Polish minister says ‘suicidal’ to reject EU stimulus fund

Poland’s finance minister urged the country’s political parties to vote in favor of the EU’s stimulus fund, saying it would be “suicidal” to reject it as Warsaw would lose cheap funding essential to boost the economy.

Poland is one of a dozen EU countries that have yet to ratify the so-called own resources decision, which allows common EU borrowing to finance the pandemic of 750 billion euros recovery fund. The case threatens to turn into a political crisis for Warsaw, with a party in the conservative-nationalist coalition swearing to vote against the bill in parliament, raising questions about the survival of the government

A failure by Poland to ratify the fund could in theory delay the disbursement of billions of euros to the rest of the EU this year, hampering Europe’s hopes of rebounding from a third wave of coronavirus infections. Poland is expected to receive € 58 billion in grants and loans from the fund.

“At the end of the day, all politicians will see the benefit of being able to get these funds, which the Polish economy and other economies in Europe need,” Tadeusz Koscinski, a former banker appointed finance minister by the law in force. and the Justice Party (PiS), said in an interview with the Financial Times.

“So it would be a bit of a suicidal gesture to vote against the [own resources decision], because we will not be able to find such funds outside the EU. At this price too.

The vote on the Own Resources Bill – expected this month – is one of many flaws in the increasingly strained relationship between law and justice and its smaller ally, United Poland, led by the intransigent Minister of Justice, Zbigniew Ziobro.

Despite supplications from the PiS leadership, politicians in united Poland say they will not vote for the own resources bill because the joint borrowing it would facilitate would leave Warsaw grappling with the debts of other states. They also claim that the EU’s plan to link access to finance to respect for the rule of law would allow Brussels to blackmail Warsaw.

However, many observers see the United Poland position as an attempt to position itself to the right of the PiS ahead of parliamentary elections slated for 2023 at the latest, as well as part of a growing feud between allies of Poland. Ziobro and Prime Minister Mateusz Morawiecki. .

If united Poland does not back down, the government, which only has a three-part majority, will depend on opposition votes to pass the own resources bill.

The main opposition group, the Civic Coalition, has left open the possibility of voting against the bill if the government does not guarantee that the money Poland receives from the EU will be spent fairly.

However, left-wing MPs have indicated they are more likely to vote for. Their support would be enough to pass the bill.

Warsaw is still in negotiations with the European Commission on how it intends to spend its share of the recovery fund and precisely on the economic and administrative reforms it will undertake in exchange for billions of euros of investment.

Koscinski complained that Brussels was demanding a series of reform commitments, some of which were irrelevant to its immediate economic recovery, such as raising the retirement age and changing its overhaul of the judiciary, which, according to the commission, constitutes a threat to the rule of law. .

“It’s like a moving goal post all the time,” he said.

As Brussels focused on longer-term structural changes, Warsaw prepared other fiscal levers to boost consumption and investment once the pandemic subsided.

“They [the commission] come from the reform point of view, we come from the project point of view. We want people to start spending money and get the economy going. “

Poland is expected to submit its stimulus package to Brussels by the end of the month. It will strengthen a broader set of fiscal and social measures that the government intends to put in place once the pandemic situation has subsided, and which should form the core of its economic message before the next elections.

Speculation has focused on deep tax cuts for low-paid workers, through a sharp increase in the income tax cut-off, although the minister said it was only one of the many proposals and final decisions yet to be made.

Koscinski was optimistic about Poland’s economic prospects despite a surge in infections in recent weeks that threatens to overwhelm the country’s hospital system.

He pointed to the government’s “conservative” forecast of 4 percent growth this year after contracting 2.8 percent last year – a slight blow in European terms. Unemployment is still the lowest in Europe, he said. Manufacturing and exports had rebounded strongly and tourism was less important than in other EU economies.

Critics say the government has been too lax with social distancing restrictions this year and point to the relaxation of restrictions in mid-February, when the more contagious B.1.1.7 variant initially sequenced in the UK was already circulating, as a particular mistake. .

Koscinski admitted that Poland had been “fairly forgiving” of some of its neighbors, but predicted that the infection rate would soon see a “dramatic decrease”.

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