Polish finance ministry expresses surprise over dismissal report
Poland's Finance Ministry said it was "very surprised" with a newspaper report that its chief Pawel Szalamacha may be on his way out following clashes over plans to impose a tax on retailers, family benefits and a proposal to convert foreign-currency mortgages. Szalamacha may step down or be dismissed, with his negative opinion on the mortgage bill being a possible trigger, Fakt newspaper reported on Thursday, citing government members it didn't name. The article comes three days after Prime minister Beata Szydlo publicly backed her minister, calling him "one the most" important members of her threemonth old cabinet.
"We don't have any such signals from the Prime Minister's office," Alina Urban, spokeswoman for Finance Minister Pawel Szalamacha, said by phone. Fakt report is "very surprising" as the minister is "busy" working on domestic issues as well as Poland's convergence plans that needs to be filed with the European Commission later this year. The report comes as Poland's new government battles to convince investors about the sustainability of its budget plans following a surprise rating downgrade from Standard & Poor's last month. Szalamacha is under fire from the country's retailers' associations, which accused the ruling party of backsliding on its pre-election promise to help local business by seeking to impose new levies on them.
Szalamacha's potential departure could unsettle markets as he's "been cautious in keeping the deficit under 3 percent" of gross domestic product, said Jakub Rybacki, an economist at ING Groep NV in Warsaw. "If he were to go and we got some- one who is less wedded to the the idea of keeping the deficit in check, bond yields could go higher." Poland's Law & Justice party -- which won both presidential and parliamentary elections last year -- is on a collision course with financial markets and the domestic banking industry. On Jan 19, Polish central bank governor Marek Belka dismissed as "pure evil" a proposal by the president to convert some foreign-denominated mortgages into zloty. That came four days after Standard & Poor's downgraded its rating on Poland for the first time ever, cutting to the third-lowest investment level.
Poland's zloty is emerging Europe's worst-performing currency this year after Russia's ruble. It fell 0.6 percent to 4.4389 to the euro at 9:32 a.m. in Warsaw. The yield on the government's benchmark 10year local-currency bonds increased 2 basis points to 3.14 percent.