Is Poland Going To Leave the EU? – October 2021

This article is related to the potential devaluation of the Polish złoty due to Polish government leaving the EU or squashing central bank independence. 

On October 7, 2021, Poland’s Constitutional Court ruled that key articles of the European Union were incompatible with Polish law. Now the European Union is threatening to withhold Covid relief money assigned to Poland worth €57 billion in the shape of grants and loans.

After slowly packing courts with party allies over the years, the ruling Law and Justice Party is keen to take on the European Union over their legal system. The ruling party is pretty popular in Poland, they have enacted sought-after policies like a child subsidy programme, abortion laws and tax reforms. Although EU membership is popular among Poles, if aid becomes tied to reform or western liberal ideas, a “Polexit” might very well happen. According to Article 50 of the Lisbon Treaty, “Any member state may decide to withdraw from the union in accordance with its own constitutional requirements.” In the UK, Article 50 was invoked only after the Brexit vote to leave or remain in the union. There aren’t any clear guidelines if you even need a vote.

Even if Poland never leaves the EU, the ruling party could try other means to get their policies enacted. They filled the courts with party sympathizers, why not go after the central bank to pursue policy goals? The Narodowy Bank Polski (Central Bank of Poland) is composed of nine members appointed for six-year terms in equal numbers by the President of the Republic of Poland, the Sejm (the Polish Parliament), and the Senate. The President has been a loyal ally of the ruling party since 2015. The Law and Justice Party has held 235 of the 460 seats in the Sejm since 2015 and which number was renewed in 2019. The party held 52 of 100 seats since 2015 but went down to 48 seats in 2019.

A potential short target could be:
-Powszechna Kasa Oszczednosci Bank Polski (PKO.WA) is a Polish regional bank with some operations in other parts of Europe with over 25,000 full-time employees.

Elsewhere in Europe, a nationalist tv personality called Eric Zemmour recently surpassed Marine Le Pen in first-round presidential election polling in France. He has pledged to restore the primacy of French law over EU law. Mr Zemmour hasn’t officially declared he is running. Current president Emmanuel Macron still leads in the polls (Zemmour is in second place).

Sources: https://www.nbp.pl/ , Yahoo Finance, BBC, Bloomberg, Financial Times, The Economist

I have no position in any stocks mentioned in this article.

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