WARSAW, April 11 (Reuters) – Poland’s central bank governor
Slawomir Skrzypek and President Lech Kaczynski died in a plane
crash in Russia on Saturday.

Following is analysis of issues surrounding the appointment
of Skrzypek’s successor and possible policy changes at the
central bank.

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For more stories on the crash, click [ID:nLDE639096]
For analysis of the market impact, click [ID:nLDE63A09N]
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HOW AND WHEN WILL A SUCCESSOR BE APPOINTED?

The Polish constitution stipulates that the governor is
appointed by the president for a six-year term, but his
candidacy needs to be approved by parliament. Skrzypek was
mid-way through his term.

But Kaczynski’s death clouds the process; the law does not
clearly indicate whether Parliamentary Speaker Bronislaw
Komorowski, who has taken over as acting president, can make the
appointment before the presidential election that he must call
within 14 days and hold within two months after that.

The central bank law requires that a new governor be
appointed within three months of a vacancy, which would leave
hardly any time after the election. Some analysts say that in
order to signal stability at the central bank, the appointment
could be made before the election if parliament reaches a
consensus on a candidate.

Skrzypek’s top deputy Piotr Wiesiolek has taken over
day-to-day management of the central bank, but it is not yet
clear whether he will take on other responsibilities, such as
voting during meetings of the Monetary Policy Council.

MPC member Elzbieta Chojna-Duch said in a television
interview on Sunday that the council would discuss several legal
questions surrounding the transition period, including how it
would choose its chair for upcoming meetings.

The MPC usually meets twice a month, with its second sitting
in the last week of the month deciding on interest rates.

WHO ARE POTENTIAL CANDIDATES TO SUCCEED SKRZYPEK?

Analysts are floating several possible candidates:

— Boguslaw Grabowski, a former MPC member who was known as
a monetary policy hawk; he ended his six-year term in 2004 and
now heads one of Poland’s largest investment funds, Skarbiec.

— Dariusz Filar, a former MPC member who ended his term
this year; also seen as a hawk.

— Jerzy Pruski, who was the top deputy governor at the
central bank for four years before falling out with Skrzypek in
2008. Since then he has served as chief executive of Poland’s
largest bank, PKO BP PKOB.WA, and now heads the Banking
Guarantee Fund.

— Finance Minister Jacek Rostowski, who has held his post
since 2007; he is widely respected for his management of the
economy during the global financial crisis, from which Poland
escaped relatively lightly.

An even more radical step would be to turn to Leszek
Balcerowicz, who was governor of the central bank from 2001 to
2007 and was known as a strong hawk. Balcerowicz was one of the
architects of Poland’s transition to a market economy two
decades ago, and was praised abroad and sometimes criticised at
home for his role. He pushed for pension and other reforms
during a stint as finance minister in the late 1990s.

Some analysts speculate the choice could come from among the
nine current MPC members, who took office this year.

WILL MONETARY POLICY CHANGE?

Skrzypek, who had a tie-breaking vote, was once seen as the
staunchest dove on the 10-member interest rate-setting body, and
was on the losing end of several decisions.

But in recent months, as a new, more government-friendly MPC
was appointed, Skrzypek had begun to speak of bringing the key
rate above its all-time low of 3.5 percent. The latest Reuters
poll, in March, found economists expecting the rate to rise to
4.0 percent by the end of this year. [ID:nLDE6270J3]

Economists expect Komorowski, a member of the ruling party
and an early favourite to win the presidential election, to pick
a new governor who might be moderately more hawkish than
Skrzypek, but there will probably be little if any effect on the
full MPC’s rate decisions.

FOREIGN EXCHANGE POLICY

Skrzypek orchestrated the central bank’s intervention last
Friday to halt the strengthening of the zloty EURPLN=, its
first such move since the zloty’s free-float a decade ago.
[ID:nLDE63816K]

There is speculation that Skrzypek’s successor may be less
inclined to intervene against the zloty, but no clear evidence
for this; Prime Minister Donald Tusk’s government backed the
intervention, believing zloty strength could hurt the economic
recovery.

POLAND’S ASPIRATIONS TO ADOPT THE EURO?

The central bank under Skrzypek was seen as one of the few
remaining bastions of euroscepticism in Poland; like Kaczynski,
who appointed him, Skrzypek had appeared reluctant to commit to
a target for joining the single currency.

The centre-right government of Prime Minister Donald Tusk
aims to adopt the euro as soon as 2015, after dropping a more
ambitious target during the global financial crisis. Komorowski
is expected to choose a central bank chief who is more
supportive of euro entry.

Ultimately it is the government which decides on euro entry,
though it must coordinate its policy with the central bank,
which would need to take steps to keep the zloty within a
euro-anchored ban for at least two years before adoption.

FISCAL POLICY

A new, more government-friendly central bank governor would
likely end the row between the bank’s management, led by
Skrzypek, and new MPC members close to the ruling coalition over
the size of the bank’s profit, and therefore how much of the
profit will go towards meeting Poland’s fiscal gap.

Under Polish law 95 percent of the profit is automatically
transferred to the government, but there has been a bitter
dispute over the size of required reserves; Skrzypek claimed the
profit was only 4.2 billion zlotys, while other MPC members
estimated it as roughly twice that amount.

Skrzypek’s successor may also drop the central bank’s
opposition to extending Poland’s $20.5 billion flexible credit
line from the International Monetary Fund, which was opened last
year and expires in May.

(Edited by Andrew Torchia)