Brussels recommends Poland exits excessive deficit procedure

WARSAW/BRUSSELS (Reuters) – The European Commission on Wednesday recommended that Poland no longer be subject to procedures aimed at cutting its budget deficits, giving Warsaw more leeway to loosen fiscal discipline before a sequence of tightly contested elections this year.

The Commission said in a statement that Poland qualified to come out of the excessive deficit procedure because its deficit was below the threshold of 3 percent of gross domestic product.

“Poland has achieved a timely and durable correction of the excessive deficit,” the statement said.

The Commission’s recommendation will now need to be implemented by the Council of Ministers of the European Union, which is likely to be a formality.

Poland was not originally scheduled to come out of the excessive deficit procedure, a sin bin for member states whose deficits exceed 3 percent of GDP, before 2016.

But Poland was allowed to file an early-exit request last month, because its public deficit could be adjusted to remove the costs of a pension reform, bringing it under 3.0 percent.

Senior figures in Poland’s governing party told Reuters this week they wanted to see tax cuts or higher spending to win back disenchanted voters. The party faces a parliamentary election around the end of this year.

Party figures are worried by the result of the first round of a presidential election on Sunday, when the incumbent, a government ally, was unexpectedly pushed into second place.

One senior party source said they wanted to see the government announce this year that it will cut value added tax in 2016.

But Finance Minister Mateusz Szczurek said on Wednesday it was too early to discuss this.

(Reporting by Wiktor Szary in WARSAW and Jan Strupczewski in BRUSSELS; Editing by Adrian Krajewski, Christian Lowe and Hugh Lawson)

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