EU chides Poland for deficit gap

The European Commission (EC) has told Poland to accelerate cuts in the budget deficit.

The EC told Poland last week to speed up cuts to its budget deficit, heightening a dispute over Warsaw's fiscal plans.

Poland recently sent its fiscal plan to Brussels, which forecast the deficit at 3.9 percent of GDP in 2006, 3.4 percent in 2007, 3.1 percent in 2008 and 2.9 percent in 2009. The EC said Poland should lower its budget deficit to below three percent in 2007. "The Polish authorities should put an end to the present excessive deficit situation as soon as possible and by the end of 2007 at the latest," said the EC recommendation.

When it joined the EU in 2004, Poland committed itself to a deficit of less than three-percent by the end of 2007. Last year, the government moved the target to 2009. "There is no reason to extend the deadline for the correction of the excessive deficit beyond 2007," said the Commission. "Thanks to higher-than-expected economic growth, Poland has a good opportunity to correct its excessive deficit in 2007 provided an additional effort is made," Economic and Monetary Affairs Commissioner Joaquin Almunia said in a statement.

The EC has given Poland until August 27 to take action to ensure its 2007 deficit is below the cap. But Poland said that its planned 3.4-percent deficit was close enough and that disciplinary procedures were therefore not necessary.

As Poland is not in the euro zone, the Commission cannot fine Poland for exceeding the limit. But the EU could freeze part of Poland's portion of regional development aid.

A deficit below three-percent of GDP is also a criterion for joining the euro zone, but Poland does not have a target date to adopt the currency and may hold a referendum on the issue. (Reuters)

Source:By Barnaby Harward,