Late in the evening the long awaited news on the coalition agreement hit the headlines – Jaroslaw Kaczynski decided to reappoint Self-Defense’s Andrzej Lepper to the deputy PM and agriculture minister post and hence revive the conservative-populist government deal after a month-long break. Interestingly the PiS-SO-LPR coalition will not have the majority of seats in the Sejm, after several breakaways left the Self-Defense recently, taking the vote count down to 230 (of 460 seats). In this case the PiS will have to resort to the parliamentary plankton for support (further coalition negotiations will be held to discuss this matter).
Our view: The two dissolution votes planned for today should be an acid test for the coalition in the current set up - one which it should easily pass given the fact that a 2/3 majority is needed to shorten the parliament term. Markets have had the chance to price in the PiS-SO-LPR deal already, but with the remaining political uncertainty wiped away the zloty should react positively at first to the perspective of short term political stability. Nonetheless as we have stressed before apart from being the most likely scenario for some time now, the revival of the government deal is not as market friendly in the medium and long term perspective, given the frailty of the coalition and its “social” orientation.