The European Commission’s position on Greece may have been the key focus of market attention on Wednesday, but there was another country that also managed to draw some criticism from Brussels.
That country was Poland:
Feb. 3 (Bloomberg) — Poland needs to take “sizeable” measures to bring its deficit down to the European Union limit by the 2012 deadline, the European Commission said.
There are “considerable risks attached to the fiscal strategy of the Polish authorities,” the commission, the EU’s Brussels-based executive, said in a report today. “Even taking into account the better-than-anticipated growth prospects, further sizeable consolidation measures” will be needed to cut the deficit to below the EU ceiling of 3 percent of gross domestic product.
Poland’s deficit swelled last year to 6.4 percent of GDP, the commission estimates, as tax revenue dropped and the government stepped up spending in a bid to boost the economy. This year, the deficit could widen to 7.5 percent, the third- largest projected among the 10 eastern members of the EU, according to commission forecasts.
The commission warned Poland that “new stimulus measures should be avoided, the 2010 budget be strictly implemented, windfall revenue be allocated to deficit reduction, and additional consolidation measures be prepared for the following years.”
Despite the above, governmental clashes over the country’s euro convergence plans and fiscal tightening measures persist.
Prime Minister Donald Tusk was expected to approve an updated plan for 2014 eurozone entry by Tuesday, dismissing junior-coalition partner concerns over the tightening path involved.
Nevertheless, by Wednesday (European) lunchtime the plan was still awaiting approval.
On the flip side, Tusk is said to be committed to the deal going through no later than February 9. If it does, Poland would then be on track to cut its deficit below 3 per cent of GDP by 2012.
Not that the recent delays haven’t worried some in the market.
Danske Bank analysts commented on Wednesday:
Last night the Polish Prime Minister Donald Tusk announced that the government had not approved the euro convergence plans, as the junior partner in the government coalition, the Polish Peasant Party (PSL), had some doubts. This is clearly bad news and is an indication that PSL does not support Finance Minister Rostowski’s plans for fiscal tightening.
The full EC report can be found in the usual place.
Related links:
Is Poland selling itself for nothing? – FT Alphaville
The EMEA debt dog – FT Alphaville
Poland is the new Hungary, says BNP Paribas- FT Alphaville
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