Komorowski Poised to Win Polish Presidency, Easing Path to Deficit Cuts

Bronislaw Komorowski of the ruling Civic Platform party won Poland’s presidential election, clearing the way for government plans to cut the budget deficit and adopt the euro in 2015.

Komorowski, acting president and speaker of parliament, got 53 percent of the vote to Jaroslaw Kaczynski’s 47 percent, according to the State Election Committee in Warsaw. The zloty rose 0.8 percent against the euro at 5 p.m., the biggest gain among 26 emerging market currencies tracked by Bloomberg.

The victory by Komorowski, 58, gives Civic Platform control of the presidency and cabinet, ending policy divisions that arose under the late President Lech Kaczynski, who died in an April 10 plane crash. That may help Prime Minister Donald Tusk push through spending cuts as he seeks to trim a budget deficit that widened to 7.1 percent of gross domestic product last year, more than twice the European Union limit.

“It’s the best outcome for the financial markets,” said Nigel Rendell, senior emerging-market strategist at RBC Capital in London. “A president from the same party as the government gives the best chance for passing legislation.”

The Civic Platform-led government has proposed limiting increases in discretionary spending to no more than 1 percent above inflation, saving an estimated 9 billion zloty ($2.7 billion) a year by 2013. That will help narrow the deficit to less than the EU limit of 3 percent of GDP within three years, the government estimates.

Komorowski said on June 14 that Poland needs a target date for joining the euro to “create pressure” for meeting the fiscal requirements of membership. Tusk’s government has said 2015 is a realistic date. Kaczynski, leader of Poland’s biggest opposition party, Law & Justice, opposes setting a deadline.

Party Clashes

Civic Platform and Law & Justice have clashed for five years. Lech Kaczynski unexpectedly won the presidency over Tusk in 2005. Two years later, Tusk’s party took control of parliament after Law & Justice lost its mandate. Since then, Civic Platform has said its efforts to modernize Poland were blocked by Lech Kaczynski.

The president represents Poland abroad, is head of the army and can veto legislation. Overriding a veto requires a three- fifths majority in parliament.

Komorowski’s victory is “good news for the markets and a serious challenge for the government, which from now on may no longer use those excuses about an unfriendly president,” said Lars Christensen, chief emerging-markets analyst at Danske Bank A/S in Copenhagen. “The government needs to go forward with fiscal reforms and the market will want to see them pretty soon. The 2011 budget plan will be the first test.”

Plane Crash

Lech Kaczynski died when a plane carrying many of Poland’s top civilian and military officials crashed outside Smolensk, Russia, killing all 96 people on board. Kaczynski was on his way to honor the 22,000 Polish prisoners of war killed by Soviet secret police in the Katyn forest and other sites in 1940.

Kaczynski, 61, ran stronger than expected. The median of 17 opinion polls conducted in the three weeks before the first round of voting on June 20 forecast Komorowski would win by 11 percentage points.

The voting breakdown shows Kaczynski won 59 percent of the rural vote, while Komorowski took 59 percent in the cities and 64 percent in metropolitan areas with more than 500,000 inhabitants.

Kaczynski congratulated Komorowski on his victory last night from his party’s election headquarters in Warsaw.

“We must continue changing Poland,” Kaczynski said. “The huge support we’ve gathered will be needed in the forthcoming local and general elections.”

‘Fair to Every Pole’

Law & Justice last year called for increased spending to offset the impact of the global economic crisis. Kaczynski has campaigned to raise benefits for older people and boost the minimum salary.

“Poland has to be fair to every Pole,” Kaczynski said on June 24 in the southeastern city of Rzeszow. Civic Platform intends to “make richer regions that are already rich.”

Uniting the presidency and prime minister’s office under Civic Platform may not guarantee deficit cuts because lawmakers may balk at making difficult decisions before parliamentary elections next year, Michal Dybula, an economist at BNP Paribas in Warsaw, said before the runoff.

Almost 75 percent of Poland’s budget goes to non- discretionary spending, including subsidies for local government, social insurance and debt service, which requires special legislation to alter.

‘Common Sense’ Needed

In an interview on July 2, central bank Governor Marek Belka said the government must ignore election-year pressures and focus on controlling the budget deficit, even though its finances are stronger than many European nations.

Failure to do so may lead investors to shun Polish bonds because of concern about Europe’s sovereign debt crisis, said Belka, 58, who headed the International Monetary Fund’s European department until he became governor last month.

“Here at the central bank we are not accepting the notion that if an election is coming, then nothing can be done,” he said. “We are not in the situation of a country that is close to default. We simply need some common sense and a little bit of discipline.”

To contact the reporter on this story: Dorota Bartyzel in Warsaw at dbartyzel@bloomberg.net;

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