Is there a doctor in the house?
Politics is nothing if not a soap opera writ large. In Poland, the drama has started to resemble the U.S. hospital soap "ER" where a relatively respected and competent surgeon is killed off while performing a painful but necessary operation to revive an otherwise terminal patient.
Throughout Central and Eastern Europe, axing the popular reformist has become grist for the mill for many politicians as they ply their dubious trade in the often byzantine corridors of power. The same politicians may mouth platitudes to the World Bank and International Monetary Fund (IMF) about the necessity of reforming bankrupt industries, but as the reforms start to bite the pill often proves far too bitter for many to swallow.
No wonder then that with the run-up to the elections in September, Polish politicians have started to tamper with those reformists who are in the middle of some deeply unpopular but necessary repair work on the economy.
A couple of weeks ago the Democratic Left Alliance (SLD) moved to reduce the independence of the Monetary Policy Council (RPP) by calling on Parliament to slash salaries at the National Bank of Poland (NBP). One RPP member threatened to resign, while others called it a foolish attempt at blackmailing bank members and undermining the bank's independence and confidence.
The RPP's hawkish policy on interest rates, right or wrong, should be a matter for the RPP to decide for itself. Unfortunately, SLD has other ideas and when it wins the autumn elections which it almost certainly will the party will probably try to quash the rate-setting council's independence for good.
As if that wasn't enough to send shivers through the markets, politicians across the spectrum then moved against Treasury Minister Aldona Kamela-Sowinska. Deputies from SLD and the Polish Peasants Party (PSL), among others, signed a no-confidence vote claiming Kamela-Sowinska was bungling privatization and mismanaging treasury assets. Many investors begged to disagree. In just four months she's already proved her mettle by settling the Eureko/Powszechny Zaklad Ubezpieczen (PZU) dispute and promising to forge ahead with the privatization program. She wisely ignored the naysayers and pledged that it's business as usual.
But the damage has been done. Calls on Kamela-Sowinska to resign have sent signals to investors that further reforms could be delayed or shelved and monetary targets will be fudged. Meanwhile, the consequences from this unnecessary spat look set to run and run.
Last week, traders at the Warsaw Stock Exchange (WSE) said that because of the political games being played, foreign players would now probably withdraw from major purchases until more settled times. The WSE fell to its lowest level in two years at one point, while questions over privatizations of state-owned concerns pushed down the stock prices of telecoms operator Telekomunikacja Polska (TPSA), copper mining concern KGHM Polska Miedz and oil giant Polski Koncern Naftowy Orlen (PKN Orlen). Meanwhile, the initial public offering of tech-firm Arena was called off amid weak investor interest.
Highly skilled and independent economic managers in Poland will need their wits about them when dealing with the vagaries of political powerbrokers during this autumn's elections. The timing of the attacks is no surprise, but the scale of the fallout could prove to be the undoing of any future administration.
