Never know what you're going to get

Life was a box of chocolates last Wednesday as government officials laughed alongside the nation's monetary policymakers, while the assembled media ate candies distributed by the prime minister's press office. So are we all happy now? "The lack of a war declaration is a real success for this meeting, but it's probably only a temporary cease-fire until the end of the month (when the Monetary Policy Council [RPP] meets again)," said Janusz Jankowiak, head economist at BRE Bank. The meeting, which included Prime Minister Leszek Miller, Finance Minister Marek Belka and RPP and National Bank of Poland (NBP) officials, followed weeks of public feuding and government threats of new legislation that would hike the number of RPP members to 16; effectively stacking the deck in favor of more aggressive interest rate cuts. The government argues that NBP's main rate, now at 11.5%, should be cut by some 400-500 basis points to stimulate the nation's flagging economy. The RPP counters that such a move would destabilize the złoty and increase inflation. "We asked two questions of the RPP," Belka said at a press conference following the meeting. "In light of our evaluation of the economy, is there a time and place for further rate reduction? Are the points of our economic policy trustworthy?" The answers, to some extent, should be known Jan. 29, when the RPP is scheduled to conclude its next meeting. While analysts said some 150 basis points might be lopped off rates then, few expect a major shift this year in the RPP's approach to rate cutting."The RPP will surely not cut interest rates dramatically, and the whole thing will start over again," Jankowiak said. "By suddenly cutting deeply, (the RPP) would appear unnecessary because the government could do whatever it wants," said Mateusz Szczurek, analyst with ING Bank Śląski. "For the government, it's better to have an RPP to criticize when there's a bad economic situation, rather than show its own inability." Fundamental relationships between economic and monetary policy, as well as the government's outlook on 2002, were the main focuses of the Jan. 9 meeting, according to government spokesman Michał Tober. "Both parties understand the law and the constitution the same way," Tober said. "Miller does not want to change (the constitution), he only wants it to be respected," Belka followed, adding that the government would likely use dialogue and not legislation to get its way. However, coalition deputies following the meeting said they would not withdraw legislation that would essentially force the RPP to cut rates. With President Aleksander Kwaśniewski threatening a veto and the European Union (EU) expressing its dismay over the prospect of government-led tinkering with the council, analysts agree that the anti-RPP proposals won't become law. And many hoped Wednesday's surprisingly cordial affair marked a permanent change in tone for the debate."It's a relief that both parties have started talking to each other face to face - not through press statements," said Paweł Kielek of ABN AMRO Bank Polska.