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Polish right agrees coalition with fringe group

Written by: Staff
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WARSAW, Apr 13 (Reuters) Poland's ruling conservatives agreed a draft coalition deal with the fringe Self-Defence party today, inching towards a parliamentary majority capable of ruling effectively.

The agreement completes a remarkable transformation for Self-Defence, a party which gained popularity with sometimes violent anti-EU and anti-reform protests in the 1990s.

''We have the (draft coalition) declaration,'' Law and Justice party leader Jaroslaw Kaczynski told a news conference.

Self-Defence's firebrand leader Andrzej Lepper added: ''We agreed that the coalition will be formed.'' Kaczynski said the final deal, expected to include a third partner that would give the coalition a parliamentary majority, should be signed soon after this weekend's Easter holiday.

Self-Defence and Lepper have in past months moderated their rhetoric, stopped bashing Brussels and foreign investors and even warmed towards private capital in a bid to become a more palatable partner for Law and Justice.

Prime Minister Kazimierz Marcinkiewicz, who has repeatedly said the coalition must not undermine efforts to cut taxes and reform public finances, said that Self-Defence understood the need for prudent fiscal policy.

''We are fully agreed with the Self-Defence that public finances must be kept in check and that the budget deficit cannot be too large,'' said Marcinkiewicz, also present.

He said earlier he would not resign, calming financial markets sceptical of Self-Defence's tilt towards moderation.

''For the past two years Poland was perceived as a country with strong fundamentals, but at this point politics may threaten this and we could see further sell-off in Polish assets,'' said Lars Christensen, economist at Danske Bank in Copenhagen.

The zloty and the Warsaw bourse showed no immediate reaction to the agreement today.

LEPPER'S TRIUMPH Last September Lepper told supporters at a campaign stop that he planned to ''shoot the liberals in the head so they never get up again'', but has mellowed since.

''We want a coalition that will implement pro-family and pro-growth policy, a programme which focuses on the economy and also sees financial problems of the country,'' Lepper said.

Still, Lepper's entry into the government of the European Union's sixth biggest country and the biggest post-communist member is likely to raise eyebrows in Brussels.

''Poland's EU partners are a bit confused,'' an EU diplomat in Warsaw said. ''His track record is bad but his recent comments paint him as a more-balanced democrat -- he probably will not be welcomed, but the EU won't rush to condemn him either.'' Economic policy details of the new coalition have not yet been ironed out, but recent comments by the parties suggest they could include a controversial plan to change the central bank charter to make rate-setters also responsible for growth.

The most likely candidate for a third coalition partner, the Peasants Party, has said it needs more time to consider the coalition offer.

REUTERS SHB PM2145

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