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Wednesday, December 6, 2023

The new government will have to face a large deficit. How will this affect the fulfillment of promises?

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We have the largest debt in history – economists warn, but government representatives talk about a “golden age” and deny that the budget is in bad condition. Additionally, the debate raises the question of how the opposition will fulfill all its election promises in the current state of public finances. There are high hopes for the release of funds for the KPO.

Dealing with the state budget and debt will be one of the first tasks for everyone who will sit on the government benches. – We have the largest debt in history, the largest increase in debt in history, which means we have a complete breakdown of control over the budget – points out Prof. Witold Orłowski from the Vistula Academy of Finance and Business and chief economic advisor to PWC.

Deputy Minister of Finance Artur Soboń assures that the situation of Polish finances is the best in history, and Prime Minister Mateusz Morawiecki talks about the “golden age”. – We are in a situation that has never been so good in Poland. From the moment we measure Polish GDP in Polish history, today we are the richest in our entire history – says Soboń. – The Polish golden age will continue. However, a necessary condition for further development is that the next government, regardless of who heads it, does not deviate from the course set by the United Right – emphasizes the head of government.

Read also: How much will the deficit be at the end of the year? Prime Minister Morawiecki about a “very big chance”

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However, public debt calculated using the EU method – which also shows the debt of funds transferred outside the budget – reached one and a half trillion zlotys at the beginning of the year. In turn, the deficit of the public finance sector – i.e. the government and local governments together – will amount to almost PLN 200 billion at the end of the year and will be PLN 80 billion higher than a year ago.

– Public finances are in a very bad condition, but this is also due to the fact that the Polish economy has almost zero growth – explains Ryszard Petru, MP-elect of Third Way.

The task of the future government will be difficult. There is also a question of how to implement all the election promises in the current state of public finances. – All promises cannot be fulfilled in one year – Petru points out and presents the Third Way’s plan for finances. – Return to the previous version of the health insurance premium and clean up after the Polish Order – he points out.

We also asked the Civic Coalition and the Left about the first steps that future ministers will take. – We certainly need to download EU funds – this is something that the Polish economy and the Polish budget are waiting for – emphasizes Arkadiusz Myrcha, MP-elect of the Civic Coalition. – First of all, we are talking about organizing the state budget, i.e. liquidating extra-budgetary funds that swelled during the last term of office of Law and Justice – says Dariusz Standerski, a politician from the Left.

Zalewski and Petru about the first tasks for the potential new governmentTVN24

Dear promises

The Civic Coalition promised 100 specifics that it would like to introduce during the first hundred days of government. These include reducing taxes, i.e. increasing the tax-free amount and abolishing the Belka tax, but also increasing expenses, such as: raises for teachers or a 0 percent loan for the purchase of the first apartment. The question is whether there will be money for it.

– These 100 details were created based on the knowledge we have from generally available information, with the assumption that things may not be so rosy. Nevertheless, each of these proposals has its own financial cushion, Myrcha assures.

The new government will inherit from Law and Justice a very tight financial corset, experts point out. – A short blanket will be very difficult, especially in the context of the fact that the pre-election announcements condemned the budget to much more expenses and chilled revenues to the budget – says Prof. Aneta Zelek, economist from the West Pomeranian Business School.

Bogusław Grabowski: The expected deficit is PLN 192 billion.  This is an absolute record.  The Prime Minister wrote to Brussels about it

Bogusław Grabowski: The expected deficit is PLN 192 billion. This is an absolute record. The Prime Minister wrote to Brussels about itTVN24

Law and Justice politicians are threatening that the Civic Coalition will not be able to increase the tax-free amount. – In my opinion, she will deceive Poles and will try to interfere in this matter – says Artur Soboń, deputy minister of finance, MP-elect of Law and Justice. He adds that it costs PLN 45 billion, of which PLN 15.5 billion is the loss of local governments.

We also asked a former member of the Prime Minister’s Economic Council during the PO-PSL government for his opinion on this matter. – If you ask an economist whether we can afford to reduce taxes at the moment and afford additional expenses, the answer will be, of course, no, and let us thank the outgoing government for that. However, if you ask politicians whether they can afford not to fulfill such clearly made promises, they will probably say that they cannot afford it – replies Prof. Witold Orłowski.

As we hear, funds from the EU reconstruction fund can actually improve our finances, because their purpose is to boost investments and economic growth.

Main photo source: TVN24

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