Polish president Lech Kaczynski died Saturday morning when his plane crashed on landing outside the western Russian city of Smolensk. Kaczynski was on his was to memorial services at Katyn, the site of a massacre of more then 20,000 Poles by Soviet agents in the 1940s. Also on board the plane, which was making its fourth attempt to land in heavy fog, were the president of the National Bank of Poland and the army chief of staff.
In accordance with the Polish constitution, the Speaker of the lower house of Parliament becomes the interim head of state upon the president’s death, and must call for early presidential elections within two weeks. The elections must then take place within two months of the president’s death. Bronislaw Komorowski, who is expected to be a candidate in elections that would normally take place in the fall, is the current speaker of the Sejm.
The tragedy could be a setback for one of Europe’s healthiest and fastest-growing economy. The Market Vectors Poland ETF (PLND) finished Friday up about 8.5% on the year, putting it more than 700 basis points ahead of the Vanguard European ETF (VGK). Poland is the world’s 18th largest economy, and one of the best examples of a country that successfully transitioned from a centrally-planned economy to a capitalist market-based economy. Because a significant portion of Poland’s GDP comes from the local economy, the country has held up relatively well as uncertainty has swirled around the rest of Europe (read more about the Poland ETF here).
Poland’s economic growth has been fueled by a growing domestic consumer market and supported by sound economic policies that have encouraged foreign investment and kept inflation in check. Under the Polish constitution the president has less power than the Prime Minister, but still maintains a significant say in foreign policy. After his election in 2005, Lech appointed his twin brother Jaroslaw as prime minister. Kaczynski “was a controversial figure on the world stage but his right-wing stance on many issues found ready reception among many Poles, especially traditionalist and rural voters,” wrote the BBC. “Throughout his political career, he was not afraid to appeal to populist sentiments.”
The Kaczynski era had both highs and lows. “Homophobic, seen by many as intolerant, ultranationalist and eager for a scrap with Poland’s neighbours, the twins set alarm bells ringing in and out of the country, writes Daniel Korski. “Relations with Germany fell to a low during their tenure, and scraps with Poland’s EU allies became frequent.” But there were a number of domestic accomplishments that spurred the Polish economy and improved quality of living for many Poles, including streamlining government spending to disburse billions of EU assistance. Unemployment fell by four percentage points, and Poland became the fastest-growing economy in Central and Eastern Europe.
Poland ETF in Focus
Poland enters a period of uncertainty following the tragic plane crash, with a number of critical posts now filled by interim officials. For U.S. investors looking to gain exposure (either long or short) to the Polish economy, PLND is the best option. This ETF began trading in November 2009, and tracks the Market Vectors Poland Index. This benchmark consists of 25 companies either headquartered in Poland or deriving at least 50% of their revenues from Poland. PLND maintains a tilt towards financials and energy stocks, and charges an expense ratio of 0.76%.
Disclosure: No positions at time of writing.