July 22 (Bloomberg) -- Poland plans to sell shares in companies including KGHM Polska Miedz SA to shore up public finances, reversing a plan to keep its stake in the copper producer and drawing a strike threat from its largest unions.

The country may sell its entire 41 percent stake in KGHM, the copper group with the largest European mine output, by the end of 2010, Maciej Wewior, a spokesman for the Treasury Ministry in Warsaw, said by phone today. The government will also sell shares in Grupa Lotos SA, the country’s second-largest oil refiner, keeping a majority stake, he said.

KGHM shares dropped by as much as 6.4 percent after the announcement, and closed at 77.8 zloty, a loss of 2.8 percent, in Warsaw. Lotos dipped by as much as 4 percent and the benchmark WIG20 Index closed 1.8 percent lower.

Earlier the Treasury Ministry had estimated it would raise 12 billion zloty ($4 billion) in 2010, to help limit borrowing and finance the widening general government budget deficit. The European Commission forecasts that the gap will reach 6 percent of gross domestic product this year, twice as wide as the bloc’s limit, and has called on the country to narrow it.

“This is sabotage,” Ryszard Zbrzyzny, leader of the Zwiazek Zawodowy Pracownikow Przemyslu Miedziowego, KGHM’s second-biggest labor union, said by phone today, adding that he would “argue for a strike” if the plan proceeds. “Selling KGHM is selling a national treasure.”

Solidarity Strike Threat

Solidarity would also seek a strike, Jozef Czyczerski, leader of the largest union at KGHM, told the TVN CNBC Biznes television channel.

When the government took office in 2007, Prime Minister Donald Tusk told parliament his cabinet would keep KGHM.

Artur Iwanski, an analyst at Erste Securities in Warsaw, said workers’ response to an attempted sale would probably resemble a riot in Warsaw yesterday that left 22 people in jail and six police officers in hospitals. A 32-day strike at KGHM led Poland to abandon a sale plan in 1992.

“If the government decides to sell its whole stake, buyers will be lining up,” Iwanski said by phone.

“We wanted to show that selling KGHM is among the options,” Treasury Minister Aleksander Grad said at a news conference in Warsaw today. “It’s up to the full cabinet to decide how much of the company it wants to sell.”

The average yield on Poland’s five-year Treasury bond rose three basis points to 5.53 percent after the Treasury Ministry announced the expanded plan, which could cut 13 billion zloty from public borrowing next year.

‘Skeptical’ Market

“The market’s skeptical that the government will meet its privatization plan on the scale announced today,” said Maciej Slomka, head of fixed-income trading at Bank Pekao SA in Warsaw.

In a separate transaction, Poland will hold talks with Deutsche Boerse AG, London Stock Exchange Group Plc, Nasdaq OMX Group Inc. and NYSE Euronext about the sale of the Warsaw Stock Exchange, central Europe’s biggest equity market by number of traded companies, the Treasury Ministry said today.

In addition to KGHM and Lotos, the government reiterated its plans to sell stakes in power group Enea SA and chemical producers Ciech SA, Zaklady Azotowe Pulawy SA and Zaklady Chemiczne Police SA.

To contact the reporter on this story: David McQuaid in Warsaw at dmcquaid1@bloomberg.net Nathaniel Espino in Warsaw nespino@bloomberg.net

Last Updated: July 22, 2009 11:01 EDT