Polish Rulers Bury Belka Hatchet on Eve of Central Bank Takeover

  • Government backs veteran central bank chief as EBRD boss
  • Belka exit on good terms would help calm markets, analyst says

The Polish ruling party’s move to end a feud with Marek Belka just as the central bank governor’s term comes to a close may mask less noble ambitions, according to two former Monetary Policy Council members.

Less than two years after calling on Belka to resign in the wake of a scandal over secret recordings, the Law & Justice party threw its weight last week behind his candidacy to replace European Bank of Reconstruction and Development President Suma Chakrabarti. Proposing to send Belka to London clears the path for the party to complete its takeover of the National Bank of Poland while limiting the risk of unsettling financial market investors, who regard the governor as a guarantor of responsible policy.

Marek Belka

Photographer: Piotr Malecki/Bloomberg

“The backing of this government for Belka isn’t love, it’s the voice of reason,” Anna Zielinska-Glebocka, whose six-year term at the MPC ended last month, said by phone on March 4. “It would be going too far, however, to say this gesture shows the government plans to respect the central bank’s autonomy -- I see a lot of uncertainty here.”

A smooth changeover would help Poland’s new government sidestep a potential conflict with its European Union partners, who have criticized it for what they say is an erosion of democracy and a system of checks and balances on its power. Concerns that Law & Justice is looking to undercut the National Bank of Poland’s independence have also surfaced as the party and its ally President Andrzej Duda unilaterally appointed eight of the rate-setting Monetary Policy Council’s 10 members this year.

The ruling party’s backing for Belka is “quite surprising” and amounts to a power grab, even if Belka has little chance of winning the EBRD job, which requires broad international political support, said Andrzej Bratkowski, another MPC member whose term ended this year.

‘Taking Control’

“Taking control of the National Bank of Poland is one of Law & Justice’s strategic goals,” Bratkowski said in a blog published on Thursday.

Law & Justice officials spooked investors in October when Henryk Kowalczyk, who now serves as the prime minister’s economic adviser, suggested amending the central bank law to boost its responsibility for economic growth and possibly pursue a loan program similar to that of the European Central Bank or the Bank of England’s funding-for-growth. Belka fended off what he then called “illegal” calls for his institution to print money.

Since then, Finance Minister Pawel Szalamacha has repeated several times that the government isn’t planning changes in the central bank charter and Belka said as recently as last month that there’s no threat to the “independence” of the monetary authority.

‘Stabilizing Role’

“Belka has definitely played a stabilizing role in the Polish financial system,” Monika Kurtek, an economist at Bank Pocztowy SA in Warsaw, said on Friday. “It’s good for this government to part ways with him on good terms.”

While derivative traders are betting on a cut of about a quarter point in Poland’s main interest rate, now at 1.5 percent, over the next half year, most of the Law & Justice-appointed newcomers to the MPC have spoken against any quick cuts in borrowing costs. Analysts at Bank Zachodni WBK on Monday became the first in 12 months to predict a reduction in the benchmark rate at this week’s meeting.

The favorite to replace Belka is Adam Glapinski, a former MPC member who was appointed to the central bank’s management last week and a friend of Law & Justice leader Jaroslaw Kaczynski.

Secret Tapes

The feud between the ruling party and the governor dates back to well before last year’s election. In 2013, Belka was illegally taped during a dinner conversation with then-Interior Minister Bartlomiej Sienkiewicz, where they discussed potential central bank support to boost the economy and help the government win the ballot. Law & Justice, the leading opposition group when the tapes were published a year later, called on the governor to step down. Belka, 64, said that he did nothing illegal and refused to cut short his tenure at the national bank.

“You can’t find a better candidate for the EBRD than Belka,” Zielinska said. “But how will the central bank function after his departure? We simply don’t know.”

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