Markets upbeat despite reshuffle
By : Jeffrey Sparshott
Markets last week dismissed Polands political reshuffling, unresolved budget crisis and hints of post-election policy shifts from the likely next government, though economists warn that the countrys leaders still have to present a detailed economic plan that will support the economy.
I think as far as the picture of Poland abroad is concerned the entire process is quite paradoxical, it is quite positive, said Dariusz Filar, chief economist at Bank Pekao. It proves that both the government and the opposition are able to see real problems. The problem is what kind of solutions we are going to adopt.
Prime Minister Jerzy Buzek last week fired Finance Minister Jarosław Bauc, blaming him for not alerting the government to the countrys dire budget deficit soon enough, while opposition political figures signaled a significant shift to the countrys privatization program. The Warsaw Stock Exchange (WSE) and the national currency held steady.
Buzek blamed Bauc for the current budget crisis.
The threats are so serious they could not have occurred within the last several months or even a year, Buzek told a news conference. It was the finance ministers responsibility to recognize those threats and inform the government about them immediately. Minister Bauc did no such thing.
Baucs replacement, Halina Wasilewska-Trenkner, said that due to limited time she would not drastically alter her predecessors 2002 budget plan and will present a final proposal before a Sept. 30 deadline, though after the Sept. 23 parliamentary elections. Voters are expected to toss out Buzeks Solidarity Election Action (AWS)-led cabinet and install the Democratic Left Alliance (SLD) at the head of the next government.
Wasilewska-Trenkner has a Ph.D. in economics from the Warsaw School of Economics and started her government career in 1974. She was appointed deputy minister at the Finance Ministry in November 1995 and was promoted from her budget specialists post Tuesday.
A budget deficit cap of zł. 40 billion ($9.52 billion) will not be breached, she said. I hope, even believe, that my colleagues will help me reach this goal and complete this task, Wasilewska-Trenkner said at her first news conference as minister.
Bauc had projected that the budget deficit would reach zł. 90 billion ($21.4 billion), or 11% of gross domestic product (GDP) in 2002 without new sources of revenue and some severe cutbacks.
I guess these are the things you expect in Poland these days, said Gábor Békés, an economist with Lehman Brothers in London, referring to the whopping deficit figure and the cabinet shuffle.
Békés said the next government would be able to make Bauc into a universal scapegoat, blaming him for the mess but largely adopting his austerity plan because there are few alternatives. Meanwhile, investors are shrugging off the dismal news, supporting both the WSE and the zloty.
We knew that these days are going to be a bumpy ride and they are indeed with both the budget and privatization, Békés said.
SLDs leaders have concurred with the zł. 40 billion deficit cap but have not offered a detailed plan of their own. The ex-communist party has signaled that it would refocus privatization efforts a key source of government revenue and a major source of foreign direct investment in Poland. Some of the biggest privatization deals, insurer Powszechny Zakład Ubezpieczeń (PZU), bank Powszechna Kasa Oszczędnoci Bank Polski (PKO BP), and oil refiner and retailer Polski Koncern Naftowy Orlen (PKN Orlen), have been questioned by SLD leaders.
The market would like a description of how politics will look after the September elections but this is almost impossible, said Ivan Fabijancic, an economist with Erste Bank in Vienna, noting that information coming out of campaigns has little or no value for the markets and that SLD will have limited room for maneuver.
I believe they will have to go forward with privatization because they will need the money, he said. Its very simple.
