EU urges Poland to speed cuts to budget deficit

The European Commission refused to end disciplinary measures against Poland over its public finances on Tuesday, urging the country's new government to cut the budget deficit more quickly.

In an assessment of Poland's public finances, the European Union's executive acknowledged that Poland would be able to reduce its deficit below the EU's cap of 3 percent of gross domestic product this year from 3.8 percent in 2006.

But the correction may not be sustainable and next year's shortfall is set to widen to 3.2 percent of GDP, rather than 3 percent as Warsaw forecasts, the Commission said, citing why it could not recommend ending the EU's excessive deficit procedure.

"The deficit, this year, is set to be below 3 percent also thanks to a favourable economic environment. But for the abrogation of the excessive deficit procedure, the correction needs to be sustainable," Economic and Monetary Affairs Commissioner Joaquin Almunia said in a statement.

"I therefore, look forward to seeing the measures that the new Polish government will adopt to put the public finances firmly on a sustainable path," he added.

Poland's government, led by the pro-business Civic Platform party which won an Oct. 21 parliamentary election, is likely to try to cut the deficit from levels proposed by the previous administration of conservative prime minister Jaroslaw Kaczynski, Platform officials say.

The Commission said no tougher measures are needed in the discipline procedure for now because Poland looks set to put its shortfall below the required cap this year.

The EU's 27 finance ministers are expected to approve the Commission recommendation in December.

Brussels monitors EU countries' deficits under the Stability and Growth Pact which is intended to underpin the euro.

Poland joined the EU is 2004 but is not yet in the euro zone, so the EU cannot fine it for persistently exceeding the deficit ceiling. But it could freeze part of the bloc's huge regional development aid as an extreme measure.

The Commission said Poland's 2007 deficit fell thanks only to much faster-than-expected economic growth, seen at 6.5 percent this year, which boosted tax revenues, and state spending actually increased.

Growth is expected to slow to 5.6 percent next year and spending will increase due to tax cuts and social security measures ordered by Kaczynski's government. (Editing by Ron Askew)
Source: By Marcin Grajewski, guardian.co.uk