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Saturday Feature
 
Polish finance minister seeks more social spending
Jan Cienski and Stefan Wagstyl
11/12/2005
 

          WARSAW: Poland must protect social welfare spending, invest more public money in high technology projects, and beware of the rapid expansion of large supermarket chains, says the country's new finance minister in a Financial Times interview that will increase international concerns about future economic policy.
In a dramatic reversal of the usual role of a finance minister, Teresa Lubinska also said she would fight for a somewhat higher 2006 budget deficit than that proposed by the rest of the government.
"If the prime minister insists, the deficit will be 30bn zlotys [£5.0bn, euro7.5bn, $8.8bn], but I think it is important to have more research and development spending," Mrs Lubinska said, adding, "In my opinion, 1.0bn zlotys doesn't matter."
Mrs Lubinska's comments will complicate the new minority government's efforts to establish itself as a credible economic manager. There is already considerable uncertainty in financial markets about Poland, after the recent general election in which the conservative Law and Justice party unexpectedly emerged as the largest grouping, ahead of the liberal Civic Platform.
The two parties, which had earlier planned a coalition, have fallen out, leaving Law and Justice setting up a minority government, supported by populists.
Mrs Lubinska, a 53-year-old academic economist, was seen as an economic liberal a decade ago, but has since developed populist views, working as a local councillor in the deprived north-western city of Szczecin.
Kazimierz Marcinkiewicz, the new prime minister, has insisted that the budget deficit will be no larger than 30bn zlotys a year during the life of his government. The previous government had proposed a 2006 deficit of 32.5bn zlotys.
Mrs Lubinska argued in favour of government intervention in selecting high-growth sectors and said the extra budgetary spending was needed to kick-start Poland's high technology sector. "I feel that Poland should complement private capital with public sources to develop high technology," she said.
Past finance ministers have grappled with Poland's bloated system of disability payments, which are received by 13 per cent of the working-age population, a rate far higher than in other OECD country.
But Mrs Lubinska insisted there was nothing amiss in a system that many analysts condemn for contributing to Poland's low employment rate, the lowest in the OECD, "It's not the level of social spending that's the problem, it's the level of poverty that we see," she said, blaming Poland's 45 years under communist rule.
She added that Poland's budget was not overly redistributive, as the level of distribution was similar to that of western Europe.
Mrs Lubinska said Poland would continue to be open to foreign investment, but would prefer investment in production. "Poland is open, and it will remain open - the challenge for Poland is to produce more ourselves."
Asked about retail investment, including investment by Tesco, the British hypermarket chain, she said: "Hypermarkets like Tesco are no investment. I mean they are not vital for economic growth," adding that when on Szczecin's city council she had tried to "chase out" hypermarkets for destroying the city centre and driving out small shops.
Tesco is the largest British investor in Poland.
While the liberal PO had pushed strongly for Poland to adopt the euro as early as possible, the PiS government has said no such decision will be made before the end of its four-year term.
"Our priority is not the euro. Quickly growing the economy is most important."

 

 
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