Court ruling could swing Polish c.bank behind bolder rate cuts
* Ruling may force c.banker Winiecki off rate-setting council
* Court to hold sitting on defamation charge on Feb. 13
* Reshuffle of council would affect rate policy
By Marcin Goettig
WARSAW, Jan 23 (Reuters) - Poland's central bank could swing behind bolder rate cuts if a court ruling next month forces Jan Winiecki, who has blocked aggressive policy easing, to leave the bank's rate-setting council.
A court in the western Polish city of Poznan is scheduled to start deliberating on Feb. 13 whether Winiecki defamed a former central bank governor in a newspaper article and an online blog in which he cast doubt on the ex-governor's academic credentials.
The criminal case has been working its way through Poland's complex judicial system for years, without reaching a legally binding ruling.
However, several legal experts consulted by Reuters said that next month's court hearing, if it finds Winiecki guilty, would be considered "legally binding" - setting in motion his removal from the central bank's Monetary Policy Council (MPC).
Under Polish law, a verdict is "legally binding" if an appeal court upholds a ruling by a lower court.
If an MPC member is subject to this kind of binding verdict, the entity that appointed the member - in Winiecki's case the upper chamber of parliament - has to remove them from the council, the law states.
Winiecki declined to comment when contacted by Reuters. His lawyer, Jerzy Naumann, said the courts had already eliminated several of the charges against his client, and he said Winiecki demanded that he be cleared of the remaining ones.
The lawyer declined to say if Winiecki would keep his job if the court ruled against him, saying that speculating about this was a "waste of time."
Winiecki's presence on the MPC has been crucial because he is the swing vote. The council is at the centre of a debate over how to respond to a sharp slowdown in Poland's economy, the biggest in eastern Europe.
"That (Winiecki's removal) would shift the centre of balance of the MPC into neutral and hence could lead to further rate cuts," Nomura's Peter Attard Montalto said in a note.
Appointed to the 10-member MPC in 2010, Winiecki was among members who blocked a motion to lower rates last October because they believed inflation was too high, even though many economists argued cuts were urgently needed.
Central bank voting records show that if Winiecki had supported colleagues seeking a cut, his vote would have been enough to carry the motion.
In November, Winiecki changed tack and supported a 25-basis-point rate cut after data showed growth was slowing while inflation was under control.
But he blocked a motion to ease policy by a more aggressive 50 points, saying there was no scope for a big cut because he expected inflation to accelerate again.
That motion was supported by three other MPC members and central bank Governor Marek Belka - who has the deciding vote if there is a stalemate - so Winiecki's support would, again, have carried the motion.
The outlook for Polish interest rates is uncertain.
The central bank cut interest rates by 25 basis points for the third month in a row in January, but said it may soon pause its easing campaign, despite gloomy economic data, to give it time to assess the effect of the cuts.
The government has been calling on the bank to cut rates further to support the economy, which is suffering from a recession in its main trading partner, the euro zone.
The governing coalition, led by Prime Minister Donald Tusk, has 65 of the 100 seats in the Senate, the upper house of parliament. It has the right to choose a replacement for Winiecki if he is removed.
"I would expect that if Winiecki is dismissed, he will be replaced with somebody less hawkish," said Maciej Reluga, chief economist at Bank Zachodni WBK.
Winiecki is accused of defaming former central bank governor Slawomir Skrzypek, who died in a 2010 plane crash that also killed the Polish president.
A lower court has already found Winiecki guilty. Winiecki appealed that ruling. Next month's sitting will decide whether to uphold or reject his appeal. Alternatively, it could decide to send the case back to a lower court.
A spokesman for the central bank said the bank would not comment on the specifics of the case. It said that under the law it would be up to the body that appointed the member to remove him, if he is found guilty of a crime by a legally binding court ruling.
The Senate's press office said that if Winiecki is convicted of a crime by a legally binding court ruling, the speaker of the chamber would receive a letter from the court, which would set in motion the procedure for his dismissal.
Winiecki's lawyer, Naumann, in reply to written questions submitted by Reuters, said the courts had already eliminated five of the seven original charges against Winiecki.
"(We) consistently demand that the ruling of the court of first instance be changed and that Prof. Winiecki be completely cleared of charges pressed against him," he said.
On his client's future with the MPC, he said: "It would be highly inappropriate to give in to speculation regarding a situation that can only be considered in terms of loose hypotheses, and it is therefore ...a gross waste of time."
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