Poland’s government has been sustaining economic growth by “draining” the country’s reserves and “pumping” borrowed money into the economy, policy maker Zyta Gilowska said in an interview with the magazine “Uwazam, rze.”
The general government deficit, which includes the local and central governments along with the social security and health-care systems, soared to 7.9 percent of gross domestic product last year from 3.9 percent in 2008, while public debt rose to 752.2 billion zloty ($253.5 billion) through the end of June from 570 billion zloty at the end of 2008.
The debt increased as the government “drained” reserves, Gilowska said in an interview with the weekly magazine. This is Poland’s “stimulus, a quiet program of pumping borrowed money into the economy. The government is traipsing blithely through the forest like Little Red Riding Hood.”
Eastern Europe’s export-led recovery from its worst slump since the end of communism two decades ago is in peril as a deepening debt crisis in the euro area and a cut in the U.S. credit rating intensify threats to the global economy.
While Polish GDP grew 4.3 percent in the second quarter from a year earlier, it will slow to 3.5 percent in the next three months Warsaw-based Citi economists Piotr Kalisz and Cezary Chrapek wrote in an e-mailed note on Aug. 31. Consumer spending is also bound to slow further from its 3.5 percent pace in the second quarter as the appreciation of the Swiss franc against the zloty is pushing up repayment costs on loans taken out in the Alpine currency, they said.
Poland’s official reserves fell to $106.7 billion at the end of July from $112 billion in April, according to central bank data released on Aug. 5.
“We’re coping reasonably well with the crisis thanks to the talents, toughness and enterprise of individual Poles. And also thanks to the precautions taken by the previous government,” Gilowska said in the interview. “What’s bad has been the government’s pandering to special interests and the ballooning public debt. We’ve sustained growth by taking bigger and bigger doses of steroids. Now we have a mountain of debt.”
With an election approaching on Oct. 9, Gilowska declared her support last week for Jaroslaw Kaczynski, leader of the largest opposition party Law & Justice, and twin brother of late President Kaczynski, who died in an April 10 plane crash. She was nominated by Lech Kaczynski to the Monetary Council last year and served as Finance Minister in the cabinet led by Jaroslaw Kaczynski in 2007.
According to Poland’s central bank law, members of the council are forbidden from “undertaking public activities.”