Poland's bank scandal turns into political conflict
A controversy over the Polish government's refusal to authorise the merger of Polish branches of two major international banks has escalated into a full blown political conflict. At the centre of the conflict is National Bank of Poland president Leszek Balcerowicz, the architect of the country's market reforms, who has found himself under attack for opposing the government line on the bank merger. The conflict has attracted the attention of the European Union, which is concerned over what it regards as the Polish government's attempts to tamper with the independence of the central bank.
The ruling Law and Justice, supported by its political allies from Selfdefence and the League of Polish Families, is pushing through parliament a motion to set up a House commission to investigate the privatization process of Polish banks, in other words, the decade and a half long history of the banking system in free and democratic Poland.
The actions are conducted on two planes - regarding, what might be called, a current dispute and a wide flung historical inquiry.
The government is trying to put pressure on the Banking Supervisory Council to overrule the Central Bank president's decision. Prime Minister Kazimierz Marcinkiewicz said the State Treasury has petitioned the Council on the matter and is expecting a reply still before its next sitting on the bank merger requested by the Italian UniCredito Group.
"We are confident of assuring that the State Treasury will be a party in this conflict situation and shall be able to present its stand during the Banking Supervisory Council meeting. This is what we are driving at and I'm 100% sure we will succeed."
Prime Minister Marcinkiewicz has invited UniCredito chairman Alessandro Profumo for talks, possibly even on Thursday. What is the aim of the meeting is subject to anyone's speculation.
Craig Otter from the London based Business Monitor International says the attack on Leszek Balcerowicz, the icon of free market transformations in post-Communist Poland, had been anticipated by many, especially that the Central Bank president has always had high marks among politicians of the Civic Platform, the strongest opposition party. Hence, financial circles have not reacted dramatically.
"It's not a new issue. This is something, which first flared up around October last year when the new (Polish) president began to speak about NOT re-appointing Balcerowicz. So, the fact that he's making his tenure more difficult towards the end is a negative thing, but not entirely unexpected. Investors will interpret that as a negative sign, but you're not going to see any great outflows of capital."
Meanwhile, the anti-Balcerowicz campaign has been gaining momentum. It took Law and Justice barely two days to call a parliamentary session devoted solely to procedural matters on green lighting and defining the scope of a House commission to investigate the very roots of the entire Polish banking system. Independent commentator Piotr Mroczyk says the action has purely political connotations.
"Law and Justice suggested on the very outset that they intend to create the Fourth Republic, claiming the Third Republic was corrupted and a lot of deals were made under the table. In this sense, they are consistent with their program. And, of course, when it comes to money that upsets a lot of people. But the way they are going about it is not very convincing. Whether this is urgent is a different story - they had to start from something. One can claim that there were some wrongdoings in the privatization of Polish banks. On the other hand, it is also true that the situation in Polish banks is not bad. All this talk about foreign capital is pretty much obsolete. Capital is capital. The issue is overemphasized on the part of the government. It's all political, consistent with their plan. Whether it's going to work is a different story."
The clash between the government and the Central Bank or the ruling Law and Justice with its political opponents from the Civic Platform, if you prefer, is making waves on the Polish financial market and could be spreading, notes Craig Otter from Business Monitor International.
"The more this government goes on pursuing policies which are obviously not to the liking of the international investment community, then you're going to see further currency weakness."
...something which has already been clearly felt in Warsaw and what can create negative consequences in attracting foreign direct investment.