(Bloomberg) -- Polish President Andrzej Duda condemned the late-night arrest of two former ruling party lawmakers at the presidential palace, a dramatic escalation of the power struggle with the new pro-European government under Prime Minister Donald Tusk.

The standoff lays bare the challenge the premier will have in dismantling eight years of nationalist rule and lifting the suspension of nearly €60 billion ($65 billion) in European Union aid. Duda, an ally of the former populist administration, wields veto power over legislation needed to carry out the overhaul. 

“I’m deeply shocked,” Duda told reporters on Wednesday, hours after police swooped into his residence in central Warsaw to detain a former interior minister and his deputy. The president insisted the two men had been granted a presidential pardon and denounced the parliament speaker’s decision to strip them of their mandates as illegal. 

The unfolding chaos underscores a rift between two interpretations of Polish law, a legacy of Law & Justice’s overhaul of the judiciary that the EU has pilloried for eroding the independence of the courts. Nationalist-appointed judges have recognized Duda’s pardon, while other judicial bodies have said his move wasn’t binding because it was issued before a final court ruling. 

Tensions in Warsaw have been running high since Tusk’s pro-EU alliance took power last month following a shock victory in the Oct. 15 election. The new government kicked off by putting the public broadcaster, widely seen as a propaganda tool of the previous administration, into liquidation — a move that sparked protests and sit-ins by Law & Justice lawmakers. 

Last week, Parliament Speaker Szymon Holownia stripped Mariusz Kaminski and Maciej Wasik of their mandates in response to a final court decision, exposing the lawmakers to legal consequences tied to the abuse-of-power conviction. 

That sparked another outcry by the opposition, which pointed to the pardon. On Tuesday, Holownia postponed this week’s parliamentary session, saying Poland was engulfed in “a deep constitutional crisis,” with Law & Justice recognizing a separate legal order. 

The legislative standoff had thrown into some doubt the 2024 budget, which must be approved by the end of the month — or the president will have the right to dissolve parliament. 

But Finance Minister Andrzej Domanski told Bloomberg that the turmoil won’t derail passage. 

“Poland is in the process of restoring the rule of law,” Domanski said in an interview. “I think the current situation will not have an impact on Polish bond yields and the zloty.” 

The market reaction reflected those comments. The zloty rose 0.2% to 4.3417 per euro at 2:05 p.m. in Warsaw, extending its gains since the election to 4.5% for the second-steepest appreciation among global currencies. 

The Polish equity market suggests there is “little reflection” of risks to the market from the crisis, according to emerging-market research outfit Tellimer.

Even as he expressed shock, Duda also issued an appeal for calm ahead of plans by the former ruling party to stage a march in Warsaw Thursday against the government. 

He said he would stand by the two lawmakers. One of them, Kaminski, said in a statement that he began a hunger strike in prison. 

“I won’t rest until they’re released,” Duda said. “I won’t be intimidated.” 

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