Polish political feud hampers reforms, euro plan

The long-running feud between Poland's president and prime minister can sometimes appear comical to the point of farce, but their rivalry could carry a hefty price tag at a time of deepening global economic gloom.

Last week, the government denied President Lech Kaczynski a place in the official Polish delegation to attend a European Union summit in Brussels and then refused to let him use a government plane, prompting him to charter a private jet.

Poland's foreign minister had begged him "on bended knee" to stay away from the summit, which was dominated by the global financial crisis, saying he would harm Warsaw's negotiating position. In the event, Kaczynski showed up briefly, then left. Investors laughed off the incident but they are also aware such spats, rooted in ideological and personal rivalry, hinder the kind of cooperation Poland needs to keep its economy growing strongly and its plans to join the euro firmly on track.

"We are now in a global financial crisis, we don't want to deal with two politicians pinching each other under the table," said one Warsaw-based economist who asked not to be identified.

Prime Minister Donald Tusk's government sounds frustrated.

"I have the impression the president is sabotaging the work of the government and the parliament," Zbigniew Chlebowski, a senior member of Tusk's economically liberal, staunchly pro-EU Civic Platform, told Reuters in an interview.

"His actions are harmful for the country and economy."

Aides of Kaczynski, a conservative Eurosceptic, accuse the government of trying to sideline the president who they say is merely trying to perform his constitutional duties, which include representing Poland overseas.

In Poland, the government sets and implements policy but the president can veto laws. Kaczynski has vowed to block some government reforms, including planned cuts in the number of people taking early retirement to help rein in state spending.

Last week, in similarly populist vein, Kaczynski called for a referendum on government plans to make hospitals operate on a commercial basis, though that move is unlikely to succeed.

He has also slammed Tusk's ambitious plan to adopt the euro in 2012, saying Poland should aim for a much later entry date.

"Kaczynski has so far been quite a passive president but he now wants to be more active ... showing he represents a more socially oriented policy that stresses the need for solidarity in time of crisis," Pawel Spiewak of Warsaw University said.

Kaczynski, who has called for increased powers for the president, plans meetings in coming days with economists and then with cabinet ministers to discuss the financial crisis.

Analysts say Kaczynski works hand-in-glove with his twin brother Jaroslaw, former prime minister and head of the main opposition, Eurosceptic Law and Justice party (PiS).

The government, stung by criticism that fear of a presidential veto has stymied its reform plans, has indicated it is now ready to take the fight to Kaczynski.

"We want to send 140 bills to the president (for signing) by next month... Whatever the president does, we will press on with our reform plans. If he vetoes them, we will push them again after the presidential election (due in 2010)," Chlebowski said.

But that election, in which Tusk is widely expected to run against Kaczynski, is an eternity away for investors and financial markets keen to see swift progress on promised health and pension reforms, privatisations and cutting red tape.

"The government has to hurry up with reforms before it starts to lose support because of the economic slowdown, which could strengthen the populists," said Lena Kolarska-Bobinska, head of the pro-EU Institute of Public Affairs think-tank.

Poland has so far weathered the global financial crisis relatively well - its banks have little exposure to the toxic credits that have played havoc in some other countries - but economic growth is expected to slow sharply next year.

Encouragingly for the government, opinion polls continue to give Tusk and his party a big lead over the Kaczynski twins. A majority of Poles also backed Tusk over Kaczynski in last week's spat over who should represent Poland at the Brussels EU summit.

"But that support cannot be taken for granted, especially at a time of economic downturn... I think the conflicts will get much worse as elections draw nearer," said Kolarska-Bobinska. The key test now for the government is the plan to join the euro in 2012, a target date that will require Poland to put its zloty currency into a trading band against the euro - the so-called European exchange rate mechanism - during 2009.