FACTBOX-Key political risks to watch in Poland

By Gareth Jones

WARSAW, May 4 (BestGrowthStock) – Poland holds a presidential
election on June 20 whose outcome will help determine the pace
and scale of reforms needed to improve the European Union’s
largest ex-communist economy and to prepare it for euro entry.

The election was moved forward from October after the death
of President Lech Kaczynski, along with 95 others including
Poland’s top military commanders, its central bank governor and
lawmakers, in a plane crash in Russia on April 10.

Bronislaw Komorowski, who took over as acting president in
his capacity as parliamentary speaker, is tipped to win the June
poll as the candidate of Poland’s governing centrists, but the
public mood remains febrile after the unprecedented disaster.

Prime Minister Donald Tusk’s government must also contend
with the turmoil on global financial markets caused by the debt
woes of Greece and some other euro zone nations that could put
renewed pressure on emerging economies such as Poland.

Below is an overview of key political risks facing Poland.

ELECTING A NEW PRESIDENT

The outcome matters. Although most power lies with the prime
minister and his cabinet, the president is not just a ceremonial
figure. He can veto laws and appoint key officials such as the
central bank governor and has a say in foreign policy.

Lech Kaczynski irritated Tusk’s government by blocking
pension, health and media reforms.

Komorowski’s main rival in the election, Kaczynski’s twin
brother Jaroslaw, is leader of the main opposition party, the
right-wing, eurosceptic Law and Justice (PiS). He may benefit
from public sympathy for his family and close the gap.

If elected, Kaczynski would thwart government bills and
oppose its efforts to join the euro, just as his brother did.
Analysts say he may also take a nationalistic stance in foreign
affairs that could harm ties with the EU, Germany and Russia.
Although conservative on moral and social issues, Kaczynski
and PiS tilt to the left on the economy, favouring more state
spending and opposing the government’s privatisation plans.

What to watch:

— Opinion polls. Kaczynski is an experienced and combative
campaigner. Support for him and for PiS has already risen since
the crash, but analysts say Kaczynski will struggle to garner
enough votes outside his core constituency — older, devoutly
Roman Catholic, patriotic-minded Poles — to win the poll. A
surprise win for Kaczynski would be negative for markets as it
would mean resumed conflict between government and president.

— Low turnout. PiS voters are generally easier to mobilise,
so a low turnout is more likely to hurt Komorowski. Tusk’s Civic
Platform (PO) wants to avoid a repeat of the 2005 presidential
race when Lech Kaczynski unexpectedly beat frontrunner Tusk.

— Crash probe. The government is vulnerable to any
perception that it is mishandling the politically sensitive
probe into the crash. But there are risks for Kaczynski too.
Russian and Polish investigations of the cockpit voice recorders
from the doomed plane may confirm media speculation that Lech
Kaczynski himself was involved in the decision to ignore traffic
controllers and to land. This might trigger a backlash against
Jaroslaw Kaczynski and PiS.

ELECTING A NEW PARLIAMENT

Poles are due to elect a new parliament in autumn 2011, but
the election may be brought forward to the spring as Poland has
the EU’s rotating presidency in the second half of next year.

Opinion polls give Tusk’s market-oriented, pro-euro PO a big
lead over PiS, its nearest rival, but the uncertain economic
outlook, especially for the euro zone, Poland’s main trade
partner, could hit the country’s recovery and also PO’s ratings.

PO needs to win, alone or with allies, a two-thirds majority
in the new parliament in order to amend the constitution to pave
the way for eventual euro adoption.

PiS, which is sceptical on the euro, has been blocking any
amendment in this parliament. A strong PO win would be welcomed
by markets as a signal for fresh reforms and for clearing the
way to eventual euro adoption.
What to watch:

— If Komorowski becomes president in June, will the
government start delivering on structural reforms such as
raising the retirement age and ending pension privileges of
farmers and other groups? Until now, it has used the risk of a
presidential veto to avoid tackling these issues, but with a
compliant president it would no longer have that excuse.

— Will PO’s junior coalition partner, the Peasants’ Party
(PSL), quit Tusk’s government early in order to have time to
prepare for the national election and perhaps to distance itself
from possibly unpopular policies? Some analysts think it might,
though PO would be expected to soldier on alone until the poll,
relying on ad hoc support from other parties for specific bills.

Investment Analysis

FACTBOX-Key political risks to watch in Poland