Poland's ruling party to consider forging new alliances over budget

POLAND:Poland's conservative minority government said yesterday it might push through its 2006 budget by forging alliances with populist parties at both ends of the political spectrum, despite their vehement opposition to key reforms.

Members of the ruling Law and Justice party (PiS) said they would turn for support to smaller parties after another collapse in coalition talks with Civic Platform, the second largest group in parliament and staunch advocates for economic change. Since PiS narrowly beat Civic Platform (PO) in autumn elections, financial analysts have hoped they would team up to overhaul a sagging economy, prepare for adoption of the euro and cut 18 per cent unemployment.

But the markets dipped yesterday on news that PiS was looking elsewhere for the votes it needs to push through the budget, towards parties who have vowed to oppose liberal reforms that worry their supporters among the rural and urban poor.

"After the failure of talks with the Platform, we are ready to seriously consider a parliamentary coalition, and in the future also a government coalition with Self-Defence, the Polish Peasants Party and even the League of Polish Families," said senior PiS member Adam Lipinski.

"I think we should reach an agreement before the budget vote on January 24th - so far we have agreed on most budget issues with those parties."

Civic Platform also acknowledged that it had abandoned hope of joining the ruling coalition by naming its shadow cabinet.

"It is good that the situation is now clear," said shadow foreign affairs spokesman Bronislaw Komorowski. "We have nothing left to talk about with Law and Justice."

While PO wants to liberalise markets, cut state spending and introduce a flat tax rate to encourage investment, PiS pledged during the election to cut taxes and boost welfare payments and state intervention in the economy.

Economists irked by lavish PiS promises were further alarmed by its sceptical attitude towards the EU and lack of enthusiasm for the euro, opinions the party shares with the populist groups it is now wooing. Both the left-wing Self-Defence party and the nationalist League of Polish Families have little time for Brussels or the kind of spending cuts that would help prepare the largest new EU member for adoption of the euro.

"There is a clear delay in the euro adoption timetable in Poland, from 2009 to 2012," said Arkadiusz Krzesniak, an analyst at Deutsche Bank in Warsaw. "This is because of the political cost of meeting the fiscal criteria for entry."