Snap Analysis:Polish faces questions after governor death

By Chris Borowski and Patryk Wasilewski

WARSAW (BestGrowthStock) – The death of Poland’s central bank governor raises questions over the country’s monetary policy, row over the bank’s profits to boost the state budget and moves to weaken the zloty.

Slawomir Skrzypek, who was midway through his six-year term, perished along with President Lech Kaczynski and dozens top officials and politicians when their plane crashed in thick fog on approach to a Russian airport on Saturday.


The central bank has already said Skrzypek’s deputy Piotr Wiesiolek would take over his duties on a temporary basis, but it was not immediately clear how long he would hold the position.

Under the Polish constitution, the president nominates the bank’s governor who must then be approved by the parliament.

It does not say whether the parliamentary speaker, who takes the president’s duties upon his death, has the power to appoint a new candidate before the early presidential election, which should take place sometime in June.

Some analysts said that to calm investors, Speaker Bronislaw Komorowski may want to consider moving quickly on this front.

“It’s important for the central bank to quickly have a new governor who would, with his background and history would confirm that our currency and reserves are in good hands,” said Andrzej Arendarski, head of the National Chamber of Commerce.

Arendarski suggested Leszek Balcerowicz, a respected former central bank governor and one of the architects of Poland’s transition to a market economy, was a possible candidate, although other analysts said it was too early to consider potential replacements for Skrzypek.

Law governing the central bank stipulates the governor should be replaced within three months, but a large number of mostly rightists deputies were also killed in the plane crash and some experts say the parliament may need to wait to replace them before voting.


Analysts said that while the markets to start in the red when trade resumes on Monday, in the longer term they do not expect a significant negative reaction.

“Although tragic, we do not believe that this event threatens political and financial stability in Poland in any fundamental way… According to the Polish constitution, the “Continuity in government and at the NBP (National Bank of Poland) will be secured, instantly,” writes Magdalena Polan, senior European economist at Goldman Sachs.

“The NBP would be ready to provide short term liquidity facilities to ensure the orderly functioning of the markets, if needed. We do not, therefore, expect to see excessive market volatility on Monday morning.”

Poland, the lone European Union member to escape recession last year, has seen the zloty rise to 16-month highs earlier this week thanks to foreign interest in its bonds and steady privatization inflows.

“Foreign investors have learned to see our country through a perspective of fundamentals, so even though we should expect a negative reaction, it should be moderate,” said Marcin Mrowiec, chief economist at Bank Pekao.

Former central banker Dariusz Filar said: “Nothing happened in our economy, our companies are functioning normally and our banking system is healthy. The financial markets look at this from a longer perspective, so even with a short-term discounting of this tragedy, I don’t see a long-term impact on the economy.”


The potential short-term negative reaction of the Polish zloty will likely eliminate the possibility of another central bank intervention after it stepped into the market to weaken the currency on Friday for the first time since Poland introduced the free-float ten years ago.

Skrzypek was seen as one of the main architects of the intervention after the zloty gained as much as 7 percent this year.

Although he had been seen in the past as a leading dove on the 10-member Monetary Policy Council (MPC), he had recently changed tacked and suggested moving rates above record lows later this year.

If Komorowski, a member of the ruling Civic Platform, picks the new governor, who has a tie-breaking vote, he will likely team up with more hawkish MPC members appointed by the parliament.


Skrzypek was also led a fight by the central bank’s executive board and some monetary policy council members appointed by Kaczynski, against moves by a majority of the council to reclassify some currency reserves.

A more government-friendly governor could drop the opposition to such move, paving the way for a transfer of as much as 8 billion zlotys in the central bank’s 2009 earnings to the stretched state budget.


(Additional reporting by Marcin Goclowski and Marcin Goettig)

Snap Analysis:Polish faces questions after governor death