Poland Fires Finance Minister, Vows to Stick to His Budget

  • Revamp gives Deputy Premier Morawiecki more economic control
  • Draft 2017 budget assumes deficit below EU’s 3% of GDP cap

Polish Premier Beata Szydlo fired Finance Minister Pawel Szalamacha while promising to stick to his budget plan to keep the deficit within European Union guidelines.

The change, signaled by Szydlo last week, consolidates economic policy in the hands of Deputy Prime Minister Mateusz Morawiecki, who’ll take over the finance portfolio and oversight of all economic issues. The cabinet approved Szalamacha’s 2017 draft budget, which envisages 3.6 percent economic growth and a fiscal shortfall of 2.9 percent of gross domestic product. The bill will now go to parliament.

The revamp in Poland’s 10-month-old government, which has ramped up social spending and raised taxes on banks, is aimed at giving Morawiecki more control over the economy so he can implement his 1 trillion-zloty ($261 billion) multi-year investment program. Morawiecki, a former banker, is an advocate of “economic patriotism” and seeks to reduce the role of foreign capital in Poland’s $475 billion economy, especially in the financial industry.

“We are carrying out a very ambitious development program,” Szydlo told reporters in Warsaw. “The time has come to start implementing concrete solutions.”

Labor Costs

Szalamacha, who failed to win a parliamentary seat in last year’s election, had little clout within the ruling Law & Justice party. While his initiatives are bearing the first fruit in limiting value-added tax fraud, his track record is mixed as the European Commission forced him to suspend a new levy on retailers this month.

Morawiecki, on the other hand, has been repeatedly endorsed by Jaroslaw Kaczynski, Law & Justice’s influential leader. The former chief executive officer of Bank Zachodni WBK SA, controlled by Banco Santander SA, is seeking to remake Poland’s economy into one based more on innovation and domestic capital, instead of cheaper labor costs than in western EU countries.

“It’s one technocrat being replaced by another, with Morawiecki gaining strength but also responsibility,” Rafal Benecki, chief economist at ING Bank Slaski SA in Warsaw, said by phone. “Markets shouldn’t react significantly in the short-term as both have pledged to keep the budget deficit in check.”

The zloty was little moved by the cabinet change, trading 0.3 percent weaker at 4.2956 against the euro at 5:50 p.m. Warsaw’s main stock index gained 0.1 percent, while the yield on Poland’s benchmark 10-year bond increased for a fourth day, ending at 2.86 percent.

Szydlo said Morawiecki will present the details of next year’s draft budget “soon.” The fiscal plan’s macro-economic assumptions remained unchanged, she said.

— With assistance by Adrian Krajewski, and Piotr Bujnicki

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