Just kidding!
By : Jeffrey Sparshott
The Sejm (http://www.sejm.gov.pl) last week left untouched central bank independence and Monetary Policy Council (RPP) (http://www.nbp.pl) wages, backing away from a move that would have changed the legal framework for setting interest rates, though officials believe the issue will be revisited.
"I think there was an attack on central bank independence, but fortunately some MPs changed their view during a 30-minute break and the amendments were rejected," said Maciej Reluga, an economist with ING Barings. "We cannot rule out the possibility of another attack."
At least one RPP official said he expects the government to look at the framework for setting inflation goals, even if it doesn't look at wages again.
"Right now we have the same legal background for our activity but of course there will be further discussion," said RPP member Grzegorz Wojtowicz. "I think Parliament will return to the question."
Meanwhile, there is no basis for the 10 members of the RPP to change their general approach to monetary policy, he said Friday following the Sejm's vote.
That policy has been widely criticized by some politicians who blame high interest rates for choking the economy.
By a mostly party-line vote Friday morning, Solidarity Election Action (AWS) and Freedom Union (UW) deputies opposed a package of laws that earlier appeared on the verge of approval. The Democratic Left Alliance (SLD) was the main backer of the legislation.
The Warsaw Stock Exchange and currency exchange rates were volatile as traders and investors awaited the vote's outcome.
"Markets were very nervous," Reluga said.
Had the law passed, it would have changed the wording in the National Bank of Poland Act, giving equal weight to price stability and supporting government economic policies. As it stands, bank officials are to support government economic policies "insofar as this does not constrain pursuit of the basic objective of the National Bank of Poland (NBP)." That crucial bit of language would have been struck from the Act; the basic objective is inflation control.
RPP and bank official salaries would also have been slashed, leading one member of the council to threaten his resignation. Other members called the move blackmail or foolish, according to reports from the Polish Press Agency (PAP).
On Thursday the bank said RPP members' gross salary is zl. 25,840 per month. Governor Leszek Balcerowicz earns zl. 44,505 per month.
SLD officials are likely to return to the issue of central bank independence, observers say. And they are likely to have more influence over future legislation following September's election, according to poll projections.
Marek Borowski, a senior SLD official and the party's point-person for economic policy, last week told a meeting of businessmen that the NBP should give up some of its role in the economy.
"The RPP and the central bank are independent and we do not intend to infringe on that, although I think their policy is mistaken and harmful," he said, according to Reuters. "But the government should be setting inflation targets."
The RPP now has the central bank's main interest rate at 17%, significantly higher than April's 6.6% inflation rate. The high real rates make it difficult for businesses and individuals to borrow money; they also contribute to the strong national currency, which makes it harder for Polish companies to sell goods abroad.
The council's reluctance to cut rates has been influenced by inflation data, which spiked in April, and a widening budget gap, which reached 89.7% of the planned 2001 deficit at the end of April. The RPP has repeated warnings that the budget gap, especially, is forcing it to maintain tight monetary policy.
The RPP's stated goal is to keep inflation at 6-8% in 2001, with an eye toward 4% inflation by the end of 2003.
While the RPP has cut rates twice this year by a total of two percentage points, most economists see room for at least two more percentage points to come off when is the big question. The RPP meets again June 26-27, but the group is difficult to predict because it was closely split and the last rate-cut, in March, followed a 5-5 vote, with Leszek Balcerowicz casting the tiebreaker.
Wojtowicz said that the RPP would not be influenced by the Sejm's recent initiative, instead following the same legal framework that has been guiding the group.
