Emerging Europe

Polish central bank chief 'embarrassed' by leaked tapes

I'm not resigning over tapes: Polish central bank chief
I'm not resigning over tapes: Polish central bank chief

Poland's central bank chief told CNBC he was "embarrassed" by the publication of a secretly recorded discussion between the governor and the interior minister about the removal of the finance minister.

Marek Belka said he had "no idea" who recorded and leaked the conversation, but saw no reason to step down.

In the tapes, recorded in July last year, Belka puts pressure on Interior Minister Bartlomiej Sienkiewicz to "appoint a technical, nonpolitical finance minister who will find full support from the central bank" – in return for the central bank boosting the economy ahead of 2015 elections. The central bank has claimed that the tape is taken out of context.

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Belka said the publication of the tapes had been very unpleasant due to the "colorful language" used, but also because the leaks created a "cooked-up narrative" that was very difficult to fight.

He said he was fighting the potential loss of credibility and added he was "very sorry" for any damage that might have been done to the central bank.

In his four years in office, Belka has become one of the most important figures behind Poland's emergence as one of the most successful economies in the former Soviet bloc, and the sixth largest economy in Europe.

The Polish central bank bank left its benchmark interest rate at 2.5 percent this month, but the rates panel changed the wording of its monthly statement regarding future policy direction to neutral .

Belka said he did not want to lead the market on with continuous promises that interest rates would remain unchanged and hinted that a rate cut, rather than a rate rise could be on the cards.

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"If the economy starts slowing down and the market will start thinking maybe a reduction in rates is something we account for, then our reiteration of this promise of keeping rates intact is very risky – so we decided to stop," Belka said, adding that it not mean after the third quarter the bank would definitely cut rates.

With the highest interest rate in Europe, foreign money has flowed into the Polish zloty in the last 12 months. Belka said there was no plans to weaken the currency.

"We never had a plan to weaken or strengthen the zloty, we are very adamant in saying we don't have a target rate," he said, which makes it difficult for the market to "play" with the currency.

"What we dislike is excessive dynamics on the exchange rate market, so if the zloty either goes up or down too quickly then we think it is helpful to show the flag on the market so investors know that something wrong can happen," he said.

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