The new finance minister

At times I come to think the more I work overtime, the more hollow my life gets. It is not about doing nothing except working and focusing on mundane daily duties – over the last fortnight I easily found time to eat out (not confuse for ‘date’) with a friend, attend a conference, visit a theatre, but to offset this, I totally lost track of what was going on in the world. Just imagine yesterday, with a three-day delay, I learnt about a considerable reshuffle in the Polish government The recent pace of my work has become so dreadful (my thanks to several colleagues who have taken sick leaves, not their fault, but me is who is bearing the brunt of their infections) that I could not even find time to take a break and spend a few minutes surfing the web to check the daily news and back home, after eleven hours of toiling away, I did not feel like watching TV or reading news online. Over the working week I lost track of everything and had to catch up…

Yesterday I read the list of 7 ministers that have been replaced and their successors. Cross my heart, I cannot recall now most of them and what has left in my memory is a portrait of Elżbieta Bieńkowska, who will serve as deputy prime minister (she’s got balls) and the new finance minister.

The departing (appointment of the new minister becomes effective on 27 November 2013) finance minister, Mr Rostowski, has held his position over six years and in the recent months has gone increasing unpopular with voters, in the wake of plans of dismantling the private-run part of pension system and the budget amendments resulting in higher deficit and suspending safety debt/GDP ceilings. Having observed him over his term in office more or less cautiously, I am in two minds about Mr. Rostowski’s performance during his tenure. To make an unbiased judgement, I would need a comparison and because of the long period of time when he was irreplaceable, I cannot find a proper benchmark. When he was taking the office, Poland was in the last months of riding the waves of pre-crisis boom. In late 2008 it became evident economic reality had been turned upside down, economic growth decelerated swiftly and running a sensible fiscal policy became a much more challenging task. In 2009 he managed to strike a fair balance between using fiscal stimulus to bolster economy and keeping debt/GDP ratio on moderate levels, without jeopardising Poland’s creditworthiness. In later years he could not boast about actual accomplishments in bringing forth structural reforms that could heal Poland’s public finances in long run. In the second wave of economic slowdown, due to excessive budgetary deficit Poland ran since 2010, he ran out of tools to rouse up economy, therefore Polish economy recorded sluggish growth of mere 0.5% in 1Q2013. His plans of detracting from the pension funds were not driven by straightforward conviction of inherent drawbacks of the pension system, but by pressure to relieve the tensions in the state budget. By many Mr Rostowski is deemed to be a seasoned liar. I do not wish to examine how many times he was departing from the truth, although such summary at the end of his term could come in useful. As his positive attribute, I will memorise his power of calmness in public discussions over the pension system. He managed to clearly and substantively explain the workings of the pension system and purpose of the proposed changes. Despite being quite selective in his justifications, his way of speaking and argumentation were assessed impressive not only by me. For too many PO supporters he was intolerable, so potential positive impact of ousting him from the government has probably urged Mr Tusk to look for someone to replace him.

My first association when I heard the name “Mateusz Szczurek” was… ING. And then my second thought was… ING pension fund…

Over the whole weekend I was wondering what the rationale behind this decision was and whose decision it actually was.

By all accounts, it should have been an independent decision of Mr Tusk. Quite probably, the prime minister, minding the impact of the reshuffle on the support for the government, shied away from swapping Mr Rostowski for a PO politician and preferred to nominate a person commonly labelled as an independent expert.

Beyond all doubt, given the gruelling state of Poland’s public finances, many potential candidates turned down offers of taking up the challenge of running the shop in which one has to bend over backwards to make ends meet. A rationally-thinking man could consider such offer either as a poison pill or… as a rewarding challenge.

Mindful of this, I find Mr Szczurek’s choice mind-boggling. He had pursued his career (started at the age of 22, just like mine) with one institution – ING and in 2011 was promoted to the position of chief economist for CEE region, the prestigious and certainly financially rewarding job. What drove this 38-year-old father of five children and cycling enthusiast to give up on the position, reputation of independent expert, credentials, esteem and earnings I could only dream of, to step into the murky world of politics?

For sure the motives were not pecuniary. I estimate his salary will shrink by at least 80%. My parents told me he had been asked by a TV journalist in one of interviews, how would he get used to earnings of 15,000 before tax a month after leaving a much better paid position and Mr Szczurek was more than perplexed. The after-tax salary of some 9,000 per month will allow him and his family to scrape along, but if they do not tap their savings, their standard of living is likely deteriorate…

If it was not about money, it must have been about power. Maybe the financial conglomerate he used to work for so long was too small for him to fulfil his potential. Maybe he craved for a profession that would make him far more recognisable, influential and, if his achievements were remarkable, remembered by generations. Maybe, after years of working for a Dutch corporation, patriotic feelings overwhelmed him and he made up his mind to sacrifice the lucrative position for a benefit of his country. I am reluctant to give credence to the last explanation which here serves the purpose of playing intellectual game with the readership. I hold the view, you may share it or not, that decent people tend to stay away from the politics, do their bit in a private sector, perform their jobs as good as they can and lead stable lives far away from the spotlight…

Revisiting my first impression. I sever from any conspiracy theories, but it has to be borne in mind ING manages a pension fund being a part of public pension system, whose assets account for 24% of total assets under management in Poland. ING is a meaningful stakeholder of the pension system in Poland and has a vested interest in retaining it in the current shape, guaranteeing pension fund managers a steady flow of fees and little responsibility for returns. It occurred to me the new minister, in the light of decreasing support for the pension reform, would take steps to unwind it. On second thoughts, I abandoned this theory. Having in mind the budget for 2014 would not be overrun without diminishing transfers to social security fund, aimed at replenishing deficiencies generated by moving contributions to pension funds, one of key criterions for sure was the candidate’s promise to take over the implementation of pension reform, in line with the government’s blueprint. After stepping down from his current position, Mr Szczurek will no longer owe the duty of loyalty to ING, but by getting involved in undermining the business of pension fund managers, he burns his bridges with his Dutch-based employer.

Most economists, asked about the competencies of the new minister, either could say little about him, or spoke highly about his characteristics. Unlike many economists, he is said to be a rational and equable expert who favours modest solutions, rather than ardent follower of a specific doctrine (see besotted neo-liberal, Mr Balcerowicz) – the stance I hold dear with economists and which bodes well on his future conduct.

I wish Mr Szczurek many successes on his new path and pin hopes in him – I hope his prudent decisions will contribute to sustainable improvement Poland’s creditworthiness and reduce the scale of indebtedness in the long run. Much indicates better times are coming. When the economy is expanding, expenditure cuts, accompanied by keeping tax rates intact, or even raising them, when appropriate, are the least painful to the economy and people. May he resist temptations to sit on laurels and cut off coupons from the booming economy and calls to add fuel to the fire by easing fiscal policies! May he not waste the chance to turn around the Poland’s public finances! May he not repeat the mistakes made by PiS government, when in 2007 the state budget, instead of reporting a surplus, ran a 22 billion PLN deficit!