July 4, 2014 4:33 pm

Poland’s central bank chief Marek Belka on crises and secret tapes

The former prime minister talks about his role in the euro crisis and last month’s scandal over secretly recorded talks
Marek Belka©Pawel Glogowski

Marek Belka in the sitting room of his Warsaw apartment

It is a rainy, early weekday morning in Warsaw, but outside the downtown flat of Marek Belka, governor of Poland’s central bank, the financial district is already buzzing. The taxi pulls up to the entrance of a painted brick building and a bespectacled aide appears with an umbrella, leading the way to a small elevator inside. Up on the fourth floor, Belka, 62, welcomes me into a minimalist living room. “It’s too early even for coffee,” he says, vanishing into a small kitchen and returning with a bottle of sparkling water and two glasses.

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In 2012 in the middle of the euro crisis, while sitting on a banking panel in London, Belka – a former prime minister of Poland – calmly issued a report card to Europe. It said “the crisis was and mostly is an issue of the developed and mature economies . . . It seems that the so-called west has lost its monopoly for wisdom . . . These are the facts.” The sight of a top Polish bank official lecturing western policy makers reflected a remarkable transformation: Poland, the only EU country to report growth just after the 2008 meltdown, had its fiscal house in order. Belka also had unique qualifications to assess the west: he headed the IMF’s European department during the banking crisis, playing a key role in the bailouts.

Last month there was uproar following the publication of secretly taped talks between high-level Polish officials, including Belka and interior minister Bartlomiej Sienkiewicz, in a Warsaw restaurant in 2013, where (in colourful language) Belka appears to discuss firing the finance minister as a condition for future central bank help for the government. Investors, however, seem to have sloughed off the scandal. And supporters are confident that Belka’s record in helping to reinforce the foundations of Polish – and other European – economies will trump questions about the independence of the central bank.

Flower painting©Pawel Glogowski

Flower painting above a side table holding a sculpture of copper coins

Belka’s two-bedroom flat is located near the central bank. “It’s not my apartment. It’s owned by the bank. I’m paying rent,” he says. Belka spends his weekdays at the flat, commuting at weekends to his family home in the city of Lodz, where he lives with his wife of 37 years, Krystyna, and enjoys visits from their grown-up children, Maria and Piotr. “Friday afternoon, I make the drive home. It’s just one hour and a half now with the new highway.”

The flat has views on to a period building across the street, with a chic, canopied restaurant below. Looking out, it is hard to believe that most of Warsaw is also new.

After the Warsaw uprising, the liberation attempt of August to October 1944, the Nazis levelled about 85 per cent of the city with dynamite, turning Warsaw into a charred wasteland. “Hitler decided to take revenge on the city,” says Belka. Yet while the Old Town was painstakingly reconstructed – stone by stone – by the 1960s, the building up of the Polish economy from grim, post-communist wreck to solid EU member took decades longer. “We started as a country in chaos, as a basket case and a bankrupt country,” says Belka.

Displayed on the walls of the flat are charming prints of the town of Lodz: a church, a market, a cobbled square near the campus where Belka went to university, and where he completed his PhD on US anti-inflationary policy before the first stabs at Polish economic reform. “I don’t claim to be in the early reform team. I stepped in later,” he says. “When transition started in the ’80s, colleagues told me . . . you will have to change interests, but I wasn’t convinced. I wrote a book. I introduced Milton Friedman to Poland.”

Photo of Marek and his wife, Krystyna, in the Atacama Desert, South America©Pawel Glogowski

Photo of Marek and his wife, Krystyna, in the Atacama Desert, South America

The experience came in handy, inoculating Belka against zealous free-market advisers when he pitched in with policy making in the mid-1990s. “It was the time that western advisers were pouring in, telling us what to do, ‘You have to liberalise with vouchers, mass privatisations.’ That simply didn’t fly, either in the Czech Republic or in Russia,” says Belka, who calls himself a “pragmatist”. “They said, ‘Leave it to market forces and it will work out’. But theory can only go so far.” The real key, says Belka, was to establish structured organisations, often drawing up blueprints from scratch. “What we did in Poland was building institutions . . . do drastic changes in the underlying structure of the economy.”

Looking around the flat, Belka says that he added the contemporary furniture in grey and black. “It was very late ’70s [in style]. We’ve made it more modern.” Hanging above a corner armchair is a photograph of Belka holding up a coin. “We are producing commemorative coins. And persuading eminent persons like [former president Lech] Walesa and [architect of the first reform Leszek] Balcerowicz, to have portraits taken with coins,” says Belka, who served as deputy prime minister and minister of finance in 1997 and 2001-2002, and prime minister from 2004 to 2005. “It was a rollercoaster . . . but an unusual season of transition,” he says.

One of Marek Belka's awards

Belka took the IMF Europe job in the autumn of 2008. “I arrived two weeks before [the collapse of] Lehman . . . I had to deal with central and eastern Europe. But it was obvious to me from the beginning the real crisis was in [old] Europe.” Why? “When we looked at Greece, Portugal and Spain, we said this is exactly what happened in Latvia. At some point capital will stop flowing and countries will be bankrupt,” says Belka, who now chairs the World Bank and IMF development committee. He was struck by the reactions of old and new Europe. “In Latvia, the people and politicians were prepared for hardship . . . In old Europe, people weren’t prepared. Good times had lasted many years.”

‘In 2010, Belka abruptly returned to Poland to run the central bank after the Smolensk plane crash that killed president Lech Kaczynski and many Polish officials, including central bank governor Slawomir Skrzypek. The event, a national trauma, elevated Belka’s profile from technocrat to trusted public figure.

©Pawel Glogowski

View of the hallway

On display around the flat are awards that Belka has started to collect. An honorary degree from Birmingham university hangs over the sofa. “It is framed,” he says, admitting he hasn’t got around to framing three other honorary degrees. “They’re in a drawer.” Propped up on a mantelpiece is a copper sculpture of a tottering pile of oversized coins. “This was something I received 15 years ago from a citizens’ association. It’s unusual and it catches the eye.” he says.

I ask Belka, whose father took part in the Warsaw uprising, how he will mark the 70th anniversary. “It’s very emotional,” he says, turning instead to the Polish determination to weld together sturdy structures out of the rubble of fascism and communism. “It never occurs to Poles that what happened in the last 25 years was not expected by the rest of the world,” says Belka, who has a seat on the new European systemic risk board.

Favourite thing

“It’s a crystal ball . . . I got it from a friend when I took the [central bank] job . . . It disturbs my econometricians,” says Belka who has a dry sense of humour. “Economic models are good for organising thinking. They’ll tell you the past, but they’ll never tell you the future . . . You have to use your brain, your instinct. You have to be mentally prepared to react to the unexpected.”

The aide and an adviser arrive to take Belka to his next meeting. Belka reaches for a last sip of water. More refurbishments are needed, he says, but the financial architecture of Poland is sound. “This is starting to pay off, even if we complain about unfinished business.”

Our interview isn’t quite over. Reached by phone in his Lodz home after the tapes scandal erupted, a shaken Belka offers his take. “They were spliced,” he says. His restaurant chat, he insists, was an informal discussion about the central bank. “It was a long conversation, almost a lecture. It was hypothetical. The minister of the interior does not know about monetary policy . . . He asks, ‘What can be done when the situation gets extreme?’ And I answer as I would to any student. There was no plan,” he says.

Our call ends, but not before Belka makes one last observation. “We don’t know who taped us, but that transcript was made by someone who has no idea of economic policy.”

Photographs: Pawel Glogowski

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