By David Ferguson in Brussels

Poland's Prime Minister designate Kazimierz Marcinkiewicz has presented a minority government to President Aleksander Kwas'niewski. Negotiations with Poland's second largest party, the Platforma Obywatelska, broke down last week. Prawo i Sprawiedliwos'c' (PiS), the winner of both the Parliamentary and Presidential elections, will now need the support of motley group of parties that includes populist and euroskeptic Andrzej Lepper's Samoobrona (Self-Defense).

"As to a partnership with Andrzej Lepper, I can only warn against it. For many years, Andrzej Lepper has shown that he does not serve the cause of stability in Poland," said outgoing President Aleksander Kwas'niewski. "Kazimierz Marcinkiewicz - and I defend him here - is a person with a great sense of responsibility. He is trying to put together all the pieces. This is not a difficult task."

"Many Poles, who voted, expected that immediately following the elections a government with PiS and Platforma would quickly be formed," continued Kwas'niewski, speaking on Friday. "I myself was assured that it was only a question of days and indeed began to wonder why it was taking so long."

With PIS's market reform and European credentials still to be proved, and with the spectre of populist Lepper wielding influence, Eliza Durka, Editor-in-chief of the Warsaw Business Journal, believes the situation could slip out of control. "When the word 'panic' appears on the market, investors' moods turn black. The Polish financial market hasn't gone through such a breakdown for a long time - let's hope it's only temporary."

Governmental instability, combined with the prospect of growing influence for populist Andrzej Lepper, has already provoked a negative market reaction. "The stock-exchange indices are falling, investors are selling Polish bonds en masse, and the zloty is getting weaker," said Durka.

"Those who won the elections ought to know that all this reproaching, discussion and strong words has an influence on financial markets," said Kwas'niewski. "They have an influence on the z?oty and the situation of many Poles who have loans in foreign currencies and are now worried about what is happening."

Kwas'niewski, however, warned against over-reacting: "Polish democracy is functioning. As we have seen in Germany, forming a government is no easy task. I stress that there is no reason to panic: the economic and financial situation in Poland is good, we still have a government that is fulfilling its obligations and soon we may have a new government," he said.

Kwas'niewski criticized PIS for not living up to 'earlier promises' as well as the failure to propose Platforma the position of Sejm Marshall [Chairperson]: "It has turned out that the difference between the partners are more fundamental, that PIS is not interested in making concessions and without concessions there is no coalition." continued the president.