Poland to miss ‘unrealistic’ EU deficit deadline
Wednesday December 02 2009
Poland will fail to rein in its budget deficit to within European Union limits until at least two years after the EU’s 2012 deadline, said former Finance Minister Zyta Gilowska.
“The deadline is completely unrealistic after the enormous debt and deficit increase we’ve seen,” Gilowska said in an interview in Warsaw yesterday. “Even during the fastest economic expansion, Poland managed to lower its deficit by 1.5 percentage points a year and such a pace of growth” won’t return soon.
The deficit will be more than double the EU ceiling of 3pc of gross domestic product this year and will widen to 7.5pc of GDP in 2010 and 7.6pc in 2011, the EU forecasts, as cuts in investment drag back economic growth and unemployment rises. The deterioration of the finances led to Poland being placed under the EU’s excessive-deficit procedure.
Gilowska, finance minister in 2006-2007, has been an informal adviser to President Lech Kaczynski on the state budget and was named by a presidential aide as an “ideal” candidate for the central bank’s new rate-setting board, which will be set up in the new year.
Gilowska accused Prime Minister Donald Tusk’s Cabinet of “occupying itself with creative accounting and playing around with the structure of the budget” and said she supports “a sensible and well-considered approach” to lowering the deficit to sustain growth.
‘Main difficulty’
“Compared to other EU countries, Poland’s debt isn’t especially high,” Gilowska said. “Our main difficulty is the rapid pace at which our debt is growing.”
After September, public debt totaled 630.5 billion zloty (€153.6bn), growing almost 61 billion zloty, or almost the same as in all of 2008. Through September, the pace of debt growth was almost three times faster than a year ago.
All euro nations will breach the EU’s deficit limit of 3pc of GDP in 2010 and 2011, according to a semi-annual economic forecast published on November 3, with the average deficit seen widening to 6.9pc of economic output in 2010.
Ireland will have the highest deficit of 14.7pc next year, followed by Spain’s deficit of 10.1pc and France with a deficit of 8.2pc.
Poland’s credit “ratings could be lowered should the deterioration of public finances continue without a clear perspective for a turnaround in government deficits,” Standard & Poor’s analysts Kai Stukenbrock and Frank Gill said in a Nov. 20 report, while adding that the “medium- to long-term economic perspective remains fundamentally sound.”
Poland’s debt is rated A2, five levels above non-investment grade, at Moody’s. The country is rated A- at Standard & Poor’s and Fitch, four notches above junk.
The economy expanded 1.7pc last quarter.
- Dorota Bartyzel
© Bloomberg
