vbw – Bavarian Business Association
Since joining the EU in 2004, Poland and Hungary experienced steady economic growth. In the meantime, also conflicts erupted between the EU and Hungary since 2010, and between the EU and Poland since 2015. The core of the conflict are increasingly authoritarian tendencies in the two countries. Their respective governments have restricted the independence of the judiciary, thereby undermining the separation of powers.
The study for the vbw – Bavarian Business Association shows the close economic ties between Poland and Hungary and the rest of the EU. The study illustrates how much both sides benefit from each other, for example in terms of economic output and jobs that depend on mutual economic exchange. It also examines potential economic distortions if the relationship between Poland and Hungary and the rest of the EU deteriorates further. Hungary or Poland leaving the EU may seem unlikely from today’s perspective and not wanted by either side, but not unthinkable.
The project team examined the deep economic relationships and analysed how profitable these are for both sides. The findings illustrate potential economic losses associated with an enduring political conflict between the Polish and Hungarian governments and the EU: It could hinder not only the exchange of goods and investment relations, but also interfere with labour market integration and research cooperation. Finally, an analysis of cross-border value chains shows how much value added and how many jobs depend on the trade with each other.
In 2021, 64% of Polish, and 74% of Hungarian exports went to EU countries. Germany is the most important trading partner for both countries. Both countries play an important role as a supplier of intermediate goods for the German and Bavarian manufacturing industries. Tens of thousands of well-paid industrial jobs in Poland and Hungary depend on the trade. High levels of Bavarian FDI in Poland and Hungary, amounting to 5.0 and 4.7 billion euros in 2020 respectively, are evidence of the close industrial cooperation. In addition, Germany is both Poland’s and Hungary's most important research partner within the framework of European research cooperation. The number of Polish and Hungarian skilled workers employed in Germany and Bavaria has increased significantly due to freedom of movement within the EU's internal market. In total, more than 100,000 people from the two countries worked in Bavaria in 2021. Many of them work in construction and thus support an industry affected by a shortage of skilled workers.
The economic interdependence of the countries leads to a high degree of economic interdependence. This is true not only for industries that export directly to the other country, but also for industries whose products are exported indirectly. In total, around 9% of Poland’s and Hungary’s gross domestic product (GDP) is related to trade with Germany. On the other hand, trade with the two countries generates 62 billion euros of value added in Germany and 11 billion euros of value added in Bavaria. More than 700,000 jobs in Germany, 120,000 of them Bavaria, depend on trade with Poland and Hungary.
The study’s findings show clearly: All parties benefit greatly from close economic cooperation at an EU level. An enduring conflict between the EU on the one hand, and Poland and Hungary on the other, endangers this success story – and has a negative impact on growth and wealth in Poland, Hungary, Germany, and Bavaria.
The following documents and information can be found on the vbw website:
Study (PDF, in German)
Learn more (in German)
Project team: Jakob Ambros, Dr Michael Böhmer, Philipp Kreuzer, Mathis Vornholt, Johann Weiß, Eva Willer
Latest update: 29.09.2022
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