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Polish Central Bank May Buy Government Debt, Rostowski Says

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Jan. 2 (Bloomberg) -- Poland’s central bank may buy government bonds as a “short-term measure” if an economic crisis boosts yields, Finance Minister Jacek Rostowski said.

“There’s no ban on the central bank buying government bonds on the secondary market,” Rostowski said in an interview with the Polish edition of Newsweek, published today. “If yields increased as a result of panic or contagion from an external virus, and not poor public-finance management, it might be expedient for the central bank to intervene.”

The central bank’s primary goal is price stability and it “can’t replace the government, particularly on issues connected with public debt management,” the Warsaw-based Narodowy Bank Polski said in a statement today. Any public speculation on the central bank buying bonds may trigger an “unwanted perception” by financial markets, it said.

“In the worst-case scenario, this could lead to uncertainty resulting in an increase in the volatility of government bond prices and the zloty exchange rate,” according to the central bank.

Economic Growth

Poland’s economy may grow between 3 percent and 4 percent, even if the euro area has a “lost decade” of zero economic growth, as long as the currency bloc doesn’t fall apart, Rostowski said in the interview.

European Union treaties need to be changed to allow the European Central Bank to buy bonds of EU members whose ability to finance debt is threatened by financial market contagion, rather than fiscal mismanagement, Rostowski said, according to the magazine.

“The truth about this crisis is that Italy, Spain, France and Germany are all solvent at 3 percent yields, while none of them -- not even Germany -- are solvent at 8 percent,” Rostowski said, according to Newsweek.

To contact the reporters on this story: Katya Andrusz in Warsaw at kandrusz@bloomberg.net; David McQuaid in Warsaw at dmcquaid1@bloomberg.net

To contact the editor responsible for this story: Balazs Penz at bpenz@bloomberg.net

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