Polish PM prepares for 2015 vote with populist platform

By bne IntelliNews August 28, 2014

Jan Cienski in Warsaw -

 

The Polish prime minister promised on August 27 to raise old age pensions and child benefits. Donald Tusk is doling out expensive goodies to voters ahead of next year's parliamentary elections, with his centrist Civic Platform (PO) party facing a growing challenge from the opposition as it seeks to win a third term in office.

Tusk's promised pensions hike in 2015 will swell the state's annual bill by PLN1.7bn (€405m); the tab for benefits to families with three or more children will grow PLN1.1bn. The proposals will mean beneficiaries will see slightly larger government payments next year, that despite deflation this year which would normally mean no increase.

Tusk explained the plan will "allow us to divide up the minimal surplus which Poland and Poles gained thanks to our economy avoiding recession." However, economists and businesses are concerned that the PM failed to spell out exactly where he will find the money.

Poland's budget deficit is still expected to come in at about 2.8% of GDP next year. That's a fraction below the EU's 3% ceiling, with a larger gap designated as "excessive". Even the forecast shortfall will only come thanks to the recent move to strip assets from privately managed pension funds and place them in the state social security system, which helped improve budget numbers.

"We see a contradiction between the prime minister's comments, which talk of using the budget surplus ... and the current deficit in public finances of about 3% of GDP," a statement from Lewiatan, the Polish employers confederation, complained. "While a deficit can be tolerated during a recession, in times of economic growth, as we now have, public finances should be balanced."

However, despite the grumbles from economists and the like, the proposals appear to have struck at their real target. The benefits boost wrong-footed the opposition, which had difficulty attacking ideas it had earlier suggested itself.

The prime minister's electoral favours aim to shift political discussion away from an embarrassing series of scandals, in particular "Waitergate," in which several ministers were illegally recorded during dinner conversations at top Warsaw restaurants. The vulgarity-laced evening chats battered Tusk's reputation for running a relatively competent and clean administration.

Civic Platform has been losing ground in recent opinion polls to the right-wing Law and Justice party. There are growing doubts over PO's chances of leading the current governing coalition to yet another victory in next year's vote.

Although Tusk's proposals will only increase an individual pension by about PLN36, that amount does have meaning for cash-strapped retirees, and could give Civic Platform and its junior partners in the Polish Peoples Party a boost at the polls.

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