Bloomberg news
ZLOTY HIT
While Western European governments have upped spending to stimulate
their
economies, Romania and Hungary have led spending cuts by eastern European
governments concerned about their ability to bring in external finance.
Poland's zloty hit a four-and-half-year low on Tuesday and the large
cap
WIG 20 bourse index slid close to levels last seen in 2003 as investors
continued to dump riskier assets in emerging Europe in favour of more
developed
western markets.
"(Without the savings) the (budget) deficit could be twice as high
and
this would be unacceptable to investors," said Marcin Mroz, chief economist
at
Fortis Bank in Warsaw.
"If such a scenario materialised, there could be problems with
selling
debt. So we can't even look at the savings plans in terms of 'is it good or
is
it not'. It is simply the only sensible way out for now."
Austrian and Italian officials have also warned in recent weeks that
a
squeeze on capital for their banks in the region could halt investment in
Central Europe's once-booming ex-communist economies.
Poland, with a population of 38 million, saw its economy grow 4.8
percent
in 2008, down from 6.7 percent in 2007. It is expected to slow even more
sharply
this year with some even expecting growth close to zero.
Fears over growth, jobs and consumption have helped prompt the
central
bank to cut interest rates three times since November, by a total of 175
basis
points, bringing its main rate down to 4.25 percent.
Underlining the pace of the country's economic slowdown, two of the
three
most persistent hawks on the central bank's 10-strong Monetary Policy
Council
(MPC) called on Tuesday for another rate cut this month.
"We're still in an easing cycle," Marian Noga, who consistently
backed
rate hikes during the bank's last cycle of monetary tightening, told the
Gazeta
Prawna daily.
"Every sharp decline in industrial output breaks the balance in the
economy. We can't allow for that now."