MNI POLICY: EU Wants Poland To Adjust Deficit More Slowly

MNI (BRUSSELS) - Poland is leaning towards presenting a four-year debt sustainability plan, but European Commission officials are trying to persuade Warsaw to opt for a more gradual consolidation under an extended seven-year plan, arguing that it would be more credible, MNI understands. 

EU officials argue that such a rapid consolidation effort may not be realistic and may have a damaging impact on Poland's economic growth.

Poland’s budget deficit is running well above the EU’s 3% of GDP limit, at 5.1% last year and an expected 5.4% in 2024, prompting it to be included among the seven states targeted by excessive deficit procedures earlier this summer.  

While Poland's public debt is currently below the EU’s 60% of GDP limit at 49.6% last year, it is forecast to climb to 57.7% by 2025, according to the Commission's Spring Forecast.

The 60% limit is enshrined in the country's constitution, adding political urgency, and the government has set out a plan to cut the deficit ratio by 0.5% of GDP a year in structural terms.  

The Commission has encouraged member states to submit medium-term fiscal-structural plans under the bloc’s new fiscal rules ahead of or at the same time as their 2025 draft budget plans by Oct 15. (See MNI POLICY: EC Sees 2 States Submitting Debt Plans By Sept 20 )

MNI also understands that Italy is expected to deliver a "stable" and "quasi-finalised" medium-term fiscal-structural plan in the first week of October.