Polish PM says central bank chief didn't break in leaked tape

By Pawel, Florkiewicz, and, Jakub and Iglewski
Marek Belka, President of the National Bank of Poland (Narodowy Bank Polski), delivers a speech during a conference on European economic integration in Vienna November 18, 2013. REUTERS/Heinz-Peter Bader

By Pawel, Florkiewicz, and, Jakub and Iglewski

WARSAW (Reuters) - Poland's prime minister said on Monday central bank governor Marek Belka had not committed any crime when he was captured in a secret recording using expletives about bank colleagues and discussing the removal of the finance minister.

The comments from Prime Minister Donald Tusk were likely to ease pressure on Belka to resign over the affair. He is considered a safe pair of hands by investors with assets in Poland, the European Union's sixth-biggest economy.

Poland's zloty fell by 0.6 percent earlier on Monday on market worries that Belka may have to quit. It recovered some of its losses after Tusk spoke.

The audio recording, released by the news magazine Wprost, contains extracts of a meeting in July between Belka and Interior Minister Bartlomiej Sienkiewicz. The conversation took place in a Warsaw restaurant called "Owl and friends," which is favoured by senior officials for its privacy.

Over the sound of dinner plates clanking, the two men can be heard using frequent expletives as they share candid views on members of the Cabinet and the central bank and talk about the government's financial problems.

Tusk, in his first detailed comments since the existence of the tape emerged on Saturday, said, "Irrespective of how nasty was their way of expressing their opinions, they were talking about how to help the country, not how to harm the country, about joint actions in the times of crisis."

At a specially-convened news conference, Tusk said he agreed with an initial assessment by Prosecutor-General Andrzej Seremet that there was no evidence either Belka or Sienkiewicz had committed a crime. Tusk said he had no plans to bow to opposition demands for the government to resign.

Under Polish law, central bank governors can only be removed if they are convicted of crimes or are incapacitated through illness. Belka is four years into a six-year term and could in theory seek another term.

CENTRAL BANK INDPENDENCE

The tape was potentially damaging to Belka because it left him open to accusations he violated the rules that the central bank and government should be independent of each other.

In the recording, he can be heard telling Sienkiewicz he would be willing for the bank to help the government out of its economic troubles on condition that Finance Minister Jacek Rostowski was removed.

Rostowski left the government in a reshuffle in November, though both Tusk and Belka have said that was a coincidence and unrelated to the discussion in the restaurant.

The other risk - which analysts say could be most significant in the long run - is that the publication of the tape will make it hard for Belka to work effectively with the central bank's Monetary Policy Council (MPC). It sets interest rates and is chaired by Belka.

In the recording, the discussion in the restaurant touches on the possibility the rate-setting council would block the bank from helping the government.

"Of course, we have this fucking Monetary Policy Council," Belka can be heard saying. "But we are able to play with it."

The recording also has Belka making disparaging personal remarks about one of the council members, Jerzy Hausner. Hausner told Reuters on Sunday he had no comment.

Belka on Sunday apologised to anyone offended by his crude language but said he had not stepped beyond the bounds of his authority as central bank chief. His comments had been taken out of context, he said, and no political deals had been struck.

Belka will have to face the members of the rate-setting council on Tuesday, when they hold one of their regular meetings.

On Monday, two members of the 10-person council, Elzbieta Chojna-Duch and Anna Zielinska-Glebocka, indicated they were satisfied with Belka's apologies for the crude language he used about the council on the tape.

A third member, Andrzej Kazmierczak, said: "I'm very sorry that I was assessed this way by the MPC chairman."

The central bank is at the moment weighing whether to break with its policy of keeping interest rates flat until September, and to cut them to help revive the economy.

Some banks' analysts said that, if Belka does stay on, the central bank may find it harder to cut rates because, in the light of the remarks on the tape, that could be perceived as bending to the interests of the government.

(Reporting by Michal Janusz and Jakub Iglewski; Writing by Marcin Goclowski; Editing by Christian Lowe, Larry King)