By Pawel Sobczak and Lidia Kelly
WARSAW (Reuters) - Poland's ruling Law and Justice (PiS) party may replace Prime Minister Beata Szydlo next week with her government's finance chief, Mateusz Morawiecki, in order to prepare for a series of elections in coming years, political sources said.
Since the euroskeptic PiS won power two years ago, Szydlo, 54, has overseen sweeping changes to state institutions in Poland, which critics in the European Union and Washington said undermined democracy and the rule of law.
Despite the criticism, her conservative government is one of the most popular in Poland since the collapse of communism, largely due to low unemployment, increases in public spending and a focus on traditional Catholic values in public life.
Senior PiS officials have said, however, that a change was needed to prepare the party -- led by Jaroslaw Kaczynski, Poland's paramount politician -- for a string of elections in the next three years.
Local elections will be held in 2018, parliamentary in 2019 and presidential in 2020.
"It's been obvious for a long time that there was no internal communication in the government and individual ministers were often following their own agenda," said one high-ranked official.
The government's spokesman could not be reached immediately and other PiS officials declined to comment.
Morawiecki, 49, an ex-banker who is also a deputy prime minister, is broadly considered as "anointed" by Kaczynski, while Szydlo lacks the full trust of the party's chairman, analysts said.
As finance minister, Morawiecki has overseen a rise in value-added tax collection of more than 20 percent so far this year, helping fund the government's popular child-subsidy program, cheaper medicine for the elderly, and a cut in the retirement age.
He has also pledged billions of euros worth of investment in the economy, in a mix of EU funds, and public and private investment.
But public investment has faltered and has been slowly recovering only this year, still below expectations. Private investments has been sluggish, with companies worrying about tax burdens and changing legal frameworks as factors keeping them from pumping money into their businesses.
The prime minister and Morawiecki have fought for control over largest state-owned companies, with the conflict becoming public this year during the selection process for the chief executive of PZU, central Europe's biggest insurance company.
After weeks of media speculation over a possible government reshuffle, Szydlo wrote on Twitter late on Monday that "no matter what happens, Poland is most important", fuelling talk she may lose her job.
"At the beginning of next week, there will most likely be changes in the government," a high-ranking PiS source told Reuters, speaking on condition of anonymity. "Everything points to Mateusz Morawiecki becoming the new prime minister."
Three other PiS and government sources confirmed the information, with a government official saying that "the final decision has not yet been made".
Market reaction has been muted, with analysts saying Morawiecki would likely maintain the government's economic policy.
"Whoever were to become the prime minister, I do not expect significant changes in economic policy, it is more a matter of whether the new government exhibits a more or a less confrontational attitude towards the EU," said Piotr Bielski, a head analyst at bank BZ WBK.
(Additional reporting by Anna Wlodarczak-Semczuk, Pawel Florkiewicz, Marcig Goettig and Bartosz Chmielewski; Editing by Justyna Pawlak and Angus MacSwan)