Inspection announce that it would be implemented very strictly. This questions the possibility of giving patients any information and taking pharmaceutical care, which chemistries are obliged to do. It asks a question about online pharmacies, where online portal is both a shop window and a counter.

Furthermore, there is the prohibition of any encouragement of reimbursed drugs including donations and discounts. This regulation should be quoted in its entirety in order to show how defective the law can be. It is about Art. 49 Paragraph 3 of Reimbursement Act. It shall be forbidden to use any kind of encouragement in relation to medicines, foodstuffs for special nutritional purposes or medical products subjected to refund from public resources, especially directed to beneficiaries, entrepreneurs and their employees or entitled people including sale conditioned by various factors, discounts, packets, customer loyalty schemes, donations, awards, presents, gifts, trips, lotteries, draws, all forms of commodatum, tie-in transactions, facilitations, sponsored shopping or services, any kinds of coupons, tokens and any not specifically mentioned benefits.

This regulation may prevent anybody from giving patients anything related to reimbursed drugs. This directly influences diabetics, who earlier got insulin pens, needles and glucose meters free-of-charge. It may have strong negative influence on situation of hospitals, which would not be permitted to accept donations. The prohibition of encouragement between entrepreneurs questions usual business practices, which include such forms of encouragement as discounts.

Uncertainty on the hospital market

Furthermore, some solutions are thoughtless. They introduce chaos and uncertainty to the market. This group may include solutions on the hospital market. For a long time it was unknown, what is the supposed character of prices of drugs sold to hospitals or whether the hospitals are subject to prohibition of encouragement including prohibition of donations and discounts. The regulations are unclear in this case. The representatives of the Ministry of Health have finally decided that prices for hospitals are maximal and not fixed, because otherwise it would be unreasonable to organize tenders. When one of the regulations of the Reimbursement Act, saying that the price of drugs bought by hospitals cannot exceed the limit, is considered, then such interpretation would prevent hospital from buying other medicine than limit-setting drug. The representatives of the Ministry of Health have not yet clearly taken a stand in using discounts and donations towards hospitals, although the prohibition of encouragement is applicable towards transactions where fixed prices are used – in order to “seal them” (i.e. prevent them from “avoiding” of fixed prices system). What is more, it is unknown how the earlier therapeutic programs will be changed into drugs programs, which was supposed to happen till the 1st January 2012. Such programs were earlier specified by Minister of Health in form of decrees and they influenced vital health issues – such as breast or kidney cancer, viral hepatitis B and C, malignant lymphoma, Crohn’s disease. Since the 1st January 2012 these programs will be established in the form of decision for each medicine separately. It is unclear how these programs are supposed to look like. Unfortunately, although it is already half of the January, these programs have not been issued yet. There is however the trial period for “old” programs till the half of 2012, but only if the agreements between National Health Fund and beneficiaries such as hospitals had been concluded till January 2012. As far as I am aware, such agreements have not been concluded.

The fault of implementation

The greatest fault of the Reimbursement Act is late implementation. It is more harmful, when we consider that these solutions change the rules of medicine financing significantly. Three days before new regulations entered into force, it turned out that more than 800 drugs disappeared from the list – including basic drugs for diabetes, asthma. Furthermore, the payment of patients for some medicines have significantly increased, which may enforce some patients to change the therapy. This change is however impossible without consultation and in case of patients needing transplantation at least five visits in transplantation centre and careful medical supervision are necessary. Have anybody prepared patients for this?

According to jurisdiction of the Constitutional Tribunal these legal changes need trial period, which will enable all interested parties to adapt. Generally it is thought that 14 days is appropriate term, but the important public interest may justify limitation of this term. Even if there is possibility of learning new regulations and adaptation possibilities, the 7-day period is necessary. Meanwhile, patients, doctors and pharmacists must adapt to the new reimbursement reality resulting from list of the reimbursed drugs during last two days.

