Cabinet meets in extraordinary session seeking to 'prevent a financial crisis'

The Cabinet yesterday held an extraordinary session to tackle the potential crisis relating to the projected budget deficit. According to Gazeta Wyborcza, the deficit could be as high as zl.100 billion in 2002. Economy Minister Janusz Steinhoff yesterday admitted that government borrowing is set to rise again next year, though he insisted 'there is no way the 2002 deficit will...exceed 4.5% of GDP'. The Cabinet has come up with a plan involving huge cuts in government spending. Boguslaw Grabowski, a member of the Monetary Policy Council (RPP), explained: "In order to prevent a financial crisis, we have to carry out a number of structural reforms of our fiscal policy. First of all, we have to decrease fixed spendings in the budget (currently 60% of the total), limit social benefits and increase control over the expenditure of funds and agencies financed by the budget." The unpopular rightist government, expected to lose power in next month's elections, had to raise its deficit target by almost zl. 9 billion after the slowdown in economic growth and lower than expected inflation depressed state revenues. (Gazeta Wyborcza, p.3; Puls Biznesu, p.31; Rzeczpospolita, p.B1; Prawo i Gospodarka, p.2, Reuters) A.K.