Polish Finance Minister Promoted to PM in Government Shakeup

(Bloomberg) -- With Poland on the road to becoming an illiberal state, the ruling Law & Justice party is turning to a western-educated banker to sell the vision to its allies.

Deputy Prime Minister Mateusz Morawiecki, who’s been in charge of economic policy, was nominated to become premier and charged with keeping the engines of growth humming while reassuring foreign investors that the rejection of European Union demands to meet democratic norms doesn’t endanger their interests.

Polish Finance Minister Promoted to PM in Government Shakeup

The former head of Poland’s third-biggest bank takes over from Beata Szydlo, who stepped down halfway through the government’s four-year term. The switch coincides with the culmination of Law & Justice’s months-long legislative battle to give politicians more control over the judiciary, including the Supreme Court, which has triggered nationwide protests and an unprecedented threat of sanctions from the leaders of EU states who have warned the government may be eroding the nation’s democracy.

While Law & Justice explained the change of premier by the “new situation at home and abroad,” party backbencher Tomasz Latos tweeted that the reshuffle effectively “hid” the court overhauls, which will be voted on by the lower house of parliament on Friday.

Responding to the comment, Jacek Sasin, one of the party’s most powerful lawmakers, told Radio Zet on Friday: “Nobody in their right mind would believe that Law & Justice is undertaking fundamental changes to cover up discussions over court overhauls.”

Morawiecki, 49, is the architect of an economic program that raised welfare spending for families with children, boosting Law & Justice’s support among voters in the country of 38 million people. He has also helped carve out a bigger role for the government in business, central to his party’s drive to centralize power and steer Poland away from a model based on foreign investment and EU integration that dominated its post-Communist transformation.

Szydlo will become a deputy prime minister, while other government changes are set to take place in January, state news service PAP reported late on Thursday, without citing anyone.

Stable Zloty

The zloty was little changed at 4.2038 per euro as of 10:17 a.m. in Warsaw, keeping its annual advance at 4.7 percent against the euro and 17 percent to the dollar, the best performances among emerging-market currencies following the Czech koruna. Warsaw’s benchmark WIG20 Index advanced 0.8 percent on Thursday.

Click here to read about the lure of low-volatility East European currencies

The government didn’t immediately make clear who would become finance minister under Morawiecki, or whether he would continue to hold that portfolio. The former chief executive officer of Bank Zachodni WBK SA -- he headed the lender controlled by Banco Santander SA from 2007 to 2015 -- Morawiecki also narrowed the budget deficit, an important benchmark for foreign institutional investors who hold 202 billion zloty ($57 billion) of the government’s local-currency bonds.

Polish Finance Minister Promoted to PM in Government Shakeup

While fluent in English and a polished veteran of foreign-investor meetings in London and New York, at home Morawiecki is a vocal cheerleader for the main source of party’s clash with the EU. He has defended the court overhaul as addressing a “widespread pathology in the judiciary” and said it’s no business of other countries to decide how a nation imposes the rule of law.

The EU’s executive, the European Commission, disagrees. It’s conducting the first-ever probe into whether a member is upholding the bloc’s democratic values. Leaders including French President Emmanuel Macron and German Chancellor Angela Merkel have suggested that Poland may face penalties for the erosion of democracy, including possible curbs to the tens of billions of euros of development aid that have driven the country’s economic growth for more than a decade.

“A personnel change at the helm of the government is a chance for a new opening in relations between Poland and the EU,” said Olgierd Annusewicz, a political scientist at Warsaw University. However, Law & Justice isn’t likely to change course on its judicial overhaul, keeping relations tense, he said.

Morawiecki’s appointment may help improve communications with Brussels, Law & Justice’s Sasin said. Asked why Jaroslaw Kaczynski, who founded the ruling party and was the force behind Szydlo’s cabinet, wasn’t picked to lead the government, Sasin said that the ruling party’s intention was “to focus on the economy.”

Hungarian Model

Law & Justice has followed in the footsteps of Hungarian Prime Minister Viktor Orban, who has pledged to transform his country, which is also an EU member, into an “illiberal state” modeled on Russia and Turkey.

So far, the Polish government’s clash with the EU hasn’t hurt its support among voters, with a survey by the pollster IBRiS showing its popularity at 47 percent at the end of November, compared with 37.6 percent in the 2015 election. Morawiecki, who studied in Switzerland, Germany and the U.S, now has the challenge of maintaining that support as the commission and EU states draw closer to a decision on how to handle, and potentially punish, wayward members.

“Most of Law & Justice’s agenda has been implemented -- the party needs a new momentum, or risks start loosing support,” said Piotr Buras, a political scientist from the European Council on Foreign Relations, a pro-EU think-tank. “Morawiecki’s modernization agenda may help protect support, but it won’t alter Poland’s institutional course, which is at the center of the conflict with the EU.”

The leadership change still requires the formal resignation by Szydlo and her cabinet, Morawiecki’s appointment by President Andrzej Duda and a vote of confidence for the new administration in parliament. That vote may not happen before the new year.

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