OECD Warns: Poland Risks Breaching EU Deficit Rules

Financial Decline

After introducing by the polish government the increase of public spending, the Organization for Economic Cooperation and Development (OECD) has issued a warning to Poland and the European Union.

According to the OECD, Poland risks breaching the EU’s fiscal deficit rules next year. The warning comes as the new populist government increases public spending to pay for social programs such as childcare, while simultaneously making politically popular (but financially ill-advised) tax cuts.

The so-called ‘500+’ program, which aims to give 500 PLN (about 90 GBP; 500 PLN is 22% of the net median salary in Poland) for every second and next child per month in the family is about to consume 17.2 billion PLN in 2016 (as to be launched in April) and 2017 budget impact estimates are not known yet. In 2016, this program alone consumes 4.6% of the total country spending and if removed, could potentially decrease the budget deficit by 31%.

Scientists, and in particular demographers, argue if such program can really impact the fertility in Poland, which is one the lowest in Europe (130 children born for every 100 women in reproductive age – the total fertility ratio of 1.3).

If there is a surplus in the country budget, the government can introduce financial aids to the families. But on it’s own it will not increase fertility. And under no circumstances, it should be called a demographic policy.

If the program is doubtful to one of the most prominent demographer in Poland, then why the government puts the country’s EU fiscal deficit rules compliance at risk? The answer can be quite pragmatic, according to The Economy Watch:

The recently elected PiS party targeted poor voters during its run at office. According to its platform, these voters had been excluded from the economic boom of the past decade.

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