Further future of the Reimbursement Act

It is unknown what will happen to the Reimbursement Act in 2012. Minister of Health has announced the change of regulations in regard to the responsibility of doctors for prescriptions. The organizations of entrepreneurs, occupational authority of doctors and opposition parties have announced to appeal the case to the Constitutional Tribunal. In spite of this, the Reimbursement Act will be implemented. It will reveal how regulations are understood and applied – such as the prohibition of the advertising of chemistry’s or prohibition in regard to reimbursed drugs. In two months there will be another list of reimbursed drugs. In June the trial period for drugs used in therapeutic programs (hospitals) will be over and  Minster of Health will have to decide, how to introduce the medicine programs. If it is not prepared properly, then there will be another “entertaining December”.

Translation: Małgorzata Jędrocha, Grzegorz Skrzypczyk

Not so long ago, it seemed that the worst was over. More cautious commentators warned against an excessive optimism, but in the main world economies production was regaining its normal level, people have resumed consuming, unemployment has stopped rising. It was tempting to announce the end of crisis on  the basis of tangible data and, as a result, rush back to one’s own affairs according to business as usual scheme.  However, the fact that we are in the epicentre of crisis becomes more and more obvious. Stock markets fluctuate wildly, debt soars and overpowers even potent United States of America. And what about Europe?

source: Vectorportal.com

Reliable plan of reform?

More than a year has passed since Greek government revealed the true state of public economy, and European Union has not yet managed to come up with a reliable plan of reform of eurozone. European leaders keep pronouncing pathetic word so as to attest to their determination. When it becomes obvious that the situation is critical they start gathering at emergency  summits and deliberate late into the night over bailout packages in order to ward off the threat of insolvency of Greece and other EU members. But relief does not last long – very soon it becomes clear that the action that has been taken is insufficient. Volume of credits for Greece has just been risen up and restructuring of its debts has been declared. However, an opinion prevails that established  sums are too low and settlements that has been  reached are too vague.

With reference to what has been said above the thought arises that there has to be a fault in the  very nature of the European Union. A conviction that Europe, which was supposed to be the Promised Land, does not pass its exam in the moment of trial,  becomes more and more widespread. The experts prophesying the end of the united Europe and pointing to its allegedly faulty foundations that are supposed to portend its decline are not scarce. They deride the vision of common Europe without borders and identify symptoms of centrifugal tendencies with visible satisfaction. According to them, a slow decision-making process, not being able to keep pace with changes on financial markets, is an outcome of continual quarrels which, in their opinion,  are not to be avoided because of national egoisms. As for national egoisms, those ‘experts’ denounce that they do exist, no matter how many naïve dreamers, selfish technocrats or cynical politicians have denied their existence.

European Union still functions

However, the European Union operates in a normal way. Its institutions consequently carry out their tasks by taking part in every legislation process. It is worth considering that about 70 percent of national legislation is created in Brussels. Which does not mean that the laws legislated in Brussels are imposed on member countries, for every legislation act must be at least approved of by representatives of those countries. Accumulated legislation of the European Union – in other words acquis communautaire – comprises 80 thousand of pages. Those legal acts are entirely in force on the EU’s territory and are gradually adopted by more and more countries that aspire to EU membership. Almost 500 million of Europeans rely on those laws and profit from liberties that they guarantee on a daily basis.

This having been said, the EU’s disintegration is a completely unrealistic scenario, developed by those who do not understand premises that form the EU’s foundations; by those who miss the world that has disappeared a long time ago. If an EU member took a decision to withdraw from European Union it would not be able to return to its own legal solutions without putting itself at risk of isolation – political and, which is more serious, economic. A return to full sovereignty would merely seem to be real, but such a country in the moment of withdrawal from the EU would lose the possibility of effective creation of politics in various domains that require cooperation beyond borders; such domains are more and more numerous. European Union is a modern answer to those transnational challenges. It provides nation states with a chance to regain influence on the course of events that are uncontrollable by a single nation state because of its relatively modest size.

