FACTBOX-Key political risks to watch in Poland

WARSAW Tue May 4, 2010 8:15am EDT

WARSAW May 4 (Reuters) - Poland holds a presidential election on June 20 whose outcome will help determine the pace and scale of reforms needed to improve the European Union's largest ex-communist economy and to prepare it for euro entry.

The election was moved forward from October after the death of President Lech Kaczynski, along with 95 others including Poland's top military commanders, its central bank governor and lawmakers, in a plane crash in Russia on April 10.

Bronislaw Komorowski, who took over as acting president in his capacity as parliamentary speaker, is tipped to win the June poll as the candidate of Poland's governing centrists, but the public mood remains febrile after the unprecedented disaster.

Prime Minister Donald Tusk's government must also contend with the turmoil on global financial markets caused by the debt woes of Greece and some other euro zone nations that could put renewed pressure on emerging economies such as Poland.

Below is an overview of key political risks facing Poland.

ELECTING A NEW PRESIDENT

The outcome matters. Although most power lies with the prime minister and his cabinet, the president is not just a ceremonial figure. He can veto laws and appoint key officials such as the central bank governor and has a say in foreign policy.

Lech Kaczynski irritated Tusk's government by blocking pension, health and media reforms.

Komorowski's main rival in the election, Kaczynski's twin brother Jaroslaw, is leader of the main opposition party, the right-wing, eurosceptic Law and Justice (PiS). He may benefit from public sympathy for his family and close the gap.

If elected, Kaczynski would thwart government bills and oppose its efforts to join the euro, just as his brother did. Analysts say he may also take a nationalistic stance in foreign affairs that could harm ties with the EU, Germany and Russia. Although conservative on moral and social issues, Kaczynski and PiS tilt to the left on the economy, favouring more state spending and opposing the government's privatisation plans.

What to watch:

-- Opinion polls. Kaczynski is an experienced and combative campaigner. Support for him and for PiS has already risen since the crash, but analysts say Kaczynski will struggle to garner enough votes outside his core constituency -- older, devoutly Roman Catholic, patriotic-minded Poles -- to win the poll. A surprise win for Kaczynski would be negative for markets as it would mean resumed conflict between government and president.

-- Low turnout. PiS voters are generally easier to mobilise, so a low turnout is more likely to hurt Komorowski. Tusk's Civic Platform (PO) wants to avoid a repeat of the 2005 presidential race when Lech Kaczynski unexpectedly beat frontrunner Tusk.

-- Crash probe. The government is vulnerable to any perception that it is mishandling the politically sensitive probe into the crash. But there are risks for Kaczynski too. Russian and Polish investigations of the cockpit voice recorders from the doomed plane may confirm media speculation that Lech Kaczynski himself was involved in the decision to ignore traffic controllers and to land. This might trigger a backlash against Jaroslaw Kaczynski and PiS.

ELECTING A NEW PARLIAMENT

Poles are due to elect a new parliament in autumn 2011, but the election may be brought forward to the spring as Poland has the EU's rotating presidency in the second half of next year.

Opinion polls give Tusk's market-oriented, pro-euro PO a big lead over PiS, its nearest rival, but the uncertain economic outlook, especially for the euro zone, Poland's main trade partner, could hit the country's recovery and also PO's ratings.

PO needs to win, alone or with allies, a two-thirds majority in the new parliament in order to amend the constitution to pave the way for eventual euro adoption.

PiS, which is sceptical on the euro, has been blocking any amendment in this parliament. A strong PO win would be welcomed by markets as a signal for fresh reforms and for clearing the way to eventual euro adoption. What to watch:

-- If Komorowski becomes president in June, will the government start delivering on structural reforms such as raising the retirement age and ending pension privileges of farmers and other groups? Until now, it has used the risk of a presidential veto to avoid tackling these issues, but with a compliant president it would no longer have that excuse.

-- Will PO's junior coalition partner, the Peasants' Party (PSL), quit Tusk's government early in order to have time to prepare for the national election and perhaps to distance itself from possibly unpopular policies? Some analysts think it might, though PO would be expected to soldier on alone until the poll, relying on ad hoc support from other parties for specific bills.

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Comments (2)
singerman wrote:
What if the presidential plane crash investigation is deliberately mishandled by Russia, rubber-stamped by the Polish Prime Minister, and Komorowski knows it? What would he do? That would test the mettle of his character.

Russia, if no one has noticed, does not get high marks for honest, efficient, timely and effective investigations to put away criminals unless the defendants happen to be enemies of Putin.

The notion that Putin detested Kaczynski before the crash then genuinely shared in Poland’s mourning of him afterward is too incredible to believe. Of course he is warming to the Polish people, the ones in his way are dead.

The blog Analyst Bluepapers has a series of posts that ask tough questions about the investigation by the Russian Interstate Aviation Committee, and probe the political and recent historical context.

May 04, 2010 4:06pm EDT  --  Report as abuse
Jasiek wrote:
The series of reforms that PO is so far advocating will no doubt cause disinflationary pressures. This means the reforms, if implemented, will reduce the economy’s aggregate demand and thus growth by that much. On the other hand, Poland is to start investing massive money, both from the revenue and EU funds, into a number of infrastructure projects such as motorways, railroads, high speed internet lines, water supplies, etc., which will increase its aggregate demand and then growth by that much. They may probably more than trade off against the contraction effect of the planned reforms. What is needed first of all is that the government make the people to understand this macroeconomic logic through proper (and enthusiastic) public relations and education methods.

May 04, 2010 9:02pm EDT  --  Report as abuse
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