Poland’s ruling coalition moves step closer to putting NBP chief on trial

Poland’s ruling coalition moves step closer to putting NBP chief on trial
A banner on the central bank building reads "All of the NBP's actions are in line with the law". / bne IntelliNews
By Wojciech Kosc in Warsaw March 26, 2024

Poland’s ruling coalition formally submitted a motion on March 26 seeking to put the National Bank of Poland (NBP) governor Adam Glapinski on trial before the State Tribunal, a special court for the country’s top officials.

Glapinski faces potential scrutiny of his actions during the pandemic and over his handling of Poland’s inflation hike in 2022 and 2023. According to the motion, the NBP chief compromised the central bank’s independence by working too closely with the Law and Justice (PiS) government, especially in the run-up to the election in October that ultimately cost PiS power.

The motion listing eight key charges against the NBP head will first be analysed by a parliamentary committee, which could next put it out to a vote in the parliament to determine if Glapinski should face the State Tribunal.

A greenlight from the parliament means an automatic suspension of Glapinski, although with an option to appeal to the Court of Justice of the EU.

The NBP says that the motion is pure politics.

“The independence of the central bank will not be infringed upon or destroyed,” an NBP board member Pawel Szalamacha told a press conference the central bank called just hours after the announcement that the motion was submitted to the parliament.

PiS also fiercely defends Glapinski.  “It’s a plan to make way for the adoption of the euro in Poland. To do that, Tusk must remove Glapinski,” Rafal Bochenek, an MP for PiS, told a press conference on March 26.

Earlier this week, Glapinski told the Financial Times that he planned to write to Prime Minister Donald Tusk in an attempt to end the ongoing spat, which, he said, is bad for Poland and only made sense as part of campaign rhetoric.

Otherwise the charges are “idiotic,” Glapinski told the UK newspaper. “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 parliamentary motion says that Glapinski illegally financed  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-handedly 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.

The conflict with Glapinski may bring the Tusk government into conflict with the European Central Bank for encroaching on the central bank's independence.

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.