At the beginning of December 2000, the governor of the National Bank of Poland (NBP), Hanna Gronkiewicz-Waltz, resigned from her position to become vice president of the London-based European Bank of Reconstruction and Development (EBRD). On 22 December 2000, the candidature of Leszek Balcerowicz as the new governor, proposed by President Aleksander Kwaśniewki, was approved by the Sejm.

Leszek Balcerowicz is a 53-year-old professor of economics. He graduated from the Warsaw Main School of Planning and Statistics (SGPiS) and the University of St Johns in New York. Between 1969 and 1981 he belonged to the Communist Party (PZPR). From 1978 to 1981 he was chairman of a group of young economists who were preparing a set of economic reforms.

After the introduction of martial law in December 1981, he withdrew from the Party and became an economic consultant for Solidarity. In the period between 1989 and 1991 he was the deputy prime minister and minister of finance in the governments of Mazowiecki and Bielecki. During this period, he was regarded as the "father of reform," transforming Poland's economy after the collapse of Communism into the free market it is today.

However, despite the passage of nearly a decade since these reforms were introduced, they are still evaluated in different ways by Polish politicians. His supporters praise him for the success of the Polish economy, while his opponents argue that he is a cold technocrat responsible for the impoverishment of society. Most recently, between February 1995 and December 2000, Balcerowicz was chairman of the Freedom Union (UW).

A fast replacement needed

The quick appointment of the new central bank governor, after the quite unexpected vacancy of the position (Gronkiewicz-Waltz had four more years before the end of her tenure), was seen in the context of preserving economic stability. This is particularly important during the period of political weakness caused by minority government rule.

Specifically, there are doubts whether Jerzy Buzek's government is strong enough to find sufficient parliamentary support to pass next year's budget. The appointment of a reliable governor was to guarantee a low level of inflation, stability of the currency (złoty), which would support quick economic growth and a low level of unemployment.

Early financial indicators seem to suggest that Balcerowicz was a good choice, as in early November the dollar stood at PLZ 4.70 and after Balcerowicz's appointment it rose on the interbank market to PLZ 4.12 on 27 December 2000.

However, the procedure of appointing the new governor—nomination by the President and then approval by Parliament—indicates the political dimensions of this decision. The appointment of this politically controversial candidate, despite his economic credentials, has to be seen as a political compromise. The importance of political compromise in Poland cannot be taken for granted and this compromise during the minority government rule is a positive political indicator worth analysing.

Support from economists

From the beginning, Balcerowicz's candidacy had the strong support of economic experts. For example, Professor Witold Orołowski, a member of the Independent Institute for Economic Research (NOBE), argued that he was one of the best-qualified persons for this position. Although there were a few other people with similar professional qualifications, it was Balcerowicz who had enjoyed the international prestige for guaranteeing economic stability during the time he was finance minister. Similarly, Professor Cezary Józefiak, a member of the Monetary Policy Council (RPP), advocated his candidature due to his professional qualifications and strong personality.

Also, Balcerowicz, as a governor of the central bank, is a guarantor for international financial centres of the independence and sovereignty of this institution. However, Professor Jan Winiecki from the European University in Frankfurt believes that Balcerowicz's ability to resist political pressure is the most important of his qualifications, as in his decisions he is assisted by the Monetary Policy Council (RPP).

Parliamentary majority in doubt

Despite overwhelming support from economists, there were doubts whether Balcerowicz, who until last month was chairman of the UW, would receive a sufficient parliamentary majority. This was particularly in question since the collapse of the post-Solidarity party coalition of the centrist UW and the right-wing Solidarity Election Action (AWS)in May 2000: the expectation of support from its former coalition partner was in doubt. One of the reasons for the dissolution of this coalition was the lack of discipline among AWS MPs, causing the dismissal of several crucial bills proposed by its government.

However, the first obstacle to his appointment was whether President Kwaśniewski would decide to present this candidature in opposition to the Democratic Left Alliance (SLD) from which he originated. Before President Kwaśniewki's nomination of Balcerowicz's candidature, Jan Maria Rokita, the chairman of the Conservative Peasant Party (SKL), one of four AWS bloc parties, asked if it would be worth risking irritating the SLD, especially if it was not certain that Balcerowicz's candidature would gain the necessary majority of votes.

According to him, if the President decided to nominate Balcerowicz, it would be good for Poland and would show that he could stand against the SLD and choose the primacy of national interest.

