Polish parliament passes PiS' flagship spending programme

By bne IntelliNews February 11, 2016

Dominated by the ruling Law and Justice (PiS) party, the lower house of the Polish parliament passed the child benefit programme on February 11. The benefit was one of PiS’ flagship policy pledges in its successful campaign for the October elections, but worries many analysts over its likely impact on fiscal discipline.

The programme grants monthly benefit of PLN500 (€112) for every second and subsequent child in Polish households, or every child in poorer families. The cost of the programme, which is due to start in April, is estimated at PLN17bn in 2016, increasing to PLN20bn in its first full year.

The scheme is the chief reason for worries over the short-term condition of the Polish budget; a plan to lower the retirement age is a concern in the short to medium term. PiS has introduced a bank tax and plans a tax on retailers in a bid to fund its spending.

Both levvies have been heavily criticised for their potential to hamper economic growth. With the deficit set to push higher, and even break the EU's 3% of GDP threshold according to some estimates, the whole package is straining the credibility of Poland’s fiscal and economic policy.

The first fallout from that was felt already, when Standard and Poor’s downgraded the country’s debt rating on January 15, weakening the zloty and hiking bond yields. Moody's and Fitch have warned they could follow suit. The difficulties have raised speculation that Finance Minister Pawel Szalamacha could be forced out just three months into his job.

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