The Polish GDP is strongly influenced by a stream of financial transfers from the European Union, in 2010 the net income from the EU budget was about 8 billion euro.
Were it not for the transfers from the Union, the change of the Polish GDP in relation to2009 would have been lower by at least 6 percentage points and we would be facing the drop of the GDP. The Polish annual GDP is about 350 billion euro and thus the amount of net income of 8 billion euro from the Union’s budget is directly equivalent to 2.3 % of the GDP. However, in a short-term life cycle assessment, it can be estimated that expenses resulting from a subsidy that Poland receives have a multiplier effect of 3-4 times.
Companies and employees completing projects financed by the Union spend monies earned on other goods and services so that other producers also purchase others goods etc.
Already in a short period concerns the projects implementation it is possible to consider that the amount of 8 billion euro of annual income from the Union increases the Polish GDP by at least 20 billion euro or by about 6 percentage points.
A High Budget Deficit
The Polish government explains to its citizens that the high deficit of public finances stems from financial transfers from the Union and is a result of a need to provide own contribution when implementing projects co-financed with assistance programs.
This justification is good for the public and within the framework of a political campaign, however is it not well grounded in facts. If we assume that investment financed by Union money are spent in a purposeful and justified manner, one also needs to assume that without these subsidies the Polish government would also complete some of these projects on its own: for example repairs of roads, bridges, highway construction, sewage treatment
plants, water processing intakes, sewage systems, water laterals etc. Other projects such as renovations of historic buildings, construction of urban fountains or piers would be most probably cancelled or postponed.
Some of the projects built with assistance do not require co-financing at all, in particular projects regarding social security, however, investments require about 25% of own contribution. And so, if the Union co-financing of an investment amounts to 6 billion euro a year, then Poland’s own contribution is 2 billion euro, which results in 8 billion euro of the value of the investment. And thus, were it not for the assistance from the Union which results in the investment of the value of 8 billion euro, the Polish government, selfgoverning entities and companies would reduce the scale of projects being implemented
with the assumption that out of the projects currently co-financed by the Union, some of these projects would be executed, for example, by spending 3-4 billion euro on some of the most essential investments. In conclusion, were it not for the assistance from the Union the scale of the budget deficit would have been much larger.
The Aborted Reform of Public Finances
The transfers from the Union made it possible for the Polish government to minimize effects of the crisis of 2008-2010. They also caused a complete lack of any public finance reforms in Poland. The increase in the Polish debt in the last 3 years from 529 billion Polish zloty in the end of 2007 to 778 billion zloty (195 billion euro) in the end of 2010 is a reflection of policy crash of the Polish government.
The Polish deficit was one of the highest in Europe in 2010, it was higher than in Iceland and just a bit lower than the deficit of Greece. Apart from it, Poland is one of the EU member states with the highest budget deficits (higher than 6 percent in 2010), which increased their deficit between 2009 and 2010. While in 2010 Greece decreased its deficit from more than 15 percent in 2009 to about 8 percent of GDP, Poland increased its deficit from 7.1 percent to almost 8 percent of GDP (forecasts of the ministry of finance predicted a drop of deficit to 6.9 percent of GDP.)
The obligations of the Polish budget practically do not capture the reserve pertaining to demographic changes for earned benefits for future retirees. The reserve created for this purpose is a fraction of the state’s obligations of the benefits owed to the future retirees. If a reserve resulting from demographic changes were considered in its real amount, it would transcend the relation of 60 percent of public debt to GDP by tens of percentage points.
The Catastrophic State of the Social Security
Poland is one of the European countries that spend the least on the social security of its citizens. For example only 4.4 percent of the GDP is destined for health care while the Union’s average is 7.5 of the GDP, additionally the average GDP per capita in the Union is much higher than in Poland. As a result, the health care is in a structural crisis, patients wait for months for a visit with a specialist, it is similar with planned surgeries and procedures, and the access to new methods of treatment is also limited by the budget of the
health care fund. Because of this, many people die while waiting for their medical services.
This situation affects not just the elderly but also people of productive age, people with a suspicion of a neoplasm wait for months for a visit and to start their therapy. In the Polish press and TV media there are ongoing appeals for help in financing treatments, also in case of children who, by law, are entitled to free health care.
Medical prevention policy, including the most serious of conditions is conducted in a minimal way, due to policy of saving on medical costs. In this situation the speech of the Polish minister of finance that he is striving to limit the budget deficit to zero in 2015 (for obvious reasons the forecast must be fairly distant – longer than the minister’s term) is not only not serious but it is also deceiving.
The situation of lack of access to medical care leads to increasing social tensions and may lead to the eruption of public dissatisfaction. The state of expenses on health care is a litmus test of the Polish budget’s situation. Any government would try to secure the right to healthcare for its citizens if in this case the situation is so dramatic and what kind of comment can be made about other matters financed from the budget?
Jaroslaw Suplacz
www.changevalue.com