Weak zloty essential for recovery says Hausner

Economy Minister Jerzy Hausner said yesterday that a weaker zloty was key for the country's nascent economic recovery, while further cuts in interest rates were less important. Analysts said Hausner's comments signal the left-wing government, whose own reforms have failed to quickly revive a weak economy, would now try to force down the zloty instead of again turning up the heat on hawkish rate-setters. "I personally don't agree with the course of monetary policy, but my job is not to quarrel with the Monetary Policy Council," Hausner told reporters. "Anyway, interest rates are a smaller problem now. The exchange rate is the key issue." He also said the economic recovery signalled by improving indicators over the last month was not yet self-sustaining. His comments followed a statement by deputy Central Bank governor Andrzej Bratkowski, who said, "the level of interest rates is appropriate and reflects the economic situation." The left-wing government has for months tried to talk down the zloty, which it believes is too strong and hurts exports, but analysts say the exchange rate had already weakened. According to analysts, the recent strengthening of the euro on world currency markets, including gains against the zloty, has already made Polish exports even more competitive. "Some weakening has already taken place and any major fall will have a negative impact: higher foreign debt servicing costs and higher inflation, which could outweigh any positive consequences," said Pekao analyst Jacek Wisniewski. Hausner's comments briefly weakened the zloty by about 0.2%, but weak results of a T-bond tender and the situation in Iraq quickly regained dominance on the market. (Reuters) A.Z./K.Z.