Polish Premier Poised to Oust Finance Chief, Boost Own Role

(Bloomberg) -- Poland’s prime minister is poised to dismiss his finance minister and may take a bigger role in running the budget portfolio himself, according to two people familiar with the plans.

Speculation about Finance Minister Teresa Czerwinska’s potential departure has been rife for months, since she clashed with Premier Mateusz Morawiecki over an $11 billion election-year fiscal stimulus package, which she feared could dangerously boost the budget deficit. The zloty weakened on Tuesday after Radio RMF FM first reported that she may leave as soon as this week.

Morawiecki is considering two main options, according to the people, who asked not to be named because they’re not authorized to discuss such information. He’ll either take the role of finance minister himself, as was the briefly case when he became premier in 2017, or promote a current deputy minister, possibly Leszek Skiba, in a caretaker’s role.

A bigger cabinet shuffle is expected as six ministers and four deputy ministers won mandates to become lawmakers in the European Parliament. The ruling party’s landslide victory over a liberal coalition in Sunday’s ballot may reduce pressure for a “bidding contest in social spending” ahead of a general election in the fall, according to analysts at MBank SA.

The Finance Ministry press office said it didn’t have any information about a dismissal, while the government’s spokeswoman wasn’t available for comment. In the furthest-reaching comment on the issue by a ruling party politician, Senate Deputy Speaker Adam Bielan said that “one or two” ministers who didn’t run in the ballot may also be replaced soon.

Consolidating Power

Reports of the finance minister’s looming departure come a day after ruling party leader Jaroslaw Kaczynski, the power behind Poland’s government, publicly thanked Morawiecki for leading a successful election drive with his tireless campaigning. Czerwinska’s ouster, should it indeed happen, would only solidify the premier’s grip on all aspects of economic policy.

He has just won a long-running battle within the cabinet about overhauling the pension system, a plan that was once opposed by the labor minister and criticized by the central bank. By gaining more direct influence over the budget, Morawiecki is also clearing obstacles from another potential increase in welfare spending, should one be required to help boost support for the ruling party ahead of the election due by mid-November.

“The weakness in zloty is due to market concerns that Poland is losing its fiscal anchor,” said Christian Wietoska, a strategist at Deutsche Bank AG in London. Still, the country is relatively well positioned as “contrary to many other emerging market countries, Poland has done its homework on the fiscal side over the past few years.”

Under Czerwinska’s watch, Poland’s budget deficit hit a record low of 0.4% of economic output last year, well below the EU’s 3% cap. It’s set to expand to 2.3% of gross domestic product next year as new welfare and tax cut programs kick in, according to the median forecast from Bloomberg’s survey of analysts. Gazeta Wyborcza daily reported on Tuesday that Czerwinska may be headed for a job at the European Investment Bank.

Since Czerwinska became finance minister in January 2018, Poland’s benchmark local-currency bonds have handed investors a 3.3% loss, counted in dollar terms, in line with a 3.4% drop in the Bloomberg Barclays EM Local Currency Government TR Index.

To contact the reporters on this story: Marek Strzelecki in Warsaw at mstrzelecki1@bloomberg.net;Adrian Krajewski in Warsaw at akrajewski4@bloomberg.net

To contact the editors responsible for this story: Wojciech Moskwa at wmoskwa@bloomberg.net, ;Balazs Penz at bpenz@bloomberg.net, Andrea Dudik

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