Event

Lawmakers of the Law and Justice Party (PiS) pushed three bills through parliament during the last two weeks of July, stoking huge protests all across Poland and drawing criticism from the EU and US. The first bill would give politicians control over the National Judicial Council, the organisation that appoints judges. The other bill would allow the Justice Minister to sack every member of the Supreme Court, the body that among other things, rules on the validity of elections. And the third enables the Justice Minister to appoint and dismiss the heads of lower courts. Under the pressure of the European Commission and large public opposition, President Duda (non-partisan but backed by PiS) said on 24 July that he will veto the two first bills, although the third one on lower courts was retained.

Impact on country risk

The European Commission sent a formal notice to the Polish government, condemning the new court laws and expressing their worries about the size of power given to the Justice Minister. By sending the formal letter, Brussels embarked on a process that puts Poland at risk of binding court orders and heavy fines. Yet, sanctions that would take away Poland’s voting rights require unanimity, which is unlikely as Hungary assured to block such a move. Poland’s relations with the EU have deteriorated since PiS came to power in 2015 and started to dismantle some important checks and balances (media, civil service, and judiciary). President Duda was pushed towards using his veto. Nonetheless, the parliament can still overrule the presidential veto if PiS gathers sufficient support from other parties and forms a three-fifths majority.

The zloty recovered since early 2017, thanks to strong growth (rising consumer spending and EU recovery) after having lost significant value following the 2016 constitutional changes. The recent political turmoil put the currency under pressure again, yet the veto had an obvious positive impact. Nonetheless, the outlook remains uncertain as PiS leader Kaczynski might continue to wear down democratic checks and balances, despite the growing domestic and international opposition and possible EU sanctions.

Analyst: Louise Van Cauwenbergh, l.vancauwenbergh@credendo.com