In Parliament, Balcerowicz's candidature was supported by the UW. Prime Minister Jerzy Buzek and his deputy, Janusz Steinhoff,(both from the AWS) also emphasised that he was a good candidate. Despite support form the AWS leadership, Balcerowicz's candidacy sparked strong resistance among Christian National Union (ZCHN) politicians, another of the four AWS coalition parties.

A political compromise

The Solidarity Election Action parliamentarians discussed barter among the former coalition partners, as the AWS's support for Balcerowicz was to be reciprocated by UW voting in favour of the budget proposed by Buzek's government.

This seemed to be an attractive deal to both of the former coalition parties, as UW support for the AWS-drafted budget would mean that the early election expected in the spring would be delayed until autumn. At the end of the year, according to the Centre for the Study of Public Opinion (CBOS), the SLD enjoyed 41 per cent support, in contrast to the AWS, whose support had been decreasing throughout the year and had now stabilised around 13 per cent, while the UW had only 9 per cent support.

Despite the fact that among MPs from the AWS parliamentary club extremely negative opinions on Balcerowicz's candidacy was marginal and there was strong support for the AWS prime minister, until the last moment it was not certain whether his candidacy would gain support in Parliament or if it would be rejected due to a lack of discipline among the AWS. In other words, his candidature was endangered more by poor discipline among the AWS than SLD actions.

Post-Solidarity fragmentation

This is a particularly interesting phenomenon of the still existing fragmentation and "individuality" of post-Solidarity parties, in contrast to the strong nomenklatura-type discipline of the SLD. Thus, often within post-Solidarity parties the "internal enemies" within their own camp were more dangerous than the formal opposition.

The most radical example of this phenomenon was the collapse of the post-Solidarity government of Hanna Suchocka in 1993 after a vote of no confidence from the Trade Union Solidarity, which was forming the present coalition government, and not from the formal opposition. Even after the post-Solidarity parties' return to power in 1997, compromise and internal discipline were still difficult lessons to learn. The collapse of the AWS and UW coalition in May 2000 is a clear example of this.

However, this election shows a certain rise in discipline among the AWS—although still not among its leadership. 226 MPs voted in favour; the absolute majority necessary for election was 221. The SLD and the Polish Peasants' Party (PSL) voted against—214 votes and nobody abstained.

All UW MPs supported Balcerowicz's candidature, but among the AWS, four MPs voted against and another 12 did not take part in voting. The SLD introduced "electoral discipline" for this election. Thus, if his candidature had not been supported by the independent MPs and the German minority party he would have won by a margin of just one vote.

A narrow victory with a positive outcome

The election of Balcerowicz shows that fragmentation of the AWS leadership still exists. Among AWS politicians who voted against Balcerowicz, there were not only the back-benchers but two quite prominent politicians: Henryk Goryszewski, former chairman of the Sejm's Commission of Finance, and Jerzy Kropiwnicki, minister of civil and regional development. Earlier, Goryszewki and Maciarewicz, another former minister, tried to delay and boycott voting by questioning the validity of this election in relation to the legality of Gronkiewicz-Waltz's resignation.

Among those who voted against Balcerowicz, the most negative and aggressive attacks came from the populist PSL, which traditionally used to treat Balcerowicz as a whipping boy for all the problems of Poland's economy when he was finance minister. They also advocated the limitation of central bank independence and its subordination to the Parliament and government. (In the Czech Republic, such attempts to limit central bank independence by the Social Democratic government caused the dismissal of Governor Josef Tošovský.)

For the SLD, the appointment of Balcerowicz was not so straightforwardly negative. On the one hand, it meant that the election would probably take place in autumn and the 40 per cent electoral support which they now enjoyed would be difficult to preserve. Moreover, Balcerowicz, as the governor of the central bank, would participate in government meetings and they could fear his criticism. This is the cause of their earlier proposal of the appointment of an apolitical expert.

On the other hand, Balcerowicz's appointment brought the SLD some advantages. After their expected victory in the autumn parliamentary election, he could be presented as the advocate of tough economic decisions, which the SLD would have to take against its own electorate.

Moreover, his authority abroad is also an asset for them, especially as hard times are expected after the election: the threat of the high current account deficit, the foreign trade gap, rising unemployment and, most of all, high social expectations. Thus, it seems that the appointment of Balcerowicz as the governor of the central bank has to be seen as a positive development, not only in economic but also in political terms.

T J Majcherkiewicz, 22 January 2001

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