PiS pushes Polish QE scheme to pay for election promises

By bne IntelliNews October 21, 2015

A bloodbath is in the offing at the National Bank of Poland should the opposition Law & Justice (PiS) take power following the October 25 election. The party has announced plans for massive monetary easing, which would be unlikely to go down well with the hawkish central bank Monetary Policy Council (MPC).

Having said it wants to raise public spending by 2.3% of GDP on policies such as lowering the retirement age and raising child benefits, PiS unveiled a financing plan on October 20. Included is a "Central Bank Program", which could generate up to PLN350bn (€82bn) over six years, reports PAP news agency.

PiS party leader Jaroslaw Kaczynski has admitted his program "will cost tens of billions of zlotys a year”, but until now has offered only improved tax collection as a means to pay for it. The party now suggests it has been inspired by the European Central Bank's massive quantitative easing program, which was launched earlier this year to give the single currency area's economy a boost.

"The ECB launched a three-year program in the amount of 10% of Eurozone GDP, lending with no interest rate," the PiS presentation reads. "By analogy: the NBP will launch a 6-year program for 20% of GDP, i.e. PLN350bn."

However, the traditionally conservative interest rate setters at the NBP are unlikely to look kindly on the plan. With PiS having the chance to change eight of the 10 members of the MPC in 2016, should it win power on October 25, NBP Governor Marek Belka has all but sealed his fate, having made no secret of his distaste for the party in recent months. However, the central bank chief is a relative moderate on the MPC, meaning several hawks also face the axe.

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