mption, a jump in corporate investment, and EU funds
inflows. GDP per capita is still much below the EU average, but is
similar to that of the three Baltic states. Since 2004, EU
membership and access to EU structural funds have provided a major
boost to the economy. Unemployment is falling rapidly, though at
roughly 12.8% in 2007, it remains well above the EU average.
Tightening labor markets, and rising global energy and food prices,
pose a risk to consumer price stability. In December 2007 inflation
reached 4.1% on a year-over-year basis, or higher than the upper
limit of the National Bank of Poland's target range. Poland's
economic performance could improve further if the country addresses
some of the remaining deficiencies in its business environment. An
inefficient commercial court system, a rigid labor code,
bureaucratic red tape, and persistent low-level corruption keep the
private sector from performing up to its full potential. Rising
demands to fund health care, education, and the state pension system
present a challenge to the Polish government's effort to hold the
consolidated public sector budget deficit under 3.0% of GDP, a
target which was achieved in 2007. The PO/PSL coalition government
which came to power in November 2007 plans to further reduce the
budget deficit with the aim of eventually adopting the euro. The new
government has also announced its intention to enact
business-friendly reforms, reduce public sector spending growth,
lower taxes, and accelerate privatization. However, the government
does not have the necessary three-fifths majority needed to override
a presidential veto, and thus may have to water down initiatives in
order to garner enough support to pass its pro-business policies.

Portugal
Portugal has become a diversified and increasingly
service-based economy since joining the European Community in 1986.
Over the past two decades, successive governments have privatized
many state-controlled firms and liberalized key areas of the
economy, including the financial and telecommunications sectors. The
country qualified for the European Monetary Union (EMU) in 1998 and
began circulating the euro on 1 January 2002 along with 11 other EU
member economies. Economic growth had been above the EU average for
much of the 1990s, but fell back in 2001-07. GDP per capita stands
at roughly two-thirds of the EU-27 average. A po