After a fewer years of break, caused by the pandemic and the inflation crisis, the European Union returns to its old, mediocre fiscal caution policy. associate States are reviewed again from their budgetary policies and, if they do not meet the criteria set, Brussels imposes an excessive deficit procedure on them. 19 June European Commission She decided It will cover 7 associate States: Belgium, France, Italy, Malta, Slovakia, Hungary and Poland. All these countries will gotta reduce their budget deficit or public debt as planned.
EC Assessment associate States according to 3 criteria – whether the current deficit (i.e. for 2023) does not exceed 3% of GDP; whether the projected deficit for the current year does not exceed 3% of GDP; whether public debt at the end of 2023 does not exceed 60% of GDP. Poland failed to meet the first two. Last year, the Polish public finance sector stood at 5.1% of GDP, and it will most likely be even 0.3 percent points worse.
Nevertheless, Polish public debt is inactive in line, as last year it amounted to little than 50% of GDP. By forecasts This year, however, the EC is expected to emergence to little than 54 percent, and in the future to 58 percent.
Criteria sucked from a finger
Where did these criteria even come from? It is hard to say, there is no evidence that 3% of GDP of the deficit and 60% of GDP of public debt are the limits above which problems begin. This is just how it erstwhile came up, and now on the basis of these criteria, associate States - and so European societies - must make cuts. This is all the more idiotic due to the fact that fiscal rules were introduced more than 3 decades ago erstwhile we had completely different realities, and European countries had much little opportunities to safe public debt.
Since then, the European Union has imposed countless obligations on EU countries, specified as those arising from climate policy. There have besides been many challenges, specified as the request to mobilise the arms industry, the production of ammunition and the acquisition of military equipment. Europe must besides face the migration crisis, which initially exerted force – besides financially – on countries in South Europe, but after 24 February 2022 besides on Central and east Europe.
In addition, there was a request to separate from the supply of fossil fuels from Russia, which active higher prices. Despite this immense amount of fresh spending and problems, the EU continues to apply the budgetary criteria set in the carefree 1990s, erstwhile capitalism and democracy seemed to have won the final victory, any announced the end of past and was mostly sympathetic and joyful – well, but for the states of the erstwhile east bloc that experienced a severe collapse at the time.
For a moment, the EU seemed to leave this completely curiosive policy. She suspended her during the pandemic and crisis, and last year she worked on changing fiscal rules. Unfortunately, the second turned out to be 1 large blowout. Done cosmetic changes, allowing associate States to exclude investment expenditure, in peculiar those co-financed by EU funds. The excessive deficit procedure itself is besides expected to go milder, which means that the countries will have a small more time to scope the set levels. In another words, Poland will not gotta make cuts in 1 year, but respective years.
The fiscal criteria, the main problem of EU fiscal policy, remain. And they inactive should be applied. The current government has fallen after its predecessors a considerable deficit of over 5% of GDP. Undoubtedly, the Law and Justice Office was very free to spend money on completely reckless projects, specified as the general coal subsidies. However, it is hard to forget that in fresh years Poland has made immense expenditure on external and interior safety and had to accept 1.5 million refugees from Ukraine, which included a full social package available to all citizen and citizen.
According to EU rules, expenditure on arms is accounted for at the time of transportation and will be taken into account in future years. According to EU data, they are presently understated, but in 2023 alone they increased by half a percent of GDP – from 1.6 to 2.1 percent. In 2028 they will scope over 4% of GDP. The question is how much of them the EU will consider investment expenditure, as a large proportion will be directed not at fresh equipment but at expanding the army's size.
Europe will fall out of global competition unchanged
In addition, the current fiscal rules bind not only Poland and individual associate States, but besides the EU as a whole. Assuming, however, that the European Union does not want to fall out of the global competition in which the US is presently leading the way of China, we cannot impose specified an idiotic muzzle on ourselves. Washington and Beijing launch giant funds to stimulate key sectors of their economy, specified as the production of electrical cars or RES installations – only American Inflation simplification Act It launched nearly $400 billion to support home producers and energy transformation. Meanwhile, Europe is tracking the budgetary weaknesses of the associate States, although it imposes further responsibilities on them itself - I do not say incorrect - linked, for example, to an highly costly building directive. In specified a situation, she could at least depart from the long-standing fiscal rules.
American public debt is presently 123 percent of GDP. It is so twice the EU's limit. authoritative Chinese public debt it besides exceeds EU standards, as at the end of last year it was almost 80% of GDP, although it is likely to be much higher. So we put on our own muzzle, which the another economical competitors do not have. Why are we doing this?
To make matters worse, in our unfortunate country, inhabited by people overran by Nadwiślanski liberalism, information about imposing an excessive deficit procedure on Poland automatically generated ideas of budget cuts, i.e. voluntary adoption of the austerity policy. Although this economical masochism is completely destructive, his lovers proceed to appear. For example, Cezary Kazmierczak of the Association of Employers and Entrepreneurs and the Warsaw Enterprise Institute proposed the elimination of almost all social benefits, apart from 800+, to which nevertheless the income criteria would be introduced, and the unemployment benefit, which only 15–16% of them benefit.
Few people think that a advanced budget deficit can be offset or even eliminated not only by cutting expenditure but besides by expanding budget revenues. That is, raising taxes – for example for Caesar Kazmerczak.
The Polish budget deficit is not due to advanced expenditure. In 2023 were little than 47% of GDP, or 2.5 percent points little than the EU average. besides low budgetary revenue, which amounted to little than 42% of GDP, i.e. 4 points little than the EU average (46% of GDP). It is so essential to increase the budget revenue. Of course, there is 1 way – taxation increases for various groups of wealthy Poles, specified as self-employed specialists, entrepreneurs, owners of the largest companies or residents.
If the EU requires us to tighten our belt, let us tighten it - but yet those who have it highly loose. Let us impose the policy of austerity on the most affluent, let them yet live by the principles they preach, that is, rationally, modestly and industriously. Obstructing a rich man’s belt should besides origin them to work harder, which will undoubtedly bring large fruitage, for they are the most capable and energetic individuals in our nation. Unleashing their energy will lead to GDP growth and fast recovery from the deficit, especially as additional budget revenues will aid the government stimulate state-owned economical sectors. That would be a pure profit, the wealthy would thank you.
Of course, this will not happen due to the fact that Polish mediocre liberalism does not foresee specified bold operations. The elimination of the privileges of best placed groups is not in Poland. Instead, we will proceed to rotation up the state and look for tiny budget cuts to make Brussels happy, even at the price of limiting the state's improvement potential.
