The European Commission has greenlit the commencement of the excessive deficit procedure (EDP) against Poland and six other European Union member states, citing significant budgetary oversights. Poland now joins a list of nations whose budget deficit has surpassed the 3 percent threshold of their GDP, a move that could trigger necessary reductions in state expenditures.
According to a statement released on Wednesday by the European Commission, the decision to open the deficit procedure for countries including Poland is justified and a formal proposal to the EU Council is expected in July.
The EU commission has prepared a compliance report covering the budgetary criteria across 12 nations, including Poland. The report substantiates the initiation of the EDP for seven member states: Belgium, France, Italy, Hungary, Malta, Poland and Slovakia.
The report marks just the initial step in the procedure’s commencement. Following the review of opinions from the Economic and Financial Committee, the commission plans to recommend the opening of the EDP in July, based on deficit criteria.
The EU’s excessive deficit procedure is triggered based on the EU commission’s recommendation when a member state’s deficit exceeds 3 percent of GDP or when debt levels surpass 60 percent of GDP.
Defense spending was to be considered by the European Commission as a “mitigating factor” in deficit estimation, but in the case of Poland, investments in the military will only be factored in the coming years, according to the commission’s report. These expenditures are expected to double over the next four years.
The Polish government argued in discussions with the commission that Poland allocates substantial funds for defense. Another factor is investments in green technologies.
Referencing Eurostat data, the commission reported that in 2022, total defense expenditures in Poland amounted to 1.6 percent of GDP. Out of this, government investments in defense accounted for 0.3 percent of GDP and remained unchanged compared to 2019. Preliminary estimates for 2023 show these expenditures at 2.1 percent of GDP, with investment values estimated at 0.7 percent of GDP
The commission highlighted in its report that military expenditures are recognized not at the time of payment but upon delivery, indicating that the current high spending will only be accounted for in coming years as equipment is delivered.
Specifically, Poland expects defense spending to double over the next four years, estimating it will reach 2.8 percent of GDP in 2024, rise steadily to 4.3 percent in 2027, and slightly decrease to 4.1 percent in 2028.
