June 18, 2020 / 8:10 AM / 24 days ago

Poland's deputy PM sees no need for negative interest rates

WARSAW, June 18 (Reuters) - Poland doesn’t need negative interest rates after its banks, which have played an important role in staving off the effects of the coronavirus, were hit by rate cuts earlier this year, the deputy prime minister said.

Poland’s Monetary Policy Council (MPC) has cut rates three times this year by a total of 140 basis points to 0.1% to help the economy tackle the slowdown.

“For sure this is a huge challenge for the banking sector, which plays a significant role ... in the fight with the pandemic consequences,” Jadwiga Emilewicz told Reuters.

“Negative interest rates mean that the security of capital is at risk. As of today - and I hope that also never in future - this measure will not be needed,” the minister said.

Emilewicz also said that she expects the economy to shrink by 4.3% this year, with the biggest slump in the second quarter. The government wants to rebuild the ailing economy by investment rather than consumption, the minister said. Taxes will not be raised, she said.

Emilewicz, who also serves as a development minister, said that the government will be discussing in the coming weeks challenges faced by its coal-reliant energy industry, which Poland may want to support with the money coming from the European Union’s recovery fund.

“Providing cheap, clean electricity for the economy is the biggest challenge for us today,” Emilewicz said. Poland needs to consolidate companies to invest in clean energy sources, she said, so that it can fill the supply gap after 2035, when many coal and lignite-fuelled power plants will have to be shut down.

She said that a recent takeover of utility Energa by state-run oil refiner PKN Orlen indicates the direction the government wants to follow.

Commenting on a project to merge PKN with state-run gas company PGNiG, Emilewicz said that she has no knowledge of such plans, but “would not be surprised if such a group was launched”.

Reporting by Agnieszka Barteczko, editing by Larry King

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