Poland downplays Brexit effect on EU funding

By bne IntelliNews June 27, 2016

The effect of a UK exit on EU funding earmarked for Poland would be “unimportant,” amounting to a maximum of €2bn during the 2014-2020 EU budget window, a government official claimed to local media on June 27.

The largest recipient, Poland is set to receive close to €105bn in EU cohesion and agricultural policy funding from the current budget. The shock “leave” result in the Brexit vote has provoked speculation that the potential departure of the third largest net contributor to the EU's finances will hurt the Central European member states in particular. The sharp fall in EU funds early in 2016, as the new window goes into operation, has only illustrated the vulnerability.

However, Warsaw insists it is confident that the Brexit process will take years, and thus not have any great impact on the 2014-20 window.  “[The EU] budget will have to reduced, including spending. However in the entire seven-year budget perspective, it is unimportant money, maybe €1bn-2bn,” the cabinet minister at the prime minister’s office, Wojciech Kowalczyk, told TV Republika.

“[Brexit] will take at least two years so it is obvious that before it happens the UK will pay its [share to the EU budget]. Once the UK is out of the EU, it will stop paying into the EU budget indeed, but also it will stop taking from it,” the official added. 

EU structural funds have been an important element in Poland’s growth for years. The funding for investment is estimated to have increased Polish GDP by around 1.7% a year, according to the European Commission. Financing in the new window - applications for projects became viable from the start of 2016 - is likely to add 4% to GDP through to 2020.

Indeed, the role of EU funding in the Polish economy was illustrated to stark effect in the first quarter. GDP contracted 0.1% q/q in January-March, the slowdown significantly driven by a 1.8% drop in investment on the year, the first contraction in seven quarters. Statisitic office GUS noted the effect of EU-driven investment that is not yet up to speed.

 

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