The emergence of a new political faction formed by former rock musician Pawel Kukiz complicates the still-likely victory of the opposition conservative Law and Justice (Prawo i Sprawiedliwosc: PiS) in Poland's parliamentary election in September/October 2015. This analysis will assess implications of the creation of a potential PiS-Kukiz government on the government stability and investment climate in Poland.
IHS perspective | |
Significance | A coalition government led by the conservative opposition PiS party after the September/October parliamentary election looks increasingly likely, with Kukiz's right-wing faction being its most probable coalition partner. |
Implications | A PiS/Kukiz coalition would be likely to increase government instability risks with both parties gathering varied groups of different political backgrounds, and would assume a more protective stance towards Polish "strategic" industries, while calling for harsher sanctions against Russia. |
Outlook | State contract alternation risks will be unlikely, but privatisations of energy, insurance and financial companies will likely be suspended. Telecom, energy and retail sectors will also face risk of higher tax burden, following Hungary's example. |
Right-wing populists reshape Poland's political landscape
A victory for the PiS in the upcoming parliamentary election looks increasingly likely. A late-June public opinion poll conducted by Millward Brown gives the PiS (in alliance with the nationalist/conservative Solidarity of Poland; Solidarna Polska: SP; and liberal Poland Together; Polska Razem: PR) a lead of up to 14% over the ruling centre-right Civic Platform (Platforma Obywatelska: PO). If the election had been held in late June, Kukiz's platform would, according to the same pollster, have received around 19% of the votes, which is consistent with Kukiz's performance during the May 2015 presidential election, in which he finished third (see Poland: 12 May 2015: Election 2015: Outcome of first round of Polish presidential poll will probably accelerate electoral and party financing reforms). Only two other parties have a chance to enter the parliament – the agrarian People's Party (Polskie Stronnictwo Ludowe: PSL) and a brand new political association Nowoczesna.pl, formed by the president of the Polish Economic Society (Polskie Towarzystwo Ekonomiczne: PTE), Ryszard Petru. Both political groups hover around the 5% threshold, although PSL has more chances to exceed it than the new liberal association due to its long history and support in Poland's agrarian areas.
Government instability risks
There are two consequences to Kukiz's party gaining seats in parliament. First, Kukiz's movement is ideologically close to the PiS, making the two the most probable coalition partners. A PiS-Kukiz coalition (in alliance with the SP and PR) will be inherently unstable as it gathers people from different political environments, and in case of Kukiz's group, also people without political experience. Kukiz's factions gather mostly right-wing local leaders, especially from the Dolny Slask region (not least former activists of the Mayor of Wroclaw, Rafal Dutkiewicz). It also attracts people linked to Janusz Korwin-Mikke, a far-right Member of the European Parliament. Therefore it is highly probable that such an arrangement would result in divisions, inter-party migrations, and overall government instability.
Second, Kukiz's right-wing agenda has already influenced Poland's policies, being incorporated in the policies of the current PO/PSL government. Soon after losing in the first round of the May presidential election, President Bronislaw Komorowski (PO) – who will soon be replaced by PiS's Andrzej Duda – said he would propose a national referendum on the electoral system, political party funding and the tax code, which was directly inspired by Kukiz's agenda. Another example is the legislation recently passed overwhelmingly by the Sejm (lower house of parliament), which imposed restrictions on the purchase of the agricultural land by citizens of other EU countries. Kukiz also supports restriction on the purchase of the agricultural lands to foreigners after the current protective period expires in May 2016.
Outlook and implications
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The PiS's nominee for the prime ministerial post, Beata Szydlo, |
A PiS/Kukiz government is likely to be much more selective towards foreign capital than the current PO/PSL coalition. Both political groups have indicated they would follow the example of the Hungarian government and impose extraordinary taxes (with rates yet to be specified) on banks, telecoms and supermarkets. This falls in line with PiS's inclination towards fiscal loosening, which will most likely take the form of higher tax-free threshold on wages or lower value-added tax (VAT) rates.
Suspension of further privatisations of "strategic" companies, as determined by PiS, would also be likely, and would affect PKO BP bank, PZU insurance group, or energy company PGE. PiS and Kukiz have also announced plans to provide help for people holding mortgages in Swiss francs, following the Hungarian example, after a surge of the currency in relation to the Polish zloty by almost 80% since 2007. The PiS's proposal includes ordering banks to converse the Swiss franc-denominated mortgages at an exchange rate of the day of the loan purchase, which according to the Polish Banks Association, would cost the Polish banking sector PLN30 billion (USD15.8 billion). Further, the two have supported creating the Ministry of Energy, indicating that the future government will attempt to keep coal mines operating (see Poland: 12 January 2015: Polish government's move to restructure country's largest coal producer increases risk of labour strikes in mining sector), revising the climate and energy package and maintaining the state control over main energy companies such as PGE, Enea, Energa and Tauron.
In terms of Poland's policy towards Russia in terms of the Russia-Ukraine conflict, a PiS government will certainly push the EU to maintain or introduce even tougher sanctions against Russia due to its consequent distrust towards Moscow. The PiS traditionally views Russia as an aggressor, seeking alliances with Ukraine, Lithuania and Belarus (the "ULB concept") instead. The PiS-led government would also attempt to renegotiate Poland's gas contract with Gazprom signed in 2009, seeking lower prices and more flexible conditions. Simultaneously, the government will attempt to lower Poland's dependence on Russian gas through imports from other countries thanks to the Swinoujscie LNG terminal which is set to open by the end of 2015. The PiS–led government will also continue the ongoing policy seeking new markets for Polish vegetable exports, which might change the trade flow in this area. However, any radical steps, such as termination of trade agreements due to political reasons, are highly unlikely, especially due to Poland's current high dependence on Russian hydrocarbons.
The PiS-led government would also likely restrict Russian investment in industries related to national security, particularly energy or digital services. The parliament is now working on legislation giving the Treasury Ministry the right to annul share transactions in strategic companies if they are considered a threat to national security. Therefore, Russian investment in Poland will be the subject of particular scrutiny, although the risk of contract review or cancellation is not probable.