Poland deserves some recognition: they brought us Lech Kaczyński (left) and Jarosław Kaczyński (right). In 2006, Lech, the president of Poland, appointed his twin brother Jaroslaw as Prime Minister. While dutifully manging the fragile coalition government and promoting a conservative Christian agenda, the duo became overnight YouTube sensations (as well as the butt end of a new wave of politically charged one-liners). In 2007, the Law and Justice party that was co-founded by the twins lost its majority in Parliament and Jaroslaw, became leader of the opposition. Lech will continue to serve his five-year term as President until 2010.
On February 10th, Poland set another precedent (unless you consider Medvedev Putin's twin) by announcing a solution to the country's currency problems. The economics minister, Waldemar Pawlak, announced that the Polish government will pass a law allowing companies to renegotiate currency option contracts established last year. Back then economists believed Poland's currency, the zloty, would continue to strengthen into 2009 and threaten Poland's export industry. These companies had the option of purchasing currency in advance at prices below the predicted value. Had the currency continued to appreciate, these companies would have been able to continue to sell products overseas at more competitive prices than the predicted exchange rate would allow. This was before the economic downturn. Now these companies are holding currency options priced well above the going rate. According to the Economist, the zloty has lost nearly 37% of it's value against the Euro since 2008 and led to cumulative losses estimated at $5 billion. Many of these companies face bankruptcy and or failure.
To solve this crisis, the Polish government is going to allow businesses to retroactively renegotiate or simply back out of their currency options. In this scenario, the burden of the currency decline will weigh more heavily upon banks and save many companies from catastrophe. Aside from the legal mess that this will create, the move is flat out sketchy business; not unlike appointing your own brother to a top political office. Laugh all you want, but these backwater politics just may stave off the collapse of the country's export industry.
Lech Kaczyński Photo via the President of the Republic of Poland
Jaroslaw Kaczyński Photo via the Chancellory of the Prime Minister
On February 10th, Poland set another precedent (unless you consider Medvedev Putin's twin) by announcing a solution to the country's currency problems. The economics minister, Waldemar Pawlak, announced that the Polish government will pass a law allowing companies to renegotiate currency option contracts established last year. Back then economists believed Poland's currency, the zloty, would continue to strengthen into 2009 and threaten Poland's export industry. These companies had the option of purchasing currency in advance at prices below the predicted value. Had the currency continued to appreciate, these companies would have been able to continue to sell products overseas at more competitive prices than the predicted exchange rate would allow. This was before the economic downturn. Now these companies are holding currency options priced well above the going rate. According to the Economist, the zloty has lost nearly 37% of it's value against the Euro since 2008 and led to cumulative losses estimated at $5 billion. Many of these companies face bankruptcy and or failure.
To solve this crisis, the Polish government is going to allow businesses to retroactively renegotiate or simply back out of their currency options. In this scenario, the burden of the currency decline will weigh more heavily upon banks and save many companies from catastrophe. Aside from the legal mess that this will create, the move is flat out sketchy business; not unlike appointing your own brother to a top political office. Laugh all you want, but these backwater politics just may stave off the collapse of the country's export industry.
Lech Kaczyński Photo via the President of the Republic of Poland
Jaroslaw Kaczyński Photo via the Chancellory of the Prime Minister
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