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Poland – Politics
Prime Minister Jaroslaw Kaczynski: trade-off between government stability and markets
·The move by Jaroslaw Kaczynski to oust Marcinkiewicz and assume position of prime minister viewed negatively by markets - given his populist commitment to more social spending.
·Significant development – not positive for market – but downside may not be as great as it first appears.
·Kaczynski’s move could be seen as a logical step towards consolidating the government after the coalition with the populist Self Defence (Samoobrona) and League of Polish Families (LPR) was formed in May06.
·The nomination of the current deputy finance minister Stanislaw Kluza as new finance minister is a positive signal to markets along with Kaczynski’s commitment to respect the pln 30 bn deficit target.
Asset conclusions: Kaczynski taking the reigns heightens the risk of a negative policy shift, but his awareness of capital markets, his weak political standing and his interest in economic prosperity should be disciplining forces. Any market sell-off should not be regarded as fundamentally justified.