Polish PM keeps options open on early polls

WARSAW, July 10 (Reuters) Poland's conservative Prime Minister Jaroslaw Kaczynski today ruled out snap general elections, leaving himself two months to rebuild his majority in parliament or call a mid-term vote.

The prospect of early polls neared after Kaczynski fired his deputy and main coalition partner Andrzej Lepper on Monday over a corruption investigation, a move which could deprive him of a majority in parliament.

''September will be a month of decision-making,'' Kaczynski told public radio. He reiterated an offer to Lepper's Self-Defence party to stay in his government without its boss.

Since coming to power in 2005, Kaczynski and twin brother Lech, the Polish president, have presided over fast economic growth but also political infighting in the ex-communist nation of 38 million people and repeated quarrels with EU counterparts.

Polish financial markets took the latest turmoil in their stride, with the zloty barely weaker at 3.75 to the euro.

The Polish economy, central Europe's biggest, grew over 7 per cent year-on-year in the first quarter.

''The increased political uncertainty obviously adds to short-term turbulence, but early elections could actually turn out to be good news, since the next government is very unlikely to be worse than the current one,'' Goldman Sachs said in a note.

The three-party government, torn by infighting and opposing views on economic policy, has effectively frozen all fiscal reforms Poland needs to adopt the single European currency.

A modest plan to improve public finances became the first legislative casualty of the crisis today when a scheduled debate on it was postponed until the autumn.

WILL SELF-DEFENCE LEAVE? Kaczynski has already thrown Lepper and Self-Defence out of the government once over disagreements on the 2007 budget, but the two patched up their differences and until yesterday looked poised to stick together until the end of the term in 2009.

Lepper, who denied any wrongdoing in the corruption case, ruled out returning to the government this time round.

He said the party's 45 deputies in the 460-member lower house of parliament would decide later yesterday on whether to leave the coalition.

Some analysts say Kaczynski may yet manage to lure away Self-Defence, a rural-based leftist party which once opposed market reforms and Poland's drive to join the European Union but has since mellowed to the verge of becoming mainstream.

Recent opinion polls showed it stands more to lose than Kaczynski's Law and Justice in early polls, with its support stuck around the 5 per cent threshold needed to enter Parliament.

''Kaczynski's basic scenario is to use the next 6 weeks to woo Self-Defence deputies and reconstruct a majority,'' Marek Migalski of the Silesia University said.

Law and Justice is running behind the opposition centre-right Civic Platform in opinion polls, but analysts say their well-oiled party machine could make up the gap.

The Civic Platform said Law and Justice should end the uncertainty and the political crisis it has led Poland into by agreeing to hold elections as soon as possible.

Piling pressure on Kaczynski, it said it would file no-confidence motions in all ministers but it was unclear if parliament would vote on them at its ongoing session, the last before the summer recess.

Under Poland's constitution, parliament's term can be shortened if two thirds of deputies vote for early polls or if the Prime Minister resigns and two attempts to form an alternative government fail.

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