Donald Tusk’s battle to oust Polish central bank boss hits hurdle

Polish Prime Minister Donald Tusk’s bid to get rid of the country’s central bank chief has run into trouble.
Poland’s top constitutional court ruled Tuesday that a parliamentary effort to try the governor of the National Bank of Poland, Adam Glapiński, before a special court for top officials was not legal under Polish law.
The decision is likely to put the campaign to oust Glapiński — spearheaded by Tusk — on a collision course with the European Central Bank.
ECB lawyers noted last year that if bringing Glapiński before the special court, known as the State Tribunal, was deemed unlawful, it could threaten the NBP’s independence and, by extension, the independence of the ECB’s general council. While the NBP is not part of the Eurosystem, the Polish governor still gets a seat on the wider council.
Tusk, who leads the Civic Platform (PO) party, took office last December after vowing to purge the country’s key institutions of the supposedly malign influence of former government officials. Glapiński, an appointee of the former Law and Justice (PiS) government, was among those at the very top of the list.
Despite the risk of upsetting Frankfurt, Tusk’s coalition, which controls the Polish parliament, voted in May to proceed with a motion to put the governor before the tribunal.
Glapiński faces eight charges, among them that he manipulated monetary policy to aid PiS’ reelection chances, and engaged in illegal monetization activity to finance the government’s emergency spending during the Covid-19 pandemic.
While Tusk’s NBP campaign was well received by voters in the run-up to last year’s elections, economists, financial analysts, fellow central bankers and even some of Glapiński’s harshest critics have expressed doubts about the legitimacy of the charges. They cite the NBP’s legal immunity from political attack under its independent charter, as well as the general lack of expertise among politicians on central banking affairs.
Speaking to Polish weekly Tygodnik Solidarność this week, Elżbieta Chojna-Duch, a member of the NBP monetary policy council, said that “under Polish law, neither the constitution nor any NBP act or law, envisages the means for the suspension of the NBP governor.”
She added that “understanding the principles of monetary policy and the role of central banking requires specialized economic and legal knowledge … I do not think that the 115 (or maybe even more) parliamentarians who signed the motion had such knowledge [or] were guided by it in their decisions.”
The Constitutional Responsibility Committee, which Chojna-Duch claims lacks the relevant expertise, is currently considering whether the motion merits a vote in Poland’s lower house of parliament. The committee has the power to compel testimony from witnesses and experts as part of its inquiry.
For the motion to succeed, a two-thirds majority of MPs within a quorum of at least 230 out of 460 members, must vote in favor of the resolution to bring Glapiński before the State Tribunal.
“In the hypothetical event the Sejm votes to put Glapiński in front of [the] State Tribunal, he would be suspended as governor and Marta Knightly, the deputy governor, put in his place at least temporarily. The question then, is whether this ruling blocks that process,” Deutsche Bank regional expert Oliver Harvey told POLITICO.
While Chojna-Duch warned that a successful ousting of the governor could cause havoc in Polish money markets and compromise the country’s financial credibility, financial analysts contacted by POLITICO appeared indifferent about the latest developments.
Most said they were no longer following the affair closely as it had lost political relevance. They added markets were more concerned with Glapiński’s views on inflation and rate cuts, which had recently turned more bearish.
The high regard for Glapiński’s view on zloty markets and the economy implies that markets, at the very least, are not expecting a leadership change at the NBP any time soon.
Others noted the affair was also losing traction with the ruling coalition, due to the shifting political appeal of coalition members among voters.
“The war with Glapiński is led by the Civic Platform,” one analyst, granted anonymity to speak freely, told POLITICO. “Other [coalition members] may not like the guy, but do not want to provide proxy support for the key coalition member.”
Even so, many think the constitutional court’s ruling is unlikely to dissuade Tusk from pursuing his assault, not least because the court has been at the center of its own politicization scandal.
“The Constitutional Tribunal’s rulings are simply not recognized in practice by the government and thus they are unlikely to influence how things are handled. This has been clearly expressed by government representatives,” Ernest Pytlarczyk, chief economist at Bank Pekao, told POLITICO.
Brussels, which withheld funds from the previous government on charges that it violated the law when it illegitimately appointed judges to the Constitutional Tribunal, fully supports Tusk’s plans to overhaul it. How that will influence affairs is unclear, but Pytlarczyk, for one, said he believes the saga is unlikely to be over yet.
Whatever happens in the months ahead, markets will continue to scrutinize Glapiński’s words. The phasing out of household energy subsidies — another pre-election goodie from the last government — means that inflation is likely to rebound sharply by year’s end, analysts said. Glapiński has already ruled out cutting interest rates further this year, even though ever more central banks around the world are doing so.
“Recent economic developments … suggest that the economic recovery is softer than expected,” said ING Poland market researcher Piotr Popławski for POLITICO, highlighting a surprisingly weak industrial output report for July. “We and the market are expecting some policy easing next year, the question is when exactly.”