Polish minister says ‘suicidal’ to vote down EU recovery fund

Poland’s finance minister has urged the country’s political parties to vote in favour of the EU recovery fund, saying it would be “suicidal” to vote it down as Warsaw would lose out on essential cheap financing to boost the economy.

Poland is one of around a dozen EU countries yet to ratify the so-called own resources decision, which allows for common EU borrowing to finance the €750bn pandemic recovery fund. The matter is threatening to morph into a political crisis for Warsaw, with one party in the conservative-nationalist coalition vowing to vote against the bill when it comes to parliament, raising questions about the government’s survival

A failure by Poland to ratify the fund could in theory hold up the disbursement of billions of euros to the rest of EU this year, hampering Europe’s hopes of bouncing back from a third wave of coronavirus infections. Poland stands to receive €58bn in grants and loans from the fund.

“At the end of the day, all politicians will see the sense in being able to reach out for these funds, something that the Polish economy and other economies in Europe require,” Tadeusz Koscinski, a former banker appointed finance minister by the ruling Law and Justice party (PiS), said in an interview with the Financial Times.

“So it would be a bit of a suicidal move to vote against the [own resources decision], because we won’t be able to source such funds outside the EU. At that price as well.”

The vote on the own resources bill — expected this month — is one of a number of faultlines in the increasingly fraught relationship between Law and Justice and its smaller ally, United Poland, headed by hardline justice minister, Zbigniew Ziobro.

It would be a bit of a suicidal move to vote against the [own resources decision], because we won’t be able to source such funds outside the EU. At that price as well.”

Despite entreaties from the PiS leadership, United Poland politicians say they will not vote for the own resources bill because the joint borrowing it would facilitate would leave Warsaw on the hook for the debts of other states. They also argue that EU plans to link access to the funding to observance of the rule of law would allow Brussels to blackmail Warsaw.

However, many observers regard United Poland’s stance as an attempt to stake out a position to the right of PiS ahead of parliamentary elections due by 2023 at the latest, as well as part of an increasingly rancorous feud between allies of Ziobro and prime minister Mateusz Morawiecki.

If United Poland does not back down, the government, which has a majority of just three, will be dependent on votes from the opposition to pass the own resources bill.

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

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

Warsaw is still negotiating with the European Commission over how it intends to spend its portion of the recovery fund and precisely what economic and administrative reforms it will undertake in return for the billions of euros investment.

Koscinski complained that Brussels was demanding a range of reform commitments, some of which were not relevant to its immediate economic recovery, such as raising the retirement age and amending its overhaul of the judiciary, which the commission says is a threat to the rule of law.

“It is like a moving goalpost all the time,” he said.

Whereas Brussels was focused on longer-term structural changes, Warsaw was preparing other budgetary levers to boost consumption and investment once the pandemic fades.

“They [the commission] are coming from the reform angle, we are coming from the project perspective. We want people to start spending money and get the economy going.”

Poland is supposed to submit its recovery plan to Brussels by the end of the month. It will buttress a wider set of fiscal and social measures which the government intends to set out once the pandemic situation has eased, and which are expected to form the core of its economic message ahead of the next election.

Speculation has centred on big tax cuts for the low-paid, through a hefty increase in the income tax threshold, although the minister said this was just one of several proposals and final decisions yet to be made.

Koscinski was bullish 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 per cent growth this year after a contraction of 2.8 per cent last year — a light hit in EU terms. Unemployment was 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 single out the easing of restrictions in the middle of February, when the more infectious B.1.1.7 variant first sequenced in the UK was already circulating, as a particular mistake.

Koscinski admitted that Poland had been “quite lenient” compared with some of its neighbours but he predicted that the infection rate would soon see a “dramatic decrease”.