Poland’s opposition Law & Justice party is on course for an election victory unprecedented in the country’s modern history as it sweeps into power pledging a tougher stance on refugees and more state control over the economy.
Law & Justice won 37.7 percent of the vote and a projected 232 seats in the 460-member lower chamber, the first time that a single group will command a majority since the re-introduction of democracy in Poland in 1989, according to a revised Ipsos exit poll. The ruling Civic Platform, which oversaw a 24 percent expansion of Poland’s economy over its eight years in power, came second with 23.6 percent and 137 seats. Three other parties cleared the threshold for representation.
The rise of Law & Justice marks the newest challenge for a European Union that’s more divided than at any time since former communist states joined in 2004. While Poland’s currency, stocks and bonds have underperformed emerging-market peers amid investor concern that the opposition will hurt banks’ profits or spend too much, analysts at banks including UniCredit SpA and PKO Bank Polski SA expect markets to rebound following the vote.
“The madness of pre-election promises has nothing in common with real rule and I’m sure that Law & Justice will need to amend its pledges,” Piotr Bujak, a senior economist at PKO, Poland’s largest bank, said on Sunday. “There’s no reason for markets to panic as Law & Justice won enough to form a stable government, but not too much to change the constitution”
The zloty is little changed at 4.2582 per euro at 9:06 a.m. in Warsaw and the WIG20 index of Polish stocks fell 0.8 percent to the lowest since Oct. 7.
The victory, if confirmed by official results due on Tuesday at the earliest, would cap the opposition’s sweep of the country’s top posts following President Andrzej Duda’s surprise election win five months ago. Law & Justice’s margin of victory was reduced in the latest exit poll, and it may lose its projected majority if another party gains seats in parliament. If it wins just below 230 seats, it would still be the best showing in any ballot since 1989 and political analysts say the party won’t have trouble forming a government.
What’s changing the political landscape is discontent over economic prospects as Poland endures widening regional gaps in prosperity and an exodus of workers to western Europe. Beata Szydlo, Law & Justice’s candidate for prime minister, is poised to overhaul the $548 billion economy with pledges to raise taxes on the financial industry, increase spending on child support and start a 350 billion zloty ($90.6 billion) central bank loan program.
More than a fifth of Polish workers make less than the $720 a-month poverty threshold. The number of Poles living abroad has more than doubled in the past decade to 2.3 million.
The new government will look to tax bank assets from January by imposing a 0.39 percent levy, and another measure planned targeting bigger retailers, Zbigniew Kuzmiuk, a European Parliament member representing Law & Justice, told reporters in Warsaw on Sunday. Szydlo told TVN24 that boosting child subsidies is her policy priority while Civic Platform’s Kopacz conceded defeat during her election-night speech.
“With Law & Justice having majority in parliament and Kukiz coming in third, the climate to hit banks is very good,” Andrzej Domanski, who manages equities at Polish mutual fund Noble Funds TFI SA in Warsaw, said by phone. “Pro-market forces are absolutely on the defensive.”
The party has also sought to lean on the central bank to rev up the economy, with Kuzmiuk saying Law & Justice will speak with the “independent” monetary authority about boosting investment and economic growth while ruling out a budget deficit above 3 percent. The next parliament will vote in six new members of the bank’s 10-member policy council. Duda will appoint a further two rate setters, besides picking Governor Marek Belka’s successor by mid 2016.
Law & Justice has promised to accelerate economic growth to 5 percent from about 3.5 percent to reduce unemployment, which fell below 10 percent for the first time since 2008 two months ago.
The Ipsos exit poll showed the anti-establishment movement of rock musician Pawel Kukiz was in third with 8.7 percent support and 42 seats. Together with Law & Justice, the two groups are short of the two-thirds needed to amend Poland’s constitution. Nowoczesna, fronted by economist Ryszard Petru, garnered 7.5 percent and 30 seats, the co-ruling Polish Peasants Party won 5.2 percent and 18 seats and the KORWiN party is at 4.9 percent, just a fraction below the threshold to win entry into legislature.
Law & Justice has kept its campaign focused on Civic Platform scandals, including secretly-taped discussions of senior officials over lavish diners, which it says highlights the government’s detachment from issues that matter for ordinary Poles.
Tapping concerns among some of its conservative Catholic base that too many Muslims are being allowed into Europe, Law & Justice opposes German-led efforts forcing EU member states to take in more migrants. It’s against plans to curb smokestack emissions, which would hit the country’s unprofitable coal mining industry. It also seeks western support for a greater NATO presence on Polish soil.
“We are heading for a new era,” party leader Jaroslaw Kaczynski said in his acceptance speech. “We are extending our hand to those who want good changes.”