BUDAPEST/WARSAW: Polish assets eased slightly on Wednesday after Prime Minister Beata Szydlo, in her first policy speech in parliament since taking office, outlined sweeping increases in state spending to boost the economy.
The eurosceptic, economically populist Law and Justice party (PiS) won last month's parliamentary election on promises of higher spending, taxes on bank assets and financial transactions and monetary stimulus for the economy.
After Szydlo confirmed the rises in spending rises, the zloty eased to 4.263 against the euro, a 9-day low, but by 1355 GMT it had rebounded to 4.254, less than 0.1 percent weaker from Tuesday.
"This weakening is a reaction to the new prime minister's pledge to quickly introduce many pre-election proposals without a real indication of new budget revenue sources," said Marcin Turkiewicz, head of currency trading at mBank in Warsaw.
"We have heard only declarations so far, and it is difficult to say what will happen to the zloty when the government starts putting words into actions," he said.
Last month the zloty fell to 9-month lows near 4.3 when investors realized that PiS was on course for victory.
But analysts in a Nov 2-4 Reuters poll projected that, even though PiS is less business-friendly than the previous government, its pro-growth policies would boost the zloty to 4.1 against the euro in the next 12 months.
Polish government bond yields rose by 3-4 basis points, with the 10-year paper trading at 2.7675 percent. Polish banking stocks were mixed.
In Hungary, the forint and shares mostly firmed, helped by expectations that Fitch would upgrade the country's debt rating to investment grade on Friday.
The forint gained 0.2 percent against the euro, trading at 310.50. The shares of OTP, Central Europe's biggest independent lender, rose more than 1 percent to a 4-month high, helping Budapest's main stock index to hit a 7-month high.
In Romania the leu eased 0.2 percent against the euro as investors awaited news from the first meeting of the country's new "technocrat" government which was sworn in on Tuesday.
New finance minister Paliu Dragu said she aimed to produce a first draft of the 2016 budget within two weeks.
"We will watch out for the first hints on future plans, especially measures to avoid the budget deficit widening past 3 percent of GDP next year," ING Bank analysts said in a note.
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