Wojciech Kosc in Warsaw -

Polish Prime Minister Donald Tusk reshuffled his cabinet on November 20 in a bid to revive his government's fading approval ratings.

Speculation has been rife for some time that Tusk would shuffle his deck midway through his second term. The move aims to address the chronic drop in popularity of his coalition-leading Citizens' Platform (PO) party, which is trailing in the polls to the opposition Law and Justice Party (PiS). The pressure is growing as PO seeks momentum going into the next election due in 2015.

On November 20, Tusk made his move. Altogether six ministers were let go. The main topic of interest for investors was the replacement of Jacek Rostowski as minister of Finance by Mateusz Szczurek.

The 38-year-old Szczurek, who will leave his post as chief economist for Central Europe at the Dutch bank ING, has some big shoes to fill. "I'm glad that one of most talented - some say the most talented - Polish economists will take on this difficult challenge," Tusk said at a press conference.

Ryszard Petru, head of the Polish Economists' Association, says Szczurek was Rostowski's own candidate for his replacement and, given the fact that the 2014 budget and major reforms like that of the pension system have already been decided, he will be a minister of continuity. "He's going to have to step into Rostowski's shoes," Petru says.

The outgoing Rostowski has proven instrumental in pushing through reform in Poland. He drove through a controversial plan for raising the retirement age to 67 despite widespread popular discontent. Meanwhile, he has unsettled the markets somewhat by planning a reduction in the role and assets of private managers in the Polish pension system - a plan only given the final green light by the cabinet 24 hours before losing his job.

That latest draft law, the ultimate goal of which is to allow the government to offer stimulus to the economy recovery by improving Poland's fiscal and debt position, appears at odds with Rostowski's track record for market-friendly policy that has angered many sections of Polish society. The market reaction to the legislation has been ambivalent as the bill makes its way towards parliament.

The plan aims to reverse pension reform conducted in the 1990s by diverting flows away from private pension funds (collectively known as OFE) towards the state pension institution ZUS. In addition, from February OFE will be banned from investing in state bonds or other debt instruments guaranteed by the treasury, with current holdings of sovereign debt transferred to ZUS.

Yet the cabinet's the approval of the reform plan on November 19 actually goes against the trend in polls. A growing number of Poles appear to be rejecting the move - which clearly has populist overtones - and say they are in favour of keeping their premiums in OFE.

A senior official from the European Bank for Reconstruction and Development (EBRD) - whose over-riding mission is to promote the development of capital markets in former communist economies - suggested to bne in an interview that it is not unduly concerned with the proposed law. Manfred Schepers, the EBRD's CFO, said the plan won't necessarily hamper Poland's development of its domestic capital market.

"Poland is a large economy, its fiscal position is relatively under control, it has a strong relationship with the German economy. Of course, the reform will have an impact on the pension funds' participation in the domestic capital market, but this will be offset by the continued interest in the Polish economy as a whole," Schepers said. "It's not that there will be no prospect of capital inflow," he added.

More reforms ahead

There are other more difficult reforms ahead for Poland and the wider Central European region, the EBRD official insisted. These include the reduction of the administrative burden and reform of the labour market. One would hope that the appointment of new ministers for administration, science, education and digitalization will help to start to address these issues.

More of a surprise was the sacking of Marcin Korolec as environment minister just as the UN climate talks in Warsaw are heading towards their decisive stages. Maciej Grabowski, formerly deputy minister of finance, will replace him. Amid Poland's struggle against tighter EU environmental legislation as it looks to continue exploiting its significant coal reserves, Korolec will now be tasked exclusively with running Poland's presidency of the UN climate negotiations.

Elzbieta Bienkowska - minister for regional development, and therefore responsible for disbursing the majority of the EU funding that Poland takes in - not only retained her post, but was also made deputy prime minister.

However, the finance ministry is centre stage as Poland seeks to continue reforms while also trying to foster the economic recovery. While investors appear happy enough with Szczurek's economic qualifications and experience, they worry he's a political novice. Without any political capital built up, he's likely to be tied to the apron strings of a PM already fighting to remain in office.

"I'm sure he's a good economist, but at a ministerial position he will have to withstand enormous pressure from lobbyists from other ministries," Petru suggests. "As a young minister, he's also running the risk of becoming too dependent on his ministry's officials. In other words, he may have big issues like the budget or the pensions reform laid out in front of him, but he's in for a difficult time."