Bloomberg News

Tusk Wins Polish Confidence Vote After Pledge to Spur GDP

October 12, 2012

Polish Prime Minister Donald Tusk, facing down a surging political opposition, won a parliamentary confidence vote after pledging $95 billion in investments to spur growth in the European Union’s biggest eastern economy.

Deputies in Warsaw voted 233 to 219 in the 460-seat lower house to approve the confidence motion submitted by Tusk, the first premier to serve a second term since communism ended in 1989. The win paves the way for Tusk to carry through with his vow to spark Poland’s expansion, which slowed in the second quarter to the weakest pace since 2009.

“Our goal is to protect growth so that not even one job is lost,” Tusk said in a speech today in parliament marking his reelection’s anniversary. “We will explore all ways to support the economy and investment financing. No plan will undermine our fiscal discipline.”

Two weeks after tens of thousands of Poles rallied in Warsaw for an end to his government, Tusk used his speech to outline a plan to pump 300 billion zloty ($95 billion) into infrastructure and other investments through 2020. It came as the opposition Law & Justice party grabbed the outright lead over Tusk’s Civic Platform for the first time in seven years, a TNS Polska poll showed on Oct. 5.

Early Elections

Tusk’s political opponents have called for early elections, three years before the next general polls are due. While growth is weakening, the economy is also enjoying its best bond rally in five years, even after Tusk eased his deficit goals to counter the slowdown. Poland’s 10-year bond yield was near a seven-year low of 4.57 percent today.

The zloty depreciated 0.2 percent to 4.0999 per euro by 5:08 p.m. in Warsaw, extending this week’s loss to 0.4 percent. That is the third-steepest drop among more than 20 emerging- market currencies tracked by Bloomberg after the Indian rupee and the Czech koruna.

While foreign investors show trust in the country, Poles are increasingly suffering. Unemployment at 12.4 percent and bankruptcies at a seven-year high have given an opening to the political opposition.

Warsaw Rally

Jaroslaw Kaczynski, the leader of Law & Justice, led a rally of as many as 100,000 people in central Warsaw on Sept. 29, protesting rising living costs, joblessness and budget cuts. The party also said it would submit a no-confidence motion against the government and named sociology professor Piotr Glinski as its candidate for prime minister.

“Unemployment is rising, companies are going bankrupt, Poles are emigrating, and public institutions and services are also in a crisis,” Glinski said on Oct. 1. “We keep hearing about the crisis, but nothing is being done about it.”

While Poland’s economy expanded 4.3 percent last year and was alone in the 27-nation EU to avoid a recession in 2009, its ability to withstand the debt crisis gripping much of Europe is waning. Gross domestic product grew 2.4 percent in the second quarter from a year earlier, the slowest since 2009. According to revised government forecasts, the pace of expansion will ease to 2.2 percent in 2013, almost half last year’s rate.

Deficit Goal

On Sept. 5, the government said it will overshoot its deficit target, raising its estimate for this year’s shortfall by half a percentage point to 3.5 percent of GDP and to 3 percent from 2.2 percent for 2013.

The changes reflect “a more realistic forecast of the economy rather than any weakening in the Polish government’s fiscal prudence,” Fitch Ratings said on Oct. 3.

In his speech, Tusk said the government will set up an investment vehicle run by Bank Gospodarstwa Krajowego, a state- owned bank, to receive shares in the biggest state companies and spend 90 billion zloty in investments in the next six years. He pledged 50 billion zloty on developing shale-gas deposits and 60 billion zloty on energy and power, while about 100 billion zloty will go to army projects. Road and railway development will also continue.

No Debt

The plan won’t increase public debt, Finance Minister Jacek Rostowski told lawmakers. “Economic growth without financial stability” is “the path Greece chose,” he said.

Kaczynski has argued that Poland must ramp up stimulus and refrain from state-asset sales. He’s also stirred passions by slamming Tusk for allowing Russia to lead a probe into the 2010 plane crash that killed his twin, former President Lech Kaczynski, and 94 others.

Support for Law & Justice rose to 39 percent compared with 33 percent for Civic Platform, according to the TNS poll of 1,000 adults Oct. 3-5. It was the first such lead since general elections in 2005. No margin of error was given.

Not Popular

Tusk, 55, acknowledges some policies outlined in his inaugural speech last year haven’t been popular. He raised the retirement age to 67 from 60 for women and from 65 for men, and cut state contributions to pension funds. He also increased disability taxes paid by employers, levies on copper and silver extraction and excluded affluent families from some tax breaks.

“Poland needs a revolution to help families,” Tusk said today, promising to extend parental leave to one year from the current six months. He also said he’ll block any attempt to raise labor costs.

Kaczynski is now seeking support from opposition groups to dismiss the government, an effort that will require overturning Tusk’s three-vote majority.

“Poles are waking up and beginning to change their mind,” Kaczynski said at a press conference in Bialystok, eastern Poland, on Oct. 6. “If the first no-confidence motion is rejected, we’ll submit another one and another until people realize we can’t wait three years to change the government.”

To contact the reporters on this story: Dorota Bartyzel in Warsaw at dbartyzel@bloomberg.net;

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


Later, Baby
LIMITED-TIME OFFER SUBSCRIBE NOW

(enter your email)
(enter up to 5 email addresses, separated by commas)

Max 250 characters

 
blog comments powered by Disqus