Where does the finance minister buy his happy pills? Grzegorz Kołodko stunned observers with his upbeat reaction last week to Poland's first currency downgrade since Standard & Poor's first rated the country's debt in 1996.
S&P's decision, he said, had nothing to do with his plans for reviving the economy, which were announced just days after the U.S. ratings agency had made up its mind to drop Poland's currency sovereign debt and senior unsecured debt ratings to single "A" from single "A"-plus.
As if S&P had only held out for a little while longer, it would have realized that Kołodko was indeed the man with the plan and was not going to ramp up spending as many had predicted. It could have then held off on the downgrade.
But the move sends a clear warning to Poland and other European Union candidate countries that they had better get deficit spen-ding under control, otherwise they risk delaying membership in the eurozone until much later in the decade.
It also puts pressure on Kołodko to deliver what he's promising - a yearly reduction in deficit spending to less than 3% by 2005, the maximum level for adoption of the euro. Kołodko maintains Poland can enter the eurozone in 2006.
External pressure is exactly what this government needs. The Democratic Left Alliance (SLD) must resist the temptation to pander to short-term political interests and do more to ensure that spending is under control and will stay that way. Kołodko, who loves to boast of his own accomplishments, has a chance to really achieve something. And while S&P's downgrade may appear an initial vote of no confidence in the new finance minister, Kołodko has an incredible opportunity to prove the naysayers wrong. For Poland's sake, let's hope he makes the most of it.
At the same time, though, Kołodko's brand of robust confidence could wear thin if the economy doesn't pick up by the fourth quarter, as he's promising. He might get a break follo-wing a successful wrap-up of EU negotiations, but even that is no longer a given.
Kołodko is right to emphasize that Poland is still a good long-term bet, but unfortunately for him he's got only a few months to show that he is. Unlike the finance minister's first turn at bat in the mid-1990s, the economy is in far worse shape than he probably ever could have imagined. And some of his recent proposals, inclu-ding his plan to relieve state industries of a chunk of their debt in order save jobs, may not have the desired political effect in the run-up to this fall's local elections. The unemployment rate is expected to climb still further before the end of the year.
When that happens, it would be unfair to blame only Kołodko. But the public's memory is short and soon Poles might only remember that this giddy finance minister promised much, but delivered little.
A good idea would be for Kołodko to continue cultivating his chummy relationship with the National Bank of Poland, and hope that further low inflation and fresh interest rate cuts - plus real fiscal reform - bring the growth he is counting on.
He could really show off then.
