The news agencies say it looks as if the populist-leftist Samoobrona party has stroke a deal with the Polish government to rejoin the coalition government with the Social-Conservative Law and Justice Party (PiS) and the Catholic nationalist League of Polish families. Hence, Poland will once again have a coalition government, and early elections are off the agenda - for now at least. This is not overly surprising and, as such, should have no significant impact on the Polish markets even though they are likely to find some relief in the fact that Poland will not be going to the polls just yet.
All in all, this does not change the situation much, and the coalition is likely to be quite weak - as was the case before Samoobrona left it. Samoobrona clearly has not rejoined the government out of love for the other parties in the coalition or because the three parties share a common political ideology, but rather because none of the parties would probably do well if elections were held now.
All things considered, the political situation in Poland will remain very uncertain and the Polish government will remain weak. Although the coalition government is not based on mutual respect among the participants, however, the participating parties agree on a number of key policy areas, such as suspiciousness of - if not outright hostility towards - foreign investment, doubts about central bank independence, and scepticism about the EU and Polish euro adoption. This is hardly the kind of policy preferences that are likely to put the financial markets in a jubilant mood. Rather, we fear that the negative political situation in Poland could intensify sales pressures in the Polish markets once the global financial conditions turn more challenging. That said, it is hardly a big market mover that the political situation is bad -with or with out Samoobrona in the Polish coalition government. As such, todays news is not really big news for the markets.
