Poland has been subjected to the Excessive Deficit Procedure. What is the Excessive Deficit Procedure? It is initiated by the European Commission when the deficit of government and local government institutions in a particular country exceeds 3% of GDP, or the debt of government and local government institutions exceeds 60% of GDP. In the case of Poland, the first criterion has been met – the deficit significantly exceeds 3% of GDP. Specifically, in 2023, it was over 5% of GDP – and moreover, according to the budget bill for 2024, it will be even 5.5%. The budget deficit, which is often considered under national methodology, will reach over 7% in 2024. For the European Union’s Excessive Deficit Procedure, the important criterion is the EU methodology – that is, over 5% of GDP. Poland is not the only one in this group. Other Central and Eastern European countries, such as Hungary, Slovakia, and Romania, which has been subjected to the Excessive Deficit Procedure since 2020, are also included. From Western Europe, the procedure includes countries such as Italy, Belgium, and France. These countries are obligated to reduce spending and work on reducing the deficit.
“This was expected because indeed, the deficit in Poland has been increasing in recent years. The increase in defense spending serves as a justification for Poland and many other European countries. And it seems that the European Union, the European Commission, will look more favorably at these countries where deficits have increased in light of the growing geopolitical threat following the outbreak of war in Ukraine,” Grzegorz Sielewicz, Chief Economist at COFACE in the Central and Eastern European region told eNewsroom.pl service. “Because 4.7% of GDP is expected to be spent on the military and defense industry in 2024, and in 2023 it was over 4% – this can play a significant role in Poland’s assessment. However, potential consequences are still real – financial penalties or halting funding from EU funds. Poland has been subjected to the Excessive Deficit Procedure in the past. This undoubtedly obliges our country to ensure that the deficit doesn’t increase. If no actions are taken to reduce the deficit, it may affect Poland’s ratings, the pricing of Treasury bonds, and the currency. And this could pose quite a threat to the Polish economy. Therefore, it seems that the Excessive Deficit Procedure is an action that will undoubtedly mobilize the government to take certain actions,” concludes Grzegorz Sielewicz.
Source: https://managerplus.pl/nie-tylko-polska-zagrozona-nadmiernym-deficytem-71397
