EC's fiscal loosening proposals to facilitate Poland's euro-zone entry.

By bne IntelliNews September 30, 2010
The European Commission has proposed that Poland and eight other EU member-states that have carried out pension reforms could deduct part of these reforms' costs from their public finances debt for five years. This will help Poland take on the euro and avoid penalties for large state debt, as noted by the Rzeczpospolita daily. Also, the Commission proposed to raise - for these countries - the limit of general government deficit-to-GDP, required of the euro-zone members and applicants, to 4% from 3%. The Polish government's representatives admit that they will be able to cut the budget gap to the 3% limit probably only in 2013, though the 2012 deadline has not been officially abandoned yet. The EC's proposal is due to be tackled by the European Council meeting on Oct 28. If the plan takes effect on Jan 1, 2012, Poland will be able to deduct all pension reform costs (but in subsequent years, 80%, 60%, 40% and 20% of these costs will be deductible, respectively). As a result, Poland's general government debt will fall to around 40% of GDP vs. the projected 57%, Rzeczpospolita reports. tom

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