May 14 (Bloomberg) -- Polish Prime Minister Marek Belka may lose a confidence vote in parliament today, increasing chances of early elections in the largest of the new European Union states, investors and economists at Deutsche Bank AG and Citibank said.

Belka's Democratic Left Alliance-led cabinet needs approval from a majority of the deputies present in the 460-seat lower house in Warsaw. The 52-year-old former finance minister, who took over as prime minister 12 days ago, claims the support of about 190 deputies and is in negotiations with other parties. Balloting is scheduled for 9 p.m.

A vote against Belka may lead to elections as soon as August and gains by opposition parties Citizens' Platform, which espouses a smaller role for the state, and Samoobrona, led by Andrzej Lepper, 49, who wants to renegotiate the terms of EU membership and curb the powers of the central bank, polls show. Losing the vote would reduce the government's chances of pushing through spending cuts needed to qualify for euro adoption this decade.

``The market is prepared for a loss and Belka's failure may mean we will soon have Lepper as prime minister, which could be a real drama in the short term,'' said Tomasz Bartminski, who helps manage $546 million for Deutsche Bank AG's DWS fund in Warsaw.

Lepper, a farmer born in Northern Poland, would devalue the zloty, rein in the central bank and renegotiate agreements with the EU, he told Bloomberg in an interview last month.

Belka Speaks

Belka, addressing parliament ahead of the vote, said lawmakers face a choice between early elections and a functioning cabinet that would work to maintain growth, reduce unemployment below 3 million by the end of the year from about 3.26 million and sell off state-owned assets.

``The fate of the country is in your hands,'' Belka said. ``The government has divided its priorities. Tasks must be oriented toward fully benefiting from EU membership. The asset sales must be continued.''

The prime minister asked lawmakers for a ``yearlong contract'' to ``perform the specific program and solve some fundamental issues.'' Elections are supposed to be held in 2005.

``We heard only lies, hypocrisy and cynical promises,'' Lepper told reporters outside the hall after Belka's address.

``Premier Belka hasn't convinced us to support his program so we are going to vote against the cabinet tonight,'' said Janusz Wojciechowski, the leader of the Polish Peasant Party, which was a member of the ruling coalition with 37 deputies until February of 2003.

Fitch Cuts

Ratings company Fitch last week reduced its local currency credit rating for Poland by one level to A, five steps below the highest grade, citing a probable delay in the country's ability to replace the zloty with the euro.

The zloty fell to 4.0368 per dollar at 1:50 p.m. in Warsaw from 4.034 yesterday. The benchmark five-year bond rose, pushing the yield down to 7.678 percent.

If Belka loses, lawmakers will name another candidate within two weeks and try and win parliamentary support. Belka would remain as prime minister until a new cabinet wins approval from parliament.

If needed, a third round would take place, in which President Alexander Kwasniewski, 59, would name a candidate who only needs a simple majority in parliament to win. Kwasniewski said last week he would propose Belka again. If the third round fails, the president must call early elections. Some economists said Kwasniewski's continued backing may rally support for Belka by the end of the constitutional process.

Third Round

``I believe Belka will win in the third round,'' said Maciej Reluga, chief economist at Bank Zachodni WBK SA, the Polish unit of Allied Irish Banks Plc. ``That means political uncertainty persists till the end of June.''

Citizens' Platform, which now holds 56 seats in the parliament and supports accelerating asset sales and cutting state spending, topped a recent poll with support of 26 percent, daily Rzeczpospolita said on Wednesday, citing its own survey. Samoobrona fell as much as 8 points to 21 percent, the paper said. The survey of 1,037 voters was carried out on May 8 and May 9. Both parties have led or been second in opinion polls for months.

Donald Tusk, leader of Citizens Platform, said after Belka's speech his party won't vote to support Belka.

The Democratic Left Alliance, the largest party in the parliament, had between 8 percent support in the survey, up from 7 percent in April. A group of deputies from Belka's party who left at the end of March to form their own party, the Polish Social Democrats, command about 7 percent support.

Belka Supported

As many as 61 percent of Poles support Belka as the prime minister and half of them think he will be a better premier than his predecessor, yesterday's poll by Warsaw-based research company Pentor showed.

The vote is the first attempt to form a new government after Belka, a former finance minister and economic director of Iraq's provisional government, replaced Leszek Miller, on May 2, a day after the country joined the EU along with nine other states.

Miller resigned due to record-low popularity and the split in the ruling party. Many lawmakers, including former member of Miller's party Roman Jagielinski have said they won't support Belka's new government and prefer early elections.

``We haven't changed our mind,'' said Marek Borowski, a chairman of the Social Democracy Party, which split in March from the ruling party. ``Poland needs earlier elections as this cabinet lack the support of majority, anyway, so it's not likely to pass any of the unpopular reforms.''

Absent Lawmakers

Earlier this week, some lawmakers, including 33 members from the Social Democracy Party, have said they may leave the parliament today and reduce the number of votes Belka's government needs to win.

``This problem might be solved by the absence of single members from other parties,'' said Katarzyna Zajdel-Kurowska, an economist at Citibank Handlowy in Warsaw.

Poland agreed on a record-wide budget deficit this year of 45.3 billion zloty, or 5.7 percent of GDP. The central bank expects the public debt may exceed 55 percent of GDP this year, while it's not allowed to be higher than 60 percent of GDP to meet the criteria for the euro adoption.

``The risk of early elections, which Poland is actually facing at the moment, makes the chance for quick euro adoption unlikely,'' said Krzysztof Rybinski, deputy governor of National Bank of Poland at a press conference on Thursday.

The government spending cuts, which haven't been completely approved by parliament, would remove 54 billion zloty ($13 billion) from expenditures and halve the deficit by 2007.

To contact the reporter on this story: Monika Rozlal at mrozlal@bloomberg.net

Last Updated: May 14, 2004 07:56 EDT