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Identifier
Created
Classification
Origin
06WARSAW36
2006-01-10 15:11:00
CONFIDENTIAL
Embassy Warsaw
Cable title:  

POLISH GOVERNMENT REPLACES FINANCE MINISTER TERESA

Tags:   ECON  EFIN  PL  PREL 
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This record is a partial extract of the original cable. The full text of the original cable is not available.
						C O N F I D E N T I A L SECTION 01 OF 03 WARSAW 000036 

SIPDIS

STATE FOR EUR/NCE DAVID KOSTELANCIK AND MICHAEL SESSUMS
USDOC FOR 4232/ITAQ/MAC/EUR/JBURGESS, MWILSON, AND JKLIMBALL
TREASURY FOR OASIA MATTHEW GAERTNER
FRANKFURT FOR TREASURY JIM WALLAR

E.O. 12958: DECL: 12/31/2015
TAGS: ECON EFIN PL PREL
SUBJECT: POLISH GOVERNMENT REPLACES FINANCE MINISTER TERESA
LUBINSKA WITH FORMER PO DEPUTY AND BUDGET EXPERT ZYTA
GILOWSKA

REF: WARSAW 00007

Classified By: Economic counselor Richard Rorvig for reasons 1.5 (b) an
d (d).

Corrected copy


-------
Summary
-------



1. (C) In a surprise move, Prime Minister Marcinkiewicz has
replaced Finance Minister Teresa Lubinska with ex-Civic
Platform Party (PO) insider and budget expert Zyta Gilowksa.
In addition, Gilowska will hold the rank of Deputy Prime
Minister. From September 2001 to May 2005 Gilowska was a
member of the Sejm. She resigned her seat in May 2005 and
left the PO following charges of nepotism. Gilowska,
currently a professor of public finance at Lubelski Catholic
University, was regarded as the PO's senior expert on budget
issues. Until her resignation from the party, she was tipped
to be the PO's candidate for Finance Minister in a possible
PO-PIS coalition government. The appointment of Gilowska
appears to be due less to the shortcomings of her
predecessor, than to PiS party leader Jaroslaw Kaczynski's
efforts to siphon off support for opposition parties and make
the PiS the big-tent center right political force. At the
same time, some analysts believe appointment of the
economically liberal Gilowska may weaken the League of Polish
Families (LPR) and Self Defence (SO) parties' support for
economic legislation in the Sejm. In a face-saving gesture,
former Minister Lubinska will now move to the Prime
Minister's office where she will work on budget issues, where
she will hold the rank of State Secretary.



--------------------------


Lubinska sacked after 60 days


--------------------------





2. (C) The sacking of Finance Minister Teresa Lubinska after
roughly 60 days in office sets something of a record for
brevity of tenure among Poland's post-communist Finance
Ministers. Lubinska, an academician who was Prime Minister
Marcinkiewicz's thesis advisor at university, was regarded as
one of the more vulnerable members of the cabinet due to her
lack of a party base, unfamiliarity with Warsaw politics, and
early press gaffes. In one widely-quoted first interview
with the Financial Times, Lubinska strongly criticized the
alleged negative impact of foreign hyper-markets on Polish
communities and pooh-poohed the value of rapid adoption of
the Euro. Lubinska will now move to Prime Minister
Marcinkiewicz's office where she will work on budget issues,
enjoying the rank of State Secretary.



--------------------------


More a Political than Economic Move


--------------------------





3. (C) Opposition Politicians leapt on Lubinska's dismissal,
the second minister to leave PM Marcinkiewicz's two-month old
government (see reftel), as evidence that the PiS Government
is wobbly. What seems likelier is that Zyta Gilowska, drummed
out of her leadership position in the opposition Civic

Platform last spring under charges of nepotism, is the latest
chapter in PIS party leader Jarolsaw Kaczynski's efforts to
siphon off support for opposition parties. PiS has pulled
away supporters from the right wing League of Polish Families
(LPR) and Self Defense (SO). Gilowska's appointment may well
be part of Kaczynski's ongoing effort to peel away supporters
from the Civic Platform as well, thus making the PiS the big
tent center-right political force in Poland. On the other
hand, bringing in the economically liberal Gilowska may
weaken LPR and SO support for economic legislation in the
Sejm.



--------------------------


Small Difference on Economic Issues


--------------------------




4. (C) In contrast to her predecessor, Gilowska brings to the
job familiarity with the Sejm procedures and inside knowledge
of Warsaw politics. However, as a practical matter, there is
likely to be little real difference on economic issues
between the two. Neither considered Poland ripe for joining
the Euro zone prior to 2010. Both are committed to carrying
out the main outlines of the PIS economic policy. Gilowska
is commonly credited with being the author of the Civic
Platform's election plank arguing for a unified 15 percent
tax rate for personal income tax, corporate income tax, and
value added tax. However, she has also stated that the 15
percent number was not her idea, but rather the concept of
PO-affiliated economist Rafal Antczak. Gilowska said she can
support the PiS proposal for a simplified, two step PIT tax
rate set at 18 and 32 percent, arguing that since the 32
percent marginal rate will only apply to a small percentage
of taxpayers, (those with a portion of income above 80,000
zloty a year), the proposal is virtually the equivalent of a
flat 18 percent rate.



5. (SBU) As the former deputy head of the PO party, Gilowska
was regarded as being very close to Party leader Donald Tusk.
She resigned from the party and the Sejm in May 2001,
following revelations that she had employed her son and
daughter-in-law in her Sejm office. Gilowska admitted no
wrongdoing, saying the daughter-in-law was hired when she was
still single, but told the press she would rather resign than
participate in a PO "show trial," her reference to the
disciplinary hearing which the PO had convoked in response to
the revelations. She subsequently resumed her teaching
position at Lubelski Catholic University and did not
participate in the 2005 election campaign.



--------------------------


Curriculum Vita


--------------------------





5. (U)

Born: July 7, 1949

Married, one child


Education:

Degree in Econometrics from Warsaw University (1972)

Ph.D. in Economics from Marie Curie Sklodowska University in
Lublin (1981)

Habilitation in Economics in 1994 from Marie Curie Sklodowska
University in Lublin


Professional experience:


1981-85 Economic faculty staff assistant at Lubelski
Catholic University

1985-94 Assistant professor of Economics Lubelski Catholic
University

1995-99 Associate Professor of Economics Catholic Lubelski
University

1999-2001 Professor of Economics Catholic Lubelski University
2001-2005 Member of the Sejm from Lublin (Civic Platform
Party)


Professor Gilowska is the author of more than 200 articles
and 20 books on public finance and local government.




--------------------------


Financial Markets Pleased


--------------------------





6. (SBU) The appointment of Gilowska, who is an expert on
public finance, has been initially welcomed by Poland's
financial markets and investors. Following news of her
appointment, the Zloty strengthened against the US dollar and
the Euro, GOP bonds rose, and the Warsaw stock market index
initially jumped two percent, prior to profit-taking.
Gilowska has reputation for toughness and speaking her mind.
PO deputy head Jan Rokita quipped to the press that she would
no doubt dominate future cabinet meetings. Financial
observers expect her to keep a somewhat tighter rein on the
GOP purse, and be a bit more likely to resist populist calls
for greater social spending. However, in her initial
interviews with the press, Gilowska has stressed her support
of PIS' goals of increasing employment and maintaining social
solidarity.






ASHE