In the project of recommendations of the Council of the European Union published on November 26, 2024, Poland’s “Medium-term budgetary-structural plan” was positively assessed. The spending path proposed by Poland will be formally recommended by the EU Council as part of the excessive deficit procedure (EDP), which Poland is subject to due to the high deficit recorded in 2023.
Poland’s spending path: Key assumptions
When developing its plan, Poland took into account the need for compliance with EU regulations regarding deficit and public debt, according to the ESA2010 methodology. The spending path up to 2028 envisages the reduction of the nominal deficit to the level of 2.9% of GDP, while taking into account the increase in defense spending, which currently enjoy priority both for Poland and the European Union.
The plan assumes a more gradual reduction of the deficit, justified by the need to support strategic security expenses. The European Commission has accepted these arguments, which are incorporated into the council’s recommendation project.
Satisfaction of the Polish authorities
Finance Minister Andrzej Domański emphasized the importance of the European Commission’s positive assessment:
“The fiscal effort we have set in the Plan will ensure the reduction of the nominal deficit to 2.9% of GDP in 2028. We are pleased that the Commission notices Poland’s investment in the expansion of defense capabilities – this is, of course, one of the EU’s priorities. The reduction of excessive deficit will be focused on the coming years, which the Commission has also taken into account.”
Poland is preparing to present its first report on actions aimed at reducing excessive deficits, which is to be published by April 30, 2025. The formal adoption of the recommendations by the EU Council is planned for the period of the Polish presidency.
Importance of defense spending
One of the key points of the Polish plan is to increase defense spending. In face of modern geopolitical challenges, Poland argued that the need to expand defense capabilities justifies a more gradual approach to deficit reduction. The European Commission and the EU Council accepted these arguments, granting a deviation from the Commission’s original assumption concerning the faster pace of deficit reduction.
Context of the excessive deficit procedure
Poland came under the excessive deficit procedure in July 2023, when it exceeded the EU limit of 3% of GDP in terms of government and local government sector deficits. The reference spending trajectories received from the European Commission were a starting point for the development of the “Medium-term budgetary-structural plan.”
The plan assumes compliance with the established pace of growth in net spending funded from national resources, excluding debt service costs and spending fully financed from EU funds.
Source: https://managerplus.pl/ue-pozytywnie-ocenia-polski-plan-redukcji-deficytu-25132
