Ministry of Treasury Poland to get nearly EUR 106 bln from 2014-2020 EU budget pool – expected impact on the Polish economy, chances and challenges - Economic News -

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Poland to get nearly EUR 106 bln from 2014-2020 EU budget pool – expected impact on the Polish economy, chances and challenges

Published: 12.03.2013

Poland to get more funds in 2014-2020 Cohesion Policy, despite EU tightening belt

The European Union summit’s approval of the 2014-2020 budget in Brussels in early February 2013 is a milestone event for the EU in general, but also has a big meaning of its own from the Polish perspective.

The new budget set the funds allocation for Poland at EUR 105.8 bln (PLN 441 bln), including EUR 72.9 bln (PLN 303.6 bln) in the Cohesion Policy framework and EUR 28.5 bln (PLN 118.8 bln) as Common Agricultural Policy payments. The fund allocation for Poland is nominally higher than in the previous budgetary perspective, in the years 2007-2013, when the Cohesion Policy subsidies for Poland amounted to nearly EUR 68 bln and the total allocation to EUR 101.5 bln. In the light of the current arrangements, over the next seven years Poland will be the biggest EU funds beneficiary among all the member states, not only the biggest beneficiary of the Cohesion funds alone as has been the case so far.

The sums to be transferred to Poland will be still higher, when we take into account inflation: according to Polish deputy Foreign Affairs Minister responsible for European affairs, Piotr Serafin, in 2014-2020 Poland will in fact receive nearly PLN 500 bln, rather than PLN 441 bln, i.e. the sum in constant prices. „The method of calculating the actual sums from constant prices into current prices is regulated by law. It is also a part of the budgetary agreement,” the official said at a conference. At the same time, Poland’s contribution to the EU’s budget in 2014-2020 will amount to some EUR 30 bln, “on a moderate increase compared to the years 2007-2013,” Serafin also said, presenting the Polish estimates that he said were slightly higher than the ones by the European Commission.

The value of total European Union funds allocation for particular EU member states, according to the EU budget for 2014-2020, as agreed during the EU summit in Brussels on February 8, 2013 (source: The Chancellery of the Prime Minister (KPRM))
The value of total European Union funds allocation for particular EU member states, according to the EU budget for 2014-2020, as agreed during the EU summit in Brussels on February 8, 2013 (source: The Chancellery of the Prime Minister (KPRM))

According to the EU summit’s agreement, the EU’s next budget presumes EUR 908 billion in payments and EUR 960 bln in commitments. The budget’s planned cost side is some EUR 12 billion lower than in the last budget proposal from November 2012 and some EUR 85 bln lower than the European Commission's original draft. The spending cuts, affecting such areas as cross-border transport, energy and telecoms projects as well as pay and perks for EU officials, were a response to demands by some Northern European countries, most notably the UK. On the other hand, the cuts spared areas that are most significant to Poland, i.e. cohesion policy and agriculture.

The budgetary deal has yet to be approved by the European Parliament, which may take several months and cannot even be taken for granted (some EP factions have already expressed opposition), but nonetheless the EU summit’s budgetary deal is a big step forward, showing that EU leaders are able to reach consensus and make decisions over crucial issues.

New EU budget earns praise in Poland, seen as a chance for the economy to maintain fast growth

The EU budget agreement at the February summit has been welcome in Poland, with most commentators considering the EU funds allocation for Poland a success and a factor supporting a continuation of the fast-track economic development of the country for another seven years.

“The outcome of the EU budget negotiations is very good. … A situation in which the [general EU] budget is shrinking and [the leaders] are able to reach such a compromise is a big success,” head of the Polish Institute of International Affairs (PISM) Marcin Zaborowski told PAP. Zaborowski expressed his belief that Poland will be able to take advantage of the money: “I am not worried about Poland’s ability to make use of the funds allocated by the EU, given the level of engagement of the funds in the current financial framework,” he said.

Poland’s efficiency in putting EU funds to work is also appreciated and underscored by rating agency Moody’s, as can be read in the agency’s February 14 Credit Outlook report. “The ability to carry out investment projects reflects the power of Polish institutions, despite their rather low development level against the backdrop of European standards,” Moody’s wrote.

