FT.com / World / Europe Thursday Feb 12 2004. All times are London time. Roger Bove Edit Profile Take a tour Log out Home World US UK Europe Asia-Pacific Middle East & Africa Americas International economy Brussels briefing News headlines News in depth Business Markets Markets & funds data Industries Lex Comment & analysis Technology Management Your money Arts & Weekend Sport Jobs & classifieds In today's FT FT Reports Creative Business FTfm FT-IT World reports Business reports News in depth Rebuilding Iraq Combating Sars US elections 2004 Global security Science briefing Arab-Israel conflict Columnists Martin Wolf Lucy Kellaway Philip Stephens Quentin Peel Lombard Gerard Baker Amity Shlaes World / EuropePrint article | Email Poland's minority government scrabbles among the opposition to gain support for spending reforms By Jan Cienski Published: February 12 2004 4:00 | Last Updated: February 12 2004 4:00 In a sign of its increasing desperation to pass a spending reform package, Poland's left-wing minority government is holding talks with the largest opposition party in the hope of gaining its support. But the opposition is pessimistic about the possibility of co-operation on the plan to halt spiralling budget deficits. Jan Rokita, the parliamentary leader of the Civic Platform (PO) opposition party, told the Financial Times that the state of the talks was bad and accused the government of being un- trustworthy. "It's always like this with communists," he said. "No one has ever held honest talks with communists." The deadline for both sides to decide whether or not to support the plan, named after economy minister Jerzy Hausner, is February 29, the date by which the government is supposed to show draft legislation for the entire reform package. If by that time the government has not broadened its support, the Hausner plan could fail in parliament, provoking an early election. Speaking on Polish radio, Krzysztof Janik, head of the parliamentary caucus of the ruling Democratic Left Alliance (SLD), warned of an Argentine-style collapse: "If by March 2 or 3 the bills are not forwarded for further work, then by the next day the zloty will go mad and investors will begin to flee from Poland." Concern over the fate of the plan, which aims to cut 30bn zlotys (€6.2bn) in social spending and another 20bn zlotys in administrative costs by 2007, is causing the zloty to fluctuate wildly on currency markets. On Friday it hit a record low of 4.9 against the euro, before rising slightly this week. Some analysts expect the rate to fall below 5 zlotys if the Hausner plan fails. As a condition for its support, the PO wants the SLD to introduce a 15 per cent flat tax for individuals, corporations and value added tax, and to extend spending and administrative reforms. Corporate tax is 19 per cent, income tax ranges from 19 to 40 per cent and the general VAT rate is 22 per cent. Leszek Miller, prime minister, is sceptical about the flat tax, warning that it could blow an even larger hole in the budget, while the PO says that lower taxes would spur economic activity and end up bringing in more revenue than is lost. If the SLD refuses to adopt the PO's economic programme, it would become very difficult politically for the opposition party to support the government, even though PO leaders acknowledge spending reforms are in the national interest. "If they don't accept our proposals, we won't agree to any political accord with them and will say that their plan does not meet the minimum requirements," said Mr Rokita of PO, adding that such as outcome was likely. The PO is leading in opinion polls and expects to form the next government after elections due in 2005, probably in coalition with the smaller Truth and Justice party (PiS). The PO recognises the risk of giving ammunition to other opposition parties for giving the impression of "collaborating with a collapsing and particularly unpopular government, which endangers our own electoral chances," said Mr Rokita. The attacks have already begun. In an attempt to boost its own stagnant poll numbers, PiS is accusing the PO of contemplating a coalition government with the ex-communists in the SLD. "I don't understand why the Platform [PO] is supporting the government of Leszek Miller," said Jaroslaw Kaczynski, PiS leader, stressing his party's rejection of the Hausner plan. 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