“Poland is heading towards a financial catastrophe, but on the government’s Titanic, the orchestra keeps playing,” wrote PiS MP Mateusz Morawiecki. The politician published an extensive article in which he thoroughly analyzed the state of the national budget under the rule of the December 13 coalition.
“A financial catastrophe” — Morawiecki on the budget under Tusk’s government
Morawiecki pointed out that “with new data emerging on fiscal forecasts for the upcoming quarters and years, there is growing concern about the stability of Poland’s public finances.”
“It is impossible to avoid comparisons in this debate between the governments of Law and Justice and the coalition led by Donald Tusk. An important element is also the need for an honest presentation of the state of public finances at the moment of the transition of power in 2023. Finally, this discussion must include all factors shaping Poland’s macroeconomic situation — both internal ones we can influence and external ones we must manage but often cannot change,” he emphasized.
He also explained “terminological differences that are often confused, ignored, or misrepresented in public debate.”
“First of all, we must distinguish between the state budget deficit and the public finance sector deficit. The former, as the name suggests, includes only the revenues and expenditures of the state budget, excluding other significant expenditures borne by the State Treasury — such as the costs of the National Health Fund, the Social Insurance Fund, the National Road Fund, and other funds managed by the Bank Gospodarstwa Krajowego, as well as local government units. The public finance sector, on the other hand — whose definition and methodology for reporting are set by the European Commission and Eurostat — includes all revenues and expenditures of the broadly defined public sector. This also includes all so-called off-budget funds (including the BGK and PFR funds) and the local government sector. Moreover, this sector is automatically ‘updated’ — any new fund or expenditure is automatically classified as part of it,” the article states.
Morawiecki argues that this means “despite common claims, it is impossible for EU governments to hide debt or deficits.”
“The income-expenditure balance and debt levels calculated under the public finance sector methodology always include the financial accounts of entities like BGK, PFR, or any other body managing public funds and implementing public tasks. The deficit and debt figures reported by Eurostat offer the most complete picture of public finances. They are the most reliable source for assessing and comparing fiscal situations, eliminating any risk of ‘hiding public expenditures.’ That’s why, to properly assess the state of public finances, one must refer to data on the public finance sector as a whole, not just the state budget,” he added.
He also recalled that “during the Civic Platform government from 2007 to 2015, the public finance sector debt rose from 44.5% to 51.1% of GDP — a 6.6 percentage point increase.”
“But if we also account for the artificial reduction of debt by taking funds from the private pension system (OFE), which allowed for a 6 percentage point drop in debt between 2013 and 2014, as well as the mass privatization of state assets amounting to 58 billion PLN, the real debt should be over 10 percentage points higher — clearly exceeding the Maastricht reference value of 60% of GDP. Another characteristic of the Civic Platform governments is worth noting: public debt relative to GDP barely decreased year over year. The only statistically significant drop occurred in 2014 — and as I mentioned, that was solely due to taking funds from OFE,” Morawiecki emphasized.
“Poland’s public finances are in a difficult situation”
The politician also warned that “according to current forecasts, this year we will exceed the 60% debt-to-GDP threshold under EU methodology — meaning that Minister Domański will become the first finance minister in Polish history to break this limit.” Morawiecki also noted that “Law and Justice governments had a much lower average public finance deficit than Civic Platform did between 2007 and 2015.”
“The real intentions of Tusk’s government are best demonstrated by changes to the expenditure rule. In 2024, for the fifth time in a row, the government amended the Public Finance Act, altering the stabilizing expenditure rule. The aim of this change was to expand fiscal space so that the finance minister wouldn’t have trouble drafting a state budget that accommodates all the programs introduced by the current ruling coalition. Under the guise of ‘tightening the rule,’ the government actually loosened it, allowing for a free increase in the maximum level of expenditures necessary to carry out its political agenda,” he stated.
In his view, “Poland’s public finances are undoubtedly in a difficult situation.”
“Minister Domański will not attempt to reduce the deficit below 3%. That’s unrealistic without tightening the tax system. While the defense clause provides some justification, it cannot explain the systematic breaches of the reference levels set out in the Maastricht Treaty. We can expect the current finance minister to adopt a wait-and-see policy until the next parliamentary elections. By not taking any steps to repair the public finances, he will leave the problem for the next government to solve. That is why we must not only critically assess the fiscal policy of those in power today, but also develop a comprehensive plan to fix it — a burden that will once again fall on Law and Justice,” he concluded.