Euro zone perseveres

However, a more moderate analyst could be willing to make clear that what we are heading  for is not the disintegration of EU  but of the Euro Zone that has been constructed on the basis of false premises form the very beginning. Those premises were that monetary union could exist in an area that was so diversified in terms of economic structures, that was not included in the Common Agricultural Policy and that kept limiting the freedom of movement of  capital and workforce. In fact, it turned out that wrong thesis has been established -  those elements truly constitute main causes of the present crisis. But it seems that there is a growing awareness of the necessity to overcome these shortcomings.

Therapy for the crisis

Because of all this tumult we did not manage to notice that apart from defensive actions taken in order to counteract the symptoms of crisis a therapy that will have long-term effects has been started. What actions comprises this therapy? Firstly, increasing the scope of competence of Eurostat so as to make it able to supervise the transparency and the quality of national statistics. Secondly,  creating  the European Securities and Markets Authority, based on common requirements regarding for instance  the amount of banks’ ownership capital and using different derivative instruments. Thirdly, establishing The European Financial Stability Facility (EFSF) that used to serve the purpose of according credits to jeopardised Greece, and at present is becoming the germ of the European Monetary Fund, which function is to transfer money in order to rule out the possibility of losing financial liquidity by any member state. All these actions tackle in a reasonable way the previous neglects.

However, the existing asymmetry will not be eradicated until the achievement of Single European Market. This flagship project of the European integration at present does not fulfill what has been promised – a free movement of goods, services, capital and workforce. Countless barriers still persist at the borders of member states that inhibit the potential of competitiveness, economic growth and employment on the EU’s territory. The problem has been identified by the President of the European Commission José Manuel Barroso who announced that his second term will be marked by the consolidation of common market. However, this intent requires systematic harmonisation of law in many domains and will not be carried out immediately and without the help of every EU institutions that participate in legislative process.

The united Europe of national egoisms

Nevertheless, this process will proceed – as opposed to the common notion of the increasing national egoisms. It is often claimed that the new era, when Europe is not considered as a value worth struggling for or investing in, has just begun. According to this idea, every member of the European Union is focused on its own benefits. It all comes down to extorting from the European treasure as much money as possible. But it is not surprising. Politicians have always been putting the blame on the European Union in order to divert attention from their own mistakes and the lack of competency. They have always been apt to make use of the citizens’ narrow knowledge of the European institutions in order to blame their own failures on Brussels or other members who, in their opinion, have been disloyal and irresponsible. They have often tried to justify own protectionist actions by means of that.
Such tendencies have been observable since the very establishment of the European Union. Every attempt to intensify the collaboration has been accompanied by a number of patriotic skeptics searching for the indications of coup d’état. The alarming forecasts have not come true up until now and, when it comes to the current situation, they also seem to be far exaggerated. The suspiciousness about this odd, unobvious and recent EU have always been present among right-wingers – the supporters of traditionalism, conservatism and nationalism – as well as left-wingers – the supporters of antiglobalism, mercantilism and protectionism. The former share the deadly fear for sovereignty and identity. The latter are concerned about the loss of control over individuals trying to make use of own enterprise and creativity.

Also the media and various experts compete each other in inventing some nightmare scenarios. According to them, the political scene, which is more and more influenced by populist parties that often benefit from the anti-European Union attitudes, is becoming more radical. Breathtaking slogans and sinister newspaper titles amaze. It is hard to shock by calming down and suggesting more balanced account. It may be assumed without any doubt that political parties which disgust and brood over past evils have recently appeared on the political scene. The Party of Freedom led by Geert Wilders came third in last year’s parliamentary election in the Netherlands. In April 2011, the Finns Party won 19% of votes during the general election to the Eduskunta. The Danish People’s Party achieved the greatest score in 2007 – 13.9% of votes. It became then the third largest party in Folketinget. But it is hard to estimate now if their strong support will persist and how long it will influence the politics both in their countries and in whole EU. It is questionable because their political programs are often monothematic and the quality of their human resources seems doubtful. As a result, their influence on the majority of political branches is limited. They usually do not take part in creating the government and their social stigma gathers a vast number of negative constituents. Their support will decrease together with the agitation around the crisis.

