NBP head says he wants peace with Tusk as motion to oust him goes to parliament

NBP head says he wants peace with Tusk as motion to oust him goes to parliament
The government claims that Glapinski overstepped his powers and compromised the central bank’s independence. / bne IntelliNews
By Wojciech Kosc in Warsaw March 26, 2024

National Bank of Poland (NBP) chief Adam Glapinski plans to write to Prime Minister Donald Tusk in an attempt to end the ongoing fight between them, which is bad for Poland and might only make sense as part of campaign rhetoric, Glapinski told the Financial Times on March 25.

The NBP head faces potential scrutiny of his actions and a vote in the parliament that could open the way to a trial before the State Tribunal, a special court for top officials. A parliamentary motion presenting the main charges against Glapinski will be submitted to the parliament on March 26, Polish media have reported.

The charges are “idiotic,” Glapinski told the Financial Times. “I understand that, for Tusk, the easiest way to manage the campaign was to accuse the government and the central bank of causing inflation, because it was so high,” Glapinski said. “But we are now after the elections. It is time to stop. We have common problems,” Glapinski  said.

Tusk has not responded publicly to the interview.

The Tusk-led majority in the parliament claims that Glapinski overstepped his powers and compromised the central bank’s independence under the previous government of Law and Justice (PiS).

The parliamentary motion says that Glapinski illegally financed the government spending during the pandemic by making the NBP buy government bonds, the transactions masked by the bonds going through commercial banks first.

The motion also accuses Glapinski of meeting the government’s campaign needs by unexpectedly slashing the NBP’s reference interest rate by 75bp in September and by another 25bp in October, mere weeks before the election.

Glapinski cannot single-handed make policy decisions, which are put to a vote in the Monetary Policy Council of the NBP. The council has been divided politically, however, with three out of its nine members – all nominated before the election by then opposition-controlled Senate – often going on record against Glapinski.

The interest rate has remained at 5.75% since, with the market expecting little movement this year, as inflation is projected to rebound in the wake of the Tusk government's decision to phase out the electricity price cap.

The motion also claims that Glapinski’s single-handedly decided on two currency market interventions in December 2020 and March 2021, blocked information exchange inside the NBP, and lied to the public about the NBP’s expected financial result for 2023.

Other charges appear less substantive. The parliamentary motion says, for example, that Glapinski spoke in superlatives of the PiS government while warning against the return of theTusk government. 

Glapinski has said many times now that he managed to bring inflation under control in a process that necessarily takes time, while asset purchases took place in an economic emergency during the pandemic. The only other option was to let the economy crash, according to Glapinski.

In theory, the parliamentary motion could lead to the suspension of Glapinski or – a less likely scenario – to his ousting from the position of Poland’s key monetary policy maker. 

It may also bring the government into conflict with the European Central Bank for breaching the central bank's independence.

The motion is now expected to go to a dedicated parliamentary committee that will put it out to vote in the plenary on a yet unclear date. According to Polish law, if the parliament decides Glapinski should face trial, he will be suspended automatically.

There has been little market reaction to the apparently growing conflict between the NBP and the government, with no dramatic changes to the PLN/EUR or PLN/USD exchange rate.