The Polish zloty slipped by 0.5% to the
euro on Tuesday on fears that president
Lech Kaczynski might decide to dissolve the
parliament on Ferbruary the 1st i.e. earlier
than the widely accepted Ferbruary 19th
budget deadline. According to the Polish
constitution the Sejm has four months to
pass the budget with time counting from the
moment the initial draft is submitted by the
government to the parliament. Otherwise the
President has the right to call for early
elections – an option particularly appealing
to PiS who’s strategy we believe is aimed at
keeping the smaller parliamentary groups in
check ahead of the budget vote later this
month. The question is whether the time of
four months starts counting from 1-st of
October – i.e. the time of submitting the
budget by the Belka’s government or from
the term of submission of the budget bill to
the newly elected parliament. After a
meeting with the president liberals from PO
have suggested that Kaczynski’s mind is
already made up and that he will in fact
dissolve the Sejm on February 1st and
according to press speculations PiS has
already begun preparations for the
upcoming election campaign. The fact is, the
former administration led by Marek Belka did
send the preliminary budget act to the Sejm
on September 30th while the current
government merely resent the act (after
applying some minor changes) three weeks
later, on the October 19th. Constitutional
lawyers are divided on whether this brings
the constitutional budget deadline forward in
time or not, while the president himself is yet
to take a stance on the issue. Currently no
one can be sure what the president will do. It
must be said that the parliament would
almost certainly fail to deliver the budget in
time if the earlier cut-off date were to be
used, which gives PiS a significant edge
over the populists right now. All in all this
only adds to the vagueness of the political
outlook in the coming weeks and is rather
discomforting for markets in the short term
perspective. Nevertheless we think that PiS
will need more time to prepare for earlier
elections and hence this party will not push
for them . Moreover, there is high risk for PiS
that popularity of center-wing parties (SLD,
SdPL and Democrats.pl) may rebound as
these group may form a coalition jointly lead
by the former president Aleksander
Kwasniewski, for whom support remains still
strong in the society.
As the coalition talks between populist Self-
Defence and farmers’ PSL on the one hand
and PiS on the other hand have been
rescheduled for today from yesterday, they
will be in the center of market attention. We
don’t expect these talks to become fruitful
and such a coalition is from our perspective
unlikely. It should be stressed however that
both Self-Defence and PSL may play with
this information in medias, what in turn may
frighten some investors.
(CSOB - Investment research)