Populism undoubtedly threatens modern democracy as it becomes a common method for doing politics, in which necessary actions are replaced with those causing the positive reactions of constituents. This alarming trend undoubtedly requires increased vigilance and deep reflection upon what democracy is and how to cultivate it. Although it is unlikely that the radical parties will govern the European political scene, there have been many at least controversial politicians who have not cared about law and order, such as Silvio Berlusconi and Viktor Orban, or who have openly opposed close European integration. For example, Vaclav Klaus who compared the EU to the Soviet Union.

No matter how shocking this information would be, the events that prove the increasing integration of the members of the European Union take place at the same time. It is essential to mention here current works on the European diplomatic service, which is the substitute for shared foreign politics one way or the other. The European Parliament develops. It has been proved during the appointment of the new diplomatic corps when the Parliament made use of its recently increased authority in order to have a substantial influence on the form of the service.

It is worth to mention here the establishment of the Spinelli Group that gathers, among others, the EU representatives from various political parties and various countries who declare that they will consider the EU matters before their countries’ matters when voting. It proves that the European identity is not fictional, but it constitutes the part of our awareness. It would contribute to the establishment of shared public zone – the important element of every democracy.

Decision-making processes in the EU must be continued

The accusations of the democratic deficit in the EU is nothing surprising. The feeling that Europe is too abstract, too remote and too self-concerned for its citizens has been present since ages. It is interesting that those who brought these accusations forward are usually against the reforms of the federal structures in the EU, which would improve representativeness and regulate the division of competencies between European institutions. They think, however, that the reforms of the supranational structures are equivalent to the reduction of the democratic legislative processes. This is one of the main reasons for the lack of radical steps towards the harmonization of the fiscal policy in the euro zone. In their opinion, the passing of budget is the inalienable right of every country.

At the same time, the impatience connected with the lack of rapid-decision making is constantly increasing. It is the paradox because, unlike authoritarian regimes, democratic institutions are not associated with rapid decision-making. When contrasted with the immediate changes on the markets, it may be assumed that politicians take sluggish actions. Nevertheless, we must come to understanding that every process in the EU takes some time because 27 countries have to be taken into consideration. The euro zone is the unprecedented experiment in the human history. The experiment does not resemble any other before. There is no clear cause-and-effect relationship and no magic formula for the problems.

The temptation to accelerate decision-making processes with reference to strong leadership appears during every crisis. It is beyond doubt that these processes require improvement. On the other hand, we should not expect any substantial improvement in that matter. Slow decision-making is, and always will be, the foundation of the united Europe because the European Union is based on the discourse of its members. That is the reason for the lack of the unanimous decision on the European bonds or the EU tax. But it also prevents Europe from returning to the conflicts characteristic of imperialistic policy.

Crisis has always been an opportunity

Current problems are serious and cannot be ignored. On the other hand, this is not the first crisis in the EU. And undoubtedly not the last one. Everyone must realize that the foundation of the European economies remains very strong. There are certain disproportions and we have been living in clover for too long. But the great majority of the European citizens live just like before the crisis. The quality of their lives has not decreased dramatically. The indebtedness of Greece has been growing at least since the 1980s. The economic bubble in Irish banking sector has been growing since ages.

Inexplicable boom in Spanish real estate market should have put everyone on guard a long time ago. The lack of the modernization of Italian economic structures is nearly chronic. Having taken all these issues into consideration, one may assume that the current crisis of the EU is anticipated. The economic problems did not come out of a clear blue sky, but they were suddenly noticed by people (markets). According to the rule of a self-fulfilling prophecy, it may drive the crisis, but it cannot be its cause.

The current problem of politicians is mainly the result of herding on financial markets, which may appear if the urgent information concerning the state of economy and public institutions has been ignored for too long. Nowadays, it has been proved once again that both expectations and emotions are the main sources of energy on financial markets. Although sudden markets’ reactions always take place with delay, they seem to be the clear sign that the defaults of politicians have been accumulating for too long and that structural reforms, which cannot be put off, are necessary. Having taken these ideas into account, Europe will overcome current crisis without any doubt. It will become stronger and more uniform. This uniformity will result from the reforms of the EU structures and the mere fact of the crisis, which will become the part of European awareness. It will help to solve another puzzle that will appear during another unavoidable crisis.

