Poland: 'Shock therapy' guru becomes top gun at Central Bank

Ulhas Joglekar ulhasj at SPAMbom4.vsnl.net.in
Sat Dec 23 19:48:31 MST 2000

23 December 2000

'Shock therapy' guru becomes top gun at Central Bank
WARSAW, Poland: The economic guru whose 'Shock Therapy' reforms successfully
jolted Poland from communism to capitalism in the early 1990s won approval
on Friday to lead the country's all-important Central Bank as Warsaw
prepares to join the European Union.
The Sejm, parliament's lower house, voted 226-214 to make Leszek Balcerowicz
the new president of the National Bank of Poland, a pillar of Poland's
economic reforms.
That was good news for financial markets and foreign investors, who have
long revered the tough-talking former finance minister as the guardian of
Poland's hard-won market reforms.
"He is highly esteemed among foreign investors, and his approval as Central
Bank president will be received with relief," said Mateusz Szczurek, a
market analyst at ING Barings in Warsaw.
Within minutes of the Sejm's vote, Poland's currency, the zloty,
strengthened to 4.17 to the US dollar, from 4.21.
Balcerowicz, 53, will start his new job Jan. 1, succeeding Hanna
Gronkiewicz-Waltz, who is taking a vice presidency at the European Bank for
Reconstruction and Development.
Balcerowicz resigned as head of the small Freedom Party this month, calling
it a "conscious decision" to leave politics and seek the Central Bank post.
"I will take care of the stability of the Zloty and a sound banking system,"
the PAP news agency quoted him as saying after Friday's vote.
It is another pivotal step in a career that has made Balcerowicz a living
legend in Poland, perhaps second only to Lech Walesa, founder of the
Solidarity movement that toppled communist rule in 1989.
Balcerowicz served as finance minister in 1989-90 in Poland's first
post-communist government, and again from 1997 until last June.
His so-called 'Shock Therapy' put the economy on track for annual growth of
4 percent to 6 percent and helped make Poland a magnet for $43 billion of
direct foreign investment.
The reforms brought cuts in state subsidies, an end to most price controls
and a sell-off of bloated state industries. Goods returned to empty shop
shelves overnight, hyperinflation cooled and Western governments forgave
half of Poland's $33 billion foreign debt.
Balcerowicz nonetheless remains unpopular among many workers and
ex-communist politicians who blame him for layoffs and other painful side
effects of the reforms. Unemployment, which now tops 14 percent, remains one
of the few dark clouds over the economy.
When confronted with such criticism, he usually retorts that things would
have been much worse without radical reforms to wipe away the legacy of
Balcerowicz also is reviled by a far-right bloc in Solidarity that has
fought his strident fiscal austerity. Things got so nasty last June that
Balcerowicz quit as finance minister and pulled his small Freedom Union out
of the governing coalition.
Economists say they expect no big changes in monetary policy, which is
decided by the central bank's 10-member Monetary Policy Council. As head of
the bank, Balcerowicz will have a decisive voice.
"Leszek Balcerowicz is probably the best candidate to handle a Euro-friendly
monetary policy. He wants to maintain a strong zloty, and that's what the
(European Central Bank) is going to want to hear," said Thomas Brown, an
analyst with JP Morgan in London.
"Obviously, with so much foreign involvement in the Polish market, a
recognised and a heavyweight name like Balcerowicz is very important," he
"He is a personal guarantee of central bank independence," said Miroslaw
Gronicki, chief economist at BIG Bank Gdanski in Warsaw.
"His tough and unyielding character should provide a sense of security."
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