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(Bloomberg) -- The $36 billion of Swiss-franc mortgages owed by Poles is giving investors another reason to avoid a country they already see as among the most at risk if the U.K. votes to leave the European Union on Thursday. 

While a weekend poll showed the "remain" camp pulling ahead, market nerves this quarter as the so-called Brexit vote neared have driven Poland’s currency 4 percent lower against the franc, which is traditionally used as a refuge by investors. If Britons opt to walk away from the bloc they joined 43 years ago, the franc may rise further still, putting more Polish households under stress and weighing on the zloty, according to HSBC Holdings Plc.

Poland is sensitive to the referendum as it’s the biggest recipient of official aid from the EU budget, to which Britain is the third-largest net contributor and the zloty rose against the euro on Monday following the last poll. It has come under pressure since Poles elected a new government last year that’s pushing policies including a proposal to make banks foot the bill for converting foreign-currency mortgages to zloty at a subsidized rate.

“If Brexit happens, zloty weakening will add pressures on the authorities to do something with costly mortgages,” Jaroslaw Janecki, chief economist at Societe Generale SA in Warsaw, said by email. He also said he doesn’t consider a vote to leave the EU as the "base scenario."

Soaring Cost

Mortgages denominated in francs were popular in Poland until mid-2008 because they allowed borrowers to take advantage of lower interest rates on offer in Switzerland. In the volatile years since the 2008-2009 financial crisis, the Swiss currency has soared, making those home loans more expensive to service, prompting the government to explore ways to alleviate the pressure.

Following a series of opinion polls showing the British "out" campaign inching ahead, the franc has risen 1.8 per cent against the euro in June, making it the fifth-best performing major world currency. In zloty terms, that risks leaving the weight of mortgage debt growing faster than the value of the homes it was used to buy. Average home-prices in Poland’s capital fell 17 percent between 2008 and 2012, according to Warsaw-based consultant Centrum Amron.

The impact of a U.K. leave vote on the zloty may be mitigated if Poland’s government steps back from some of the policies most likely to anger international investors, according to PKO Bank Polski SA, the country’s biggest lender. An initial proposal in January by President Andrzej Duda to require lenders to accept repayment on the loans at a non-market fixed exchange rate was criticized by the central bank as too onerous for the country’s financial industry to be workable. Duda’s advisers have since reworked the plan, suggesting the costs are spread over time.

For a story on Poland’s latest proposals for Swiss-franc mortgages, click here.

“A Swiss franc surge may be short-lived," Piotr Bujak, PKO’s chief economist, said by e-mail on June 15. "Poland shouldn’t be hit, providing the government doesn’t take actions that would be seen negatively by rating agencies.”

Ratings Pressure

S&P Global Ratings, which shocked investors by downgrading Polish debt in January, is due to publish its next assessment of the country on July 1, while Fitch Ratings is releasing a credit review on July 15. Both agencies have said that how the Polish government addresses the issue of Swiss-franc mortgages will impact their assessments.

The zloty rose 0.5 percent to 4.3893 against the euro on Monday, bringing its decline for the year to 2.9 percent, the worst performance in developing Europe after Turkey’s lira.

If the financial-market volatility unleashed in the event of an "out" vote’ in the U.K. proves to be acute and sends the Swiss franc soaring while causing the zloty to crash, further government action on the mortgages issue is likely, ING Bank Slaski SA economists led by Rafal Benecki said in a note.

A Swiss-franc jump will turn foreign-currency denominated loans into “an even hotter potato than it is now, making the zloty very vulnerable to Brexit,” they said.

To contact the reporter on this story: Konrad Krasuski in Warsaw at kkrasuski@bloomberg.net. To contact the editors responsible for this story: Alex Nicholson at anicholson6@bloomberg.net, Chris Vellacott, Daliah Merzaban

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