Maria Mazurek, Next.gazeta.pl: Defense expenses are now the main topic in Europe. One plan has recently been announced by the European Commission, the other, its own, is planning Germany. Can what we see can be considered a new opening in Europe?
Rafał Benecki, chief economist of ING: What Germany is doing is – I don't like this word – but it's Gamechanger and it's very big. Both in terms of economic and defense policy. Before the election in Germany, the consensus assumed that the new coalition would introduce new expenses at the level of EUR 15 billion, optimists – there were not many of them – they pointed to EUR 40 billion. Meanwhile, we got to know a plan assuming EUR 50 billion for infrastructure per year and about EUR 40 billion for defense. This is several times more than expected And a positive surprise. The reaction of financial markets speaks about the scale of this surprise – the strengthening of the euro in relation to the dollar, an increase in the profitability of German bonds.
It is worth remembering that the German economy is huge. When allocating 2 percent GDP for defense Germans spent a nominal EUR 100 billion for this purpose. Poland at 4 percent She spent EUR 35 billion. It is also important that Germany also has a budget space for indebtednesswhich other euro area countries do not have – for example, those from the South. Ursula von der Leyen announced that at EU level it will amount to EUR 800 billion, of which EUR 150 billion joint financing. Today we know that it can be difficult to implement this plan, because some countries can be more cautious with expenses and not use the gate that a change in fiscal rules is given. Among them is France, which is threatened with a reduction in rating. Hence A large program in Germany is a very strong point of this European awakening.
How do these ambitious plans remember and translate into Poland? We spend the most on GDP in NATO on defense. Will the German Bazooka get our exports and the EU intensification will shoot our economy as a whole?
Polish business will also gain in German investments in infrastructure and defense. Part of orders will go to Polish subcontractors. Various industries will benefit from Stalowa to other industries or construction industries. Poland has highly qualified employees who are on average 2/3 cheaper than German. However, such a large expenditure impulse in Germany, in underinvested conditions of many German industries, means that a lot of time will pass from plans to real expenses. We will feel this impulse only in 2026. Remember that in April 2025 Trump can also introduce customs duties, e.g. to the car sector, which will also hit Poland to some extent. And when it comes to the plan of the European Commission, in the case of Poland the key is the element assuming the possibility of using KPO structural funds for defense. Poland has already declared that it wants to use this option, preparing to move PLN 30 billion. This is also very important because there are some concerns about whether we can use KPO funds at the allowed time and whether this money will definitely be wisely intended for valuable projects. The ability to move them to defense is a good investment.
Unfortunately, we returned to the arms race. Today, Europe is racing with Russia for who will be better prepared in the next few years – In this way to avoid armed confrontation. According to reports of various interviews, Russia will achieve combat readiness for up to 5 years. This arms race is of fundamental importance for Poland's security as a country on the NATO flank and it is difficult to ignore him Also in economic analyzes. This concert of the powers caused Poland to be in a completely new situation. It requires Changes in priorities in Polish economic policy, from social expenditure on supporting industry and defense. And this can be an important developmental opportunity.
In some respects we found ourselves in a similar situation as South Korea. After years of social expenditure, today we must focus on investments in defense. For the time being, we satisfy the import of weapons and technology, but Poland has a chance to develop its productionThe question is whether we will use this opportunity. We are observing a very fast USA output from the post -war security system in Europe, a certain approximation of Washington to Moscow. We also have the answer to this from the EU, including a German, which is greater than expected, which means that the “net” is not so risky to us. But no one has the illusions that Europeans are unable to replace the US in the European security system. Hence An existential need to change priorities in economic policy in social to support industry. Today The force of the economy directly translates into its military safety.
In the Mario Draghi report a few months ago, the former president of EBC warned against the loss of competitiveness by Europe, especially in the technological scope. Can defense intensification help? At first glance, you can see a focus on heavy industry.
This is just a weaker point of these two programs – German and EU. The infrastructure in which Germany wants to invest in will not necessarily improve innovation and backwardness to the digital country. Also, defense expenses will significantly support the traditional means of battlefield. The Russian army is mainly a rocket-artlery army and a little armored, so a significant part of the investment will probably go in these directions. Although we have new means of battlefield – like drones, and here new technologies will already be used.
In the technology race, the United States and China will be ahead of Europe all the time, but there is also space for development for us, because At the current stage of the development of AI technology, a lot of investments will go in applicationsnot just infrastructure, which was so much up to the technology companies in the USA. There are investors to finance this application potential, Europe also has quite good intellectual potential. I think he will be a big player on the technology market at the level of technology.
Europe was a little censored for quite a long time, a lot was said about its weakness and stagnation. And now economic forecasts for Germany and the euro area are growing. At the same time, in the case of the USA, we see traffic the other way and cutting expectations – recently, for example, a report of the Fed branch of Atlanta, indicating recession moods, was loud. Europe enters an upward wave?
Actually, GDP growth forecasts are revised up to Europe, for the United States down. It is worth remembering, however, that in the case of the USA we are still talking about an increase of about 2 percent this year, meanwhile for Germany it is a range between 0 and 1, and for the euro area between 0.7 percent. and just over 1 percent Therefore, the US economy will still develop faster. There is one more important thing. Donald Trump's agenda looks slightly different at the beginning of this term than at the firstwhich translates into these forecasts. This time Trump at the start focused on the duties and savings of the budget sector at the federal level – this is the famous Doge project led by Elon Musk, under which mass layoffs are carried out. US residents are afraid of returning inflation, enterprises are afraid of disturbing in supply chains between North American countries and how restrictions for immigrants will affect the labor market. The positive effects of Donald Trump's policy for the American economy, such as tax cuts and deregulation, will come later, in the second half of this year and the following year.
Finally, I would like to go back to Poland. Is this all you talked about give hope for a higher GDP growth, will your team revolve forecasts up?
Forecasts for this year are currently cautious, just over 3 percent. year to year, because we still do not know what the decision of Donald Trump will be in the matter of customs for Europe [wywiad autoryzujemy 17 marca – red.]. At the same time, the expenditure package, which Germany is just adopting, will have a greater impact on GDP, also ours, only in 2026. German awakening is another argument for the revival of the Polish industry. Earlier, we were afraid that in this economic cycle this sector would reflect poorly, because there will be no traditional strong export impulse, that we would follow the stagnation path of Germans and Czechs. Now these fears are going out. There are surveys indicating that over 20 percent German industrial companies wants to move production to Central Europe, half of which to Poland.
I know from other sources that CDU preparing an expenditure program She assumed that the element of increasing defense production would be greater demand for steel and She saw the source of this steel, among others in Poland. We have three steel stoves, which were basically dimmed: in Częstochowa – which is just moving, Nowa Huta and Dąbrowa Górnicza. Of course, we will see what EU green politics will look like here, but everything indicates the renewal of steel production in Europe. In the last two decades, European abilities have dropped in this area, although there is a small surplus of production but associated with the problems of the automotive industry. To develop defense production, Europe needs steel and Poland and Italy are two countries where the jumping in production capacity can be very high.
At the end of last year, several economists and economists presented me with their suspicions about this, What everyone will talk about, but they don't know it yet. Now I talk to them, verifying these expectations – Rafał Benecki then focused on investments in the arms industry in Poland. A few days ago I also talked to Ernest Pytlarczyk from Pekao SA, the interview can be read under This link: Ernest Pytlarczyk: The consensus wrote Europe for losses and a completely different script is played.