Poland’s stock market has slumped to its lowest level in six years as protests over the new national conservative government spread to 20 Polish cities yesterday. A growing row over Poland’s constitutional court has sparked two successive weeks of street protest and seen support for the ruling Law and Justice (PiS) party slump 15 points to just 27 per cent since taking office just last month.
The mood of uncertainty, with a weakened zloty and a 16 per cent fall in the blue-chip WIG20 share index, has been compounded by uncertainty over the new administration’s financing of election promises.
Though socially conservative, PiS won an absolute majority in October’s general election with left-wing economic promises, including a boost in family spending and a reduced retirement age. To finance that plan, PiS has confirmed it will levy additional taxes on banks and on large retailers – largely owned by foreign investors.
“The message for foreign investors is that they are welcome,” said Poland’s new finance minister Pawel Szalamacha to Bloomberg. “We’re committed to sound public finances, but we expect investors to understand that we have an ambitious family-support agenda, which we will implement.”
State machinery
The government has started reshaping management at powerful state-owned firms that dominate the economy and has plans for losses at Poland’s coal mines, still a big employer, to be subsidised by other energy sector companies.
Investors are also worried the government’s search for cash will see it conclude a plundering of pension fund assets started by the previous, liberal government.
On Wednesday, Warsaw confirmed that, despite additional bank and supermarket levy income, spending plans will require a budget deficit hike of up to 1.5 billion zloty (€350 million) next year. Further deficits are possible as 2016 tax estimates are based on a growth forecast of 3.8 per cent, higher than the central bank’s prediction.
Last week, central bank governor Marek Belka warned the new government’s plans would place too many burdens simultaneously on the banking sector. Particularly problematic, he said, were plans to introduce a bank levy and to reverse Swiss franc-denominated mortgages sold to Poles but increasingly unaffordable due to exchange rate shifts.
Mr Belka warned that a rapid, forced mortgage reversal would cause a “serious crisis” in Poland’s banks.
Dariusz Górski, head of equity research at Bank Zachodni WBK Brokerage, said the new government’s inexperience had compounded the negative effects of a series of unco-ordinated announcements.
“These guys are new, they may not know exactly what they are doing,” he said. “The overall climate is not very supportive and all these different pieces are being put together in a puzzle that does not create a good image.”
Negative outlook
The negative outlook should not be overestimated, he said, but conceded that matters were not helped by talk of an “Orbanisation” of Polish life and economy under PiS.
Poland’s emotional standoff began when the PiS administration set aside five judicial appointments made by the last government to the constitutional court and made five new appointments. The court has ruled that this action was illegal but the PiS has refused to budge.
The newly formed Committee for the Defence of Democracy (KOD) says PiS interference with Poland’s highest judicial court undermines the country’s 26-year-old democracy.
“We have freedom and we will fight for it and strive for it,” said KOD head Mateusz Kijowski at Warsaw protests.
On television, prime minister Beatz Szydlo dismissed claims that her government was undermining Polish democracy.
“I would like those who demonstrate to think through if their slogans, about protecting democracy and freedom, match the reality in which we all live,” she said.