The value of European Union funds allocation for particular EU member states in the Common Agricultural Policy framework, according to the EU budget for 2014-2020, as agreed during the EU summit in Brussels on February 8, 2013 (source: The Chancellery of the Prime Minister (KPRM))
The value of European Union funds allocation for particular EU member states in the Common Agricultural Policy framework, according to the EU budget for 2014-2020, as agreed during the EU summit in Brussels on February 8, 2013 (source: The Chancellery of the Prime Minister (KPRM))

The agency sees the funds’ allocation as a factor supporting the Polish debt market. “The increase [compared with the previous budget] of the funds committed by the EU [for Poland] is positive for the Polish debt, as the money will support the government in developing innovativeness, which in turn will simulate the decelerating economy and help it achieve a long-term growth,” Moody’s report reads.

Invest Bank economists are also optimistic, even if cautiously so: “Certainly, the money will allow for a slightly faster development of the Polish economy than we would see if they were not there, but it is difficult to expect them to be a lasting driver of Poland’s economic development medium- and long-term.” The sums to be transferred from the EU to Poland over the next years are not really mind-boggling or of revolutionary importance, they argue. “Even if we assumed that the sum of EUR 73 bln (or PLN 300 bln) in the Cohesion Policy framework was spent to the last euro … within the next seven years, it turns out it would be an additional injection of PLN 43 bln a year on average. To compare, Poland’s investment outlays in 2012 alone amounted to some PLN 310 bln.”

Economists call for long-term vision in EU funds spending, underscore the need to invest in innovation

Obviously, economists point out, getting the EU money is one thing and spending them in a sensible way is another. PISM chairman director Marcin Zaborowski, alongside many others commentators, underscores the need to use the EU money to support innovativeness. “In the new [financial] perspective, a greater emphasis should be put on innovativeness. The government should pay much attention to this matter. Poland spends little on research. It is an aspect that does not have much support of entrepreneurs, and so the state should provide incentives,” he argues.

A similar argument is made by economists of Polish employers’ organization PKPP Lewiatan, who point out that innovation, understood as a means to boost competitiveness, is also one of the 2014-2020 priorities of the EU as a whole. Despite the fact that in general the next EU budget has been downsized compared with the previous one, the EU 2014-2020 commitments in the area “competitiveness” (including spending on R&D, innovation and education) were hiked to EUR 125.6 bln, up by 37% compared with the last financial framework, Lewiatan points out. Similarly, more funds will flow in the framework of the program Horizon 2020, focused precisely on R&D and innovation, the organization adds, proceeding to calls on the Polish government to prioritize the EU funds spending accordingly. “… the support should be directed mainly into those areas, where the added value from the invested funds will be the greatest,” the organization writes.

The value of European Union funds allocation for particular EU member states in the Cohesion Policy framework, according to the EU budget for 2014-2020, as agreed during the EU summit in Brussels on February 8, 2013 (source: The Chancellery of the Prime Minister (KPRM))
The value of European Union funds allocation for particular EU member states in the Cohesion Policy framework, according to the EU budget for 2014-2020, as agreed during the EU summit in Brussels on February 8, 2013 (source: The Chancellery of the Prime Minister (KPRM))

Consequently, the greatest peril connected with EU funds, according Lewiatan, is using the EU support to boost “short-term growth drivers”. Such an approach “… in the long run leads to … preventing Poland from developing its future competitive edge,” the employers’ lobby comment reads. The same message is sent by Invest Bank economists, who warn against short-sightedness. “… the world does not end in 2020. We should start thinking about ways to maintain the relatively high pace of economic development and revenues growth once we run out of the funds from the new EU budget,” the bank writes. These measures should be focused on lowering public spending, structural balancing of the budget, permanently hiking employment rate and inciting growth of private savings and investments, the economists believe. Poland’s current economic slowdown is to a certain extent connected to the scarcity of investment projects in 2013-2014, a result from the transition from one EU funding period to another – and the government should learn its lesson from this, the bank’s report reads.

Source - Polish Press Agency, Economic Service                    

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Published by: Agnieszka Steindl
Author: Public Relations Office
Last change: 12.03.2013 Agnieszka Steindl
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