It is beyond any doubt that another crisis will appear. We should realize that because crisis may be the integral part of a globalized world based on interdependencies. According to this idea, it may even be permanent. We should probably become accustomed to crisis, value its therapeutic properties and realize how many opportunities it gives – opportunities to infuse new blood, modernize and make progress.

Translation: Aleksandra Kozłowska, Katarzyna Laprus

source: TaxBrackets.org

Euro zone isn’t about to fall apart

I don’t believe that the euro zone is about to fall apart. This would not be either in the interests of countries which might be considered candidates for leaving the zone nor for those intending to remain. Let us not forget that this is a political project and that politicians will dictate what kind of year the zone will have. And as long as the price of saving the common currency will be lower than the cost of eurozone disintegration, everything will be done to prevent collapse. As the costs of disintegration are a great unknown, I do not expect anyone in Europe to wish to go that route. Not even one country leaving. With the current level of tension, a country leaving the common currency zone – let’s say Greece – would trigger a domino effect. This certainly doesn’t mean that leaving the Eurozone will be become an impossibility. The problem of how to organise a controlled exit should be solved swiftly and adopted together with the New Fiscal Pact.

Poland in 2012

In Poland 2012 will be fraught with serious systemic challenges. The economy will slow, debt will not decrease and businesses be reluctant to invest and create jobs in a climate of such stark uncertainty. The structural changes announced by the government may not be enough to stem rising debt but they do represent critical additional fuel for the growth of the Polish economy in the future. Two such key changes are the raising of the retirement age and the reform of the state pension and sickness fund for farm workers (KRUS). Legislation to raise the pensionable age should be adopted during the first quarter of 2012 while the Council of Ministers should adopt the necessary legislative amendments in the matter of KRUS reform. There is no point in delaying, it is better to act preemptively than be at the mercy of the markets.

For investments to maintain their current momentum, it will be necessary to invest more in both the public and private sectors than in 2011 which will not be an easy thing with the drop in public spending. Because that would mean that the increase in the volume of investments made by private investors would have to considerably exceed 2011 figures. 2011 was marked by optimism at least until summer. At the moment many large domestic and foreign investment projects have been suspended which unfortunately does not bode well for investments in 2012. The lack of urgency is primarily caused by an uncertain future which is mainly in the hands of the leaders in the euro zone who didn’t handle the 2011 crisis particularly well.

“In 2012 net exports will have a positive effect on growth” In actual fact this sentence is a little misleading as the weak zloty will make firms reluctant to expand as they fear that there will be less demand for their products. The current weakening of the zloty is linked to the risk of recession in the euro zone. For Polish businesses which have to bear the entire risk of currency fluctuations, there is nothing worse than the exchange rate roller coaster. I would like the zloty to remain stable in 2012 with no wild swings either way. These are however pious wishes because the situation on the financial markets is far from being stable. It’s enough to recall that in the first quarter of this year half a billion’s worth of bonds denominated in euros will have to be rolled over.

Italy and IMF

I cannot see Italy’s problems being solved without IMF help. Let’s not delude ourselves – there is no money available for a firewall for Italy. Not coming from the ECB at any rate and neither will the German government agree to the further printing of euro bonds. Mario Monti is capable of requesting help from the IMF and the IMF is prepared to give conditional aid. And this should happen in 2012. Those people calling for massive bond purchases by the ECB are forgetting that in economics there are no shortcuts. Just as there is no such thing as perpetual motion, there is no easy and palatable solution for rescuing countries which are heavily in debt and sunk deep in recession.

And in the end I am quietly hoping that at least towards the end of the year we will see some green shoots in the euro zone which promise growth during the coming years. I hope, or rather I fear that this will be a year of stagnation which is in itself an optimistic outlook.