Poland speeds up privatisation to secure public finances

Poland, the only EU member to have maintained growth in 2009, has intensified a privatisation drive this year to curb a public deficit that has far surpassed the bloc’s three per cent of GDP limit.

“We’re not privatising at any price, but privatisation is serving to optimise our public finances,” Poland’s Treasury Minister Aleksander Grad told delegates at a regional investment forum in Tarnow, southern Poland.

Prime Minister Donald Tusk’s liberal government aims to raise 55 billion zloty (€14 billion) through privatisation between 2010-2013, including a hefty 25 billion zloty (€6.36 billion) this year.

But Mr Grad insists that aside from plugging a public deficit due to balloon to seven per cent of gross domestic product this year, the mass sell-off of state assets is both a rational response to the global crisis and part the government’s long-term strategic vision.

“Our answer to the global crisis is wise privatisation and economic modernisation,” Mr Grad insisted.

“Privatisation processes are strengthening Poland’s capital markets, building the strength of our stock exchange and strengthening Poland’s role in the European and world economy,” he said.

After the first six months of this year, privatisation revenues totalled 12.3 billion zloty compared to just 500 million zloty during the same period in 2009 as the global crisis clipped investors’ wings.

Mr Tusk’s government scored success with the sale of Poland’s largest insurance company, Powszechny Zaklad Ubezpieczen, in a record IPO for central and eastern Europe, earning 8.1 billion zloty for the treasury and minority PZU owner, Dutch insurance group Eureko.

The sell-off of the Tauron energy group brought another 4.21 billion zloty into state coffers. The treasury, determined to meet its privatisation target, also sold parts or all of dozens of smaller firms.

The treasury, which holds 98.8 per cent of the Warsaw Stock Exchange said it planned to float 63.82 per cent of the bourse while retaining strategic control over the exchange, the largest in central and eastern Europe.

The treasury provided no estimated value for the IPO tranche, likely to debut on November 9.

With 385 companies worth some €197 billion traded on the WSE, it is the largest exchange in central and eastern Europe in terms of equity turnover value and market capitalisation, surpassing Vienna, according to the Federation of European Securities Exchanges.

The WSE also scored the leading position in the European IPO market in the second quarter of this year with seven IPOs worth €3.139 billion, according to a July IPO Watch Europe survey by PricewaterhouseCoopers.

The planned sale 51 per cent of Enea, Poland’s number three energy company, is also expected to raise about 4.8 billion zloty, while the sell-off of 82.9 per cent of Energa, which commands 17 per cent of Poland’s electricity market, is expected to raise eight billion zloty.

“Privatisation has to be seen in the context that the Polish government also has to ensure that the public debt does not increase above 55 per cent of GDP,” the ceiling set by Poland’s constitution, observes Danske Bank economist Lars Christensen.

“It’s (public debt) certainly not as bad as in Italy or in Greece or even in Germany,” he notes, but looking beyond the privatisation drive and at once echoing other analysts, he slammed Tusk’s liberals for not “really showing any commitment to substantial fiscal reform.”

Boasting that output grew by 1.8 per cent in 2009 and forecasting GDP growth at 3.3 per cent this year, the Tusk government has vowed to rein in Poland’s public deficit to under the three per cent of GDP limit set by the EU’s Maastricht Treaty.