Bloomberg News

Poland’s Tusk Leads as Purses Swell in Only Recession Dodger

September 14, 2011

(Adds zloty in eighth, comment in 19th paragraph.)

Sept. 14 (Bloomberg) -- Poland’s ruling Civic Platform is favored to win a second term as voters choose rising prosperity over policies and reward the only European Union government to dodge a recession amid the 2009 global financial collapse.

Civic Platform, led by Prime Minister Donald Tusk, has remained the most popular party since it won elections in 2007, with polls suggesting a win over its nearest rival. Victory at the Oct. 9 vote would make it the first party since communism fell to gain a second stint in office.

“If you look at the moving sands of the Polish political scene since 1989, a victory for the current governing party would show a continuity that hasn’t been seen since the beginning of the transformation,” said Andrew Michta, head of the German Marshall Fund’s Warsaw office. A Tusk win “would mean people were responding to how full their purses are rather than reacting to ideological issues.”

Civic Platform may have done enough to win the vote after living standards improved during its first term. While the party’s lead has narrowed and analysts such as Krzysztof Bobinski, president of the Unia & Polska research foundation, say Tusk’s policies lack substance and ambition, growth remains more than twice that of the euro area as the region battles a sovereign-debt crisis.

‘Pretty Good Shape’

The EU’s seventh-biggest economy grew 4.4 percent a year in 2007 to 2010, compared with 0.1 percent in the EU. Average wages have increased about 18 percent since Tusk took power four years ago, with companies such as Credit Suisse Group AG and Dell Inc. opening offices. Ferrari opened its first showroom in Warsaw last year.

“The Polish economy really is in pretty good shape -- that’s not just some kind of government propaganda,” said Maciej Krzak, head of macroeconomics at the Warsaw-based Center for Social and Economic Research. “Poland can aspire, with time, to become one of the EU’s largest economies.”

Warsaw’s benchmark WIG20 stock index rose 14 percent last year, outperforming the Stoxx Europe 600, which advanced 8.6 percent. The extra yield investors request to hold Polish rather than German five-year bonds was 376 basis points yesterday, compared with 558 basis points for Hungarian bonds, according to Bloomberg data.

The zloty fell to 4.3457 against the euro at 11:37 a.m. in Warsaw from 4.3295 at yesterday’s close. The yield on the five- year bond maturing in April 2016 rose to 5.095 from 5.018 yesterday.

Civic Platform Leads

Civic Platform, which controls 208 of the 460 seats in the lower chamber of parliament, had 35 percent backing in a Sept. 11 poll by Millward Brown SMG/KRC for private broadcaster TVN24, down from 39 percent Aug. 3. That compares with an unchanged 29 percent for the biggest opposition party, Law & Justice.

Tusk’s junior coalition partner, the Peasants’ Party, has 7 percent, according to the same poll, after backing hovered around the 5 percent threshold for representation for much of the year.

Civic Platform’s support may dwindle before the vote, according to Andrzej Rychard, sociology professor at the Polish Academy of Sciences in Warsaw.

“The competition is going to be tough for Tusk, whatever the polls say,” Rychard said.

The party has been criticized for lacking ambition in its policies, preferring to present itself as a safe pair of hands to guide Poland through Europe’s debt crisis.

“Civic Platform has become increasingly content-free,” said Bobinski, from Warsaw-based Unia & Polska. “Its leaders have realized that if they put forward ideas they might make enemies, so they mumble and promise to work hard and get less and less specific.”

Kaczynski Challenges

The main challenge to Tusk, 54, will come from ex-Prime Minister Jaroslaw Kaczynski, whose policies as leader of Law & Justice include delaying a plan to sell government assets. Kaczynski holds Turk partly culpable for the death of his twin brother, former president Lech Kaczynski, who died in a plane crash in Russia last year along with his wife and 94 others.

Voter turnout may help decide to the election, according to Michta from the German Marshall Fund. Almost 54 percent of eligible Poles voted in 2007’s parliamentary elections, while less than half participated in the three preceding elections.

Voting Behavior

“The voting behavior of Poles in their twenties is the big unknown,” Michta said. “Since most of them are probably Civic Platform voters, the final result could be a close call if they stay at home.”

Whatever its composition, the new government will be faced with a budget deficit that has quadrupled since 2007, surpassing the EU limit of 3 percent of GDP for a third year in 2010 to reach 7.9 percent as tax revenue fell and companies laid off staff and delayed or canceled investment.

Poland is unlikely to repeat its “stellar outperformance” from 2009 as it no longer has the leeway to loosen fiscal policy, a report by Citigroup Inc. published today said. The general government deficit may be as high as 4.5 percent of GDP next year, wider than the 3 percent forecast by the Finance Ministry, Citigroup said.

‘How Serious?’

“The election is important to us because we’ll see afterwards if and how serious the new government is about implementing public finance consolidation,” Piotr Kowalski, head of Fitch Ratings’s Polish unit, said in a Sept. 7 interview.

While challenges remain -- GDP per capita was 62 percent of the EU average in 2010, below other former Soviet satellites such as Slovakia and Hungary, according to Eurostat -- the achievements of the current administration’s initial four-year term may allow it to stay in power.

“It does look as though Tusk is going to win,” Pawel Swieboda, director of the Center for European Strategy, said by phone from Warsaw. The prime minister had “a big portion of luck in governing through a period viewed by the public as a prosperous one.”

--Editors: Andrew Langley, Balazs Penz

To contact the reporter on this story: Katya Andrusz at kandrusz@bloomberg.net

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


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