Wednesday, March 02, 2011

Voluntary pensions, involuntary coalition crisis

A ruling coalition clash over a key element of the proposed cut of pension contributions could imperil the coalition itself, triggering snap elections this spring. As ever, the political calculations of the Civic Platform (PO)-Polish People's Party (PSL) coalition will be critical. But the junior PSL will have the bigger say. Will it decide that pulling away from the senior PO and sparking early elections is the right path? Or will the PSL opt to stick it out with the PO and carry on to the October elections?

The bone of contention is a measure supported by Labour Minister Jolanta Fedak (PSL) to give individuals the choice to have all their retirement pension contributions transferred to the state system or to have them (or some of them) sent to the privately managed pension funds. The proposal being worked on by the government does not currently include any voluntary aspect.

Leaving aside the economic impact, the political issues are clear. The opposition Law and Justice (PiS), Democratic Left Alliance (SLD) and PJN all support the voluntary aspect and want to amend any government project to reflect this. The three parties can muster 209 votes, putting them short of the 231 that would guarantee the amendment could be passed. But if the PSL's 31 MPs are added, then the resulting 240 would be unassailable.

The PO's desire not to make participation in the so-called second pillar (the privately managed part) voluntary is clear. Could it then accept extreme insubordination from the PSL? It shouldn't. It should say "good riddance to bad rubbish." By choosing to go with the opposition, the PSL would make clear it has no intention of backing up the PO.

The PO could then blame the PSL for destroying the coalition and submit a parliamentary dissolution vote that would pass easily were the PO, PSL, PiS and SLD to support it. That would set the stage for early elections sometime this spring.

Yet, my political calculations suggest this threat is probably small. First, the PSL would not necessarily gain much by distancing itself from the PO, which remains the most popular party despite some weakness in support of late. The PO's polling lead means it is likely to win the parliamentary elections that must be held by end-October. Assuming it does not win outright (as I do), the PO will have to form a coalition. Potential PSL treachery now would be a stark warning for the PO to avoid any future coalition with the Peasants.

Second, neither the PO nor the PSL wants elections this spring. The one-year anniversary of the April 10 Smolensk crash that killed President Lech Kaczynski and scores more will give PiS a big boost as the nation turns to mourn its dead. PiS voters will be electrified by the event, and Jaroslaw Kaczynski's party is likely to do everything to up the pressure on the government during this period, including trying to pin blame, whether direct or indirect, on the PO. PiS also targets the PSL's electorate directly.

The ruling coalition is also planning to capitalise on hanging out with European leaders in the second half of the year when Poland holds the six-month rotating EU presidency. Early elections would remove this option. The economy and wages are expected to grow further this year and unemployment should fall, giving more incentive for autumn rather than spring elections.

The political fight or PSL brinksmanship could lead to an early coalition explosion, but for now this seems unlikely. Rather, the PSL will likely attempt to extract some concession or another, and the PO-PSL coalition will carry on, or stumble on, to the autumn.

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