The pre-emptive and early tightening by Poland’s central bank and skilful balancing of growth versus inflation meant that the country was the only one in Europe to avoid a recession in the years following the 2008 financial crisis
When Marek Belka was appointed governor of the National Bank of Poland in mid-2010, it was in tragic circumstances: his predecessor, Slawomir Skrzypek, was one of the 96 victims of the Smolensk air crash that killed the country’s president, along with much of its elite.
Yet however traumatic the circumstances, Belka, who has also been prime minister and finance minister, acknowledges that his appointment led to an improvement in relations between the central bank and the government at a crucial time.
“It was a tricky moment,” he says. “The bank and the finance ministry were at odds with each other, disagreeing over the prolongation of Poland’s flexible credit line from the IMF. After I took office, we signed on the terms of the prolongation within 48 hours – today everyone agrees this is one of the key pillars supporting the stability of the Polish economy.”
Poland, the only country in Europe to avoid recession in the aftermath of the 2008 financial crisis, faced hard policy calls, and Belka is widely credited with playing a major role in shepherding the country through a stormy patch.
The National Bank of Poland was among the first in the region to begin tightening last year, but has also balanced the inflation risk against the region’s still-fragile growth, and with inflation falling 0.3% on a sequential basis in July and the annual inflation rate moving back towards target, the policy mix appears to have been vindicated.
“We used our intuition correctly on monetary policy. The economy was growing and inflation wasn’t imminent, but if you’re serious about inflation you should start to tighten at that point. But we did so in a modest way,” he says.
But while growth remains robust – dipping one percentage point to 4.3% in the second quarter – Poland could still face trouble if the eurozone slips back into recession.
Belka, however, believes the country still has room for manoeuvre, with potential for rate cuts as well as the promise of a sound budget. “This year’s budget will be a positive surprise for most people. I believe that there is a determination inside the ministry of finance to cut the deficit to below 3%.”
Belka is aware, however, that Poland cannot be immune to Europe’s economic woes. “The fiscal situation is improving dramatically this year, and this protects Poland from an attack on Poland’s debt. We are prepared to fight, but if there is a perfect storm then of course there will be problems.”
But he is also the central banker of an increasingly self-confident country of 38 million that is keen to assert itself on the European stage.
Despite current concerns, joining the euro remains a political commitment, he says. “Even if the economic case looks weaker right now, Polish elites have a fear of being on the outside with others taking decisions over their heads.”
And he is certain that the eurozone is moving towards a form of fiscal integration. Given the momentousness of the events that are afoot, he says, the political reaction across the continent has been remarkable: “In normal times, people would be astonished at the speed of the political response. But this is not a normal time.”