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. Last Updated: 07/27/2016

Cutbacks In Poland Come Under Attack

WARSAW -- Poland's ambitious three-year economic program is being threatened by pressure to increase government spending, Deputy Finance Minister Grzegorz Kolodko said.

"There is great pressure for more spending in social and other spheres," Kolodko said last week.

"As time goes by, I am becoming less optimistic that we can implement our program," he said.

Kolodko did not detail the spending pressures but the Finance Ministry was recently forced by the left-wing ruling coalition to put off plans for pension cuts.

Kolodko said the government was now working on a tight 1995 budget, envisaging a deficit equivalent to 3.3 percent of gross domestic product, and inflation of 19 percent.

But he said the budget and his mid-term plan, under which the economy would expand by 22 percent by the end of 1997 and inflation would fall to a single digit from 32 percent now, was becoming hostage to political tensions in Poland.

"There is a resistance in the political sphere ... which I regret because I believe there should be a basic agreement on certain aims of the country," Kolodko said.

Kolodko said he was referring to media and opposition criticism of the government's policies. But he also conceded there were some tensions within his own coalition, for example concerning privatization.

Recently, the opposition criticized Prime Minister Waldemar Pawlak for delaying privatization and charged that Kolodko's plans could not be implemented because of conflicts within the cabinet.

Kolodko, brushing aside questions about these conflicts, said Poland needed a concerted effort to bring down inflation, continue macroeconomic discipline and facilitate further rapid growth.

Asked about his recent conflict with the central bank over monetary policy, Kolodko said it was purely professional and that there was no intention on his part to limit the bank's autonomy.

He called the bank's refusal to lower interest rates its sovereign decision but said he believed it was professionally wrong.

He also said he expected the bank to define conditions under which it would be prepared to meet the government's wish for the rates to be reduced by about one point.

The bank said Thursday it might lower the rates (now around 33 percent) later this year, provided the economic situation was favorable.

The dispute, which also touched on the bank's Monday decision to slow the pace of the devaluation of the Polish zloty, has turned into a bitter public row.

The bank has accused Kolodko of trying to undermine its independence while the government said the bank was harming the economy.