Polish Prime Minister Donald Tusk’s government has quietly shelved plans to bring National Bank of Poland (NBP) Governor Adam Glapiński before the State Tribunal, according to a report by Bloomberg. The reversal, attributed to financial concerns, marks a significant shift in strategy for the ruling coalition, which had vowed to hold Glapiński accountable during last year’s election campaign.
The move comes as the government grapples with a widening budget deficit and seeks to maintain investor confidence. While the parliamentary Commission for Responsibility for Constitutional Violations continued to review the case as recently as Monday, sources indicate the administration has concluded that pursuing the tribunal process would yield limited, if any, political benefits.
The primary concern, Bloomberg reports, is the potential for legal battles with the central bank to spook foreign investors. Poland’s financial stability is particularly sensitive given the country’s substantial borrowing needs. Officials fear escalating tensions with the NBP could undermine trust in Polish debt, increasing borrowing costs and exacerbating the fiscal situation.
The shift in approach also coincides with a change in the economic narrative. During the election campaign, Tusk’s Civic Platform party heavily criticized Glapiński for maintaining high interest rates. However, the NBP has since begun a series of rate cuts, and analysts are now forecasting further easing. This has diminished the potency of the opposition’s central argument against the governor.
Glapiński himself has dismissed the charges leveled against him as “baseless,” arguing that the NBP acted appropriately during the Covid-19 pandemic and that any attempt to politicize the central bank would be detrimental to Poland’s economic health. He has consistently maintained that the NBP’s quantitative easing program during the pandemic was crucial in mitigating the economic fallout and supporting growth.
The charges against Glapiński include allegations of lacking independence from the previous Law and Justice (PiS) government, violating constitutional rules regarding central bank financing of government borrowing, and misleading the finance ministry about the bank’s financial results. However, economists and financial analysts have expressed doubts about the legitimacy of these claims, citing the NBP’s legal immunity and the complexity of central banking affairs.
The NBP governor recently highlighted the link between monetary policy and the government’s fiscal challenges. He pointed to Poland’s significant budget deficit – projected to reach nearly 7% of GDP this year – as a constraint on further monetary easing. Glapiński also emphasized that the NBP’s rate cuts have already reduced the government’s debt servicing costs by an estimated 25 billion złoty over the next two years.
However, this calculation does not account for the potential loss of VAT revenue resulting from lower inflation. Higher prices typically translate to increased VAT receipts, and the NBP’s rate cuts, by contributing to lower inflation, could offset some of the savings in debt servicing costs.
The State Tribunal, Poland’s highest court for trying high-ranking officials, has a limited track record. In over a century of operation, it has only definitively convicted two individuals. Both convictions stemmed from the “schnapsgate” scandal of the late 1980s, involving the large-scale, untaxed import of alcohol into Poland.
In that case, five officials from the former communist regime were accused of negligence and failing to prevent significant revenue losses to the state. Jerzy Ćwiek, the head of the Main Customs Office, and Dominik Jastrzębski, the minister for economic cooperation with foreign countries, were ultimately convicted, losing their right to hold public office for five years.
The case revolved around a 1988 decision to simplify alcohol import regulations, effectively eliminating the need for import licenses. This led to a surge in alcohol imports, primarily of pure spirit, which was then sold without taxes. The resulting loss of revenue to the state was estimated at the equivalent of 2 billion złoty at the time.
The decision to abandon the pursuit of Glapiński before the State Tribunal underscores the delicate balance between political accountability and economic stability. While Tusk’s government remains committed to reforming Poland’s institutions, it appears to have prioritized maintaining investor confidence and managing the country’s fiscal challenges over pursuing a potentially divisive and economically risky legal battle.
