Finance ministers frequently try to jawbone uncooperative financial markets. But the new Polish Finance minister, Grzegorz Kolodko, has taken a different tack: silence.
Early last month Prime Minister Leszek Miller appointed Kolodko to replace Marek Belka, who resigned after losing a cabinet struggle to maintain tough budget discipline.
The news unsettled markets in Warsaw. Investors remembered Kolodko from his 1994'97 stint as Finance minister: Back then Poland’s economy was growing robustly, its budget deficit was manageable, and tax revenues were pouring in. Just how committed to spending restraint will Kolodko now be as he tries to jump-start the economy?
Even more worrying for investors: In May Kolodko publicly urged the government to devalue the z/loty and peg its value with a currency board. Such a move could stimulate growth in an economy where unemployment has reached 17 percent. But it would also wrest power from the National Bank of Poland, whose strict anti-inflation policies have attracted widespread criticism at home while bringing inflation down sharply.
Although the z/loty tumbled during his first ten days in office, Kolodko said nothing, leaving embarrassed ministry officials unsure what their policy was. Finally, the new minister emerged to promise a continuation of Belka’s fiscal discipline and to declare a truce with the central bank. Still open to a devaluation, Kolodko promised not to act unilaterally. Even the central bank’s fiercely independent head, Leszek Balcerowicz, welcomed the “good atmosphere” emanating from recent talks between his bank and the ministry. Kolodko’s few utterances have been “pretty much the right things,” notes an analyst.
