(Bloomberg) — For decades, Polish coal miners have enjoyed benefits that are the envy of their working class countrymen: An annual bonus of two months’ pay regardless of performance, company-sponsored holidays, retirement before 50, and no weekend shifts. Today, that legacy of the communist era threatens the mostly state-owned mining sector and is digging a hole in the national budget.
To understand why reform remains elusive, take a drive through Upper Silesia, the coal-rich region in southern Poland that’s home to two dozen mines. The snowy countryside, drained of color in the feeble winter light, is framed by smoking chimney stacks and elevator towers that haul coal up from the pits.
Even as European coal prices have fallen by half in recent years and producers have struggled, powerful unions have foiled government attempts to close failing operations, cut jobs, and restore the sector to profitability. In January, the Economy Ministry cautioned that without significant restructuring Kompania Weglowa SA — the European Union’s largest coal producer — risked bankruptcy.
With their historical ties to Lech Walesa’s Solidarity, Poland’s roughly 100,000 miners are clinging to their jobs. Their unions’ links to the 1980’s movement mean they can easily forge alliances across the political spectrum — and threaten any reform-minded government with widespread strikes.
“We’re absolutely against any solution that would involve shutting down mines and cutting jobs,” said Przemyslaw Skupin, a union leader at the Pokoj mine, an unprofitable operation in the town of Ruda Slaska that was slated for closure in a restructuring plan the government proposed in January.
Coal for delivery next year in northwest Europe fell as much as 2 percent to $59.80 a ton at 2:15 p.m. in London, according to broker data compiled by Bloomberg, headed for the biggest weekly drop in eight weeks.
Outside Skupin’s office in the town of Ruda Slaska, the smell of burning coal lingers in the air and black-faced miners in heavy boots and headlamps file out after their shifts. The town, with a history of mining that dates to the 13th century, is surrounded by mountains of shiny briquettes that few want to buy.
While Poland’s utilities burned 57 million tons of coal last year, the country’s mines produced 69 million tons, the economy ministry estimates, and industry executives say imports may have reached 12 million tons.
A compact man with a trim mustache, Skupin slaps his hand on a Formica-topped table to vent his anger at the suggestion that job cuts may be unavoidable, and says he considers the government an enemy, not a negotiation partner. He suggests Kompania Weglowa, Pokoj’s owner, increase production despite the glut because “at least we’ll sell more coal and solve our cash-flow problem.”
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