The amended NBP bill has already seen the light of day. On May 28th it was taken up by the Council of Ministers and the government is expected to consider it the next meeting, on June 17th. Economists have objections to the part concerning the right to purchase Treasury bonds on the secondary market.
According to the taped conversation between Marek Belka and Bartłomiej Sienkiewicz, it was supposed to secure the government and the coffers in difficult election years. In July 2013 forecasts for our economy were not as optimistic as they are today, as the worst scenarios indicated GDP growth of 0.5%. Back then it was not certain, whether it would be possible to transfer some of the funds in OFEs to the public pension fund, which would greatly improve the state’s debt statistics. The preliminary bill was approved at year end. The idea discussed on tape was officially proposed by the Ministry of Finance several months later.
Economists emphasize that the Article 220 of Polish Constitution is clear: “The budget bill cannot assume that the budget deficit be financed by borrowing from the central bank”. According to the Treaty on the functioning of the European Union, the ECB and national central banks are forbidden to lend to governments to cover budget deficits or for any other reason. However, at the time when the proposal for Treasury bond purchase was first unveiled, in Autumn, the Ministry of Finance explained in a special statement that planned changes in the Act on the NBP will allow the central bank to become the so called lender of last resort, i.e. to assist distressed banks. “The intention of the new law is not to introduce the possibility of financing the budget deficit by the NBP” – the Ministry’s press release states.
Economists are divided in their assessment of the instrument discussed on the taped meeting. – Such a proposal is in violation of the Constitution and the EU treaty – claims Rafał Antczak, member of the board at Deloitte Business Consulting – such mechanisms can be considered when public finance is in danger but our economy was stable in July 2013.
A different economist believes, however, that the proposed instrument does not pertain to direct budget financing and as such is constitutional. Maciej Bukowski, the President of WISE Institute, emphasizes, however, that the mechanism is in fact widely used throughout the world but it requires a high degree of political culture and maturity. It must be beyond the shadow of a doubt that it would not be used to put pressure on the central bank by someone who wants to do his political interests.
Full article is available on the rp.pl website.
