Poland tries to handbag UK over EU budget

By bne IntelliNews October 22, 2012

Jan Cienski in Warsaw -

EU structural funds helped save the Polish economy from recession in 2009 and modernise the country, which is why Warsaw is pushing so hard to ensure that the next EU budget is at least as generous as the current one. That has put the centre-right government of Prime Minister Donald Tusk on a collision course with the UK government of David Cameron, which is leading the resistance to a large budget for 2014-2020.

"Do you know what hypocrisy is?" Tusk asked at a recent summit of leaders of the European People's Party, the grouping to which his Civic Platform party belongs. "Hypocrisy is when politicians call for 'more Europe' and then the next day in the same place say 'a smaller European budget'."

For Poland, another generous budget is key to the country's hopes of continuing to swiftly catch up to Western European living standards. "I am convinced that Polish ambitions of a sum of PLN300bn (€73bn) - which will enable Poland to keep up growth and its tempo of development - is a realistic but difficult goal," Tusk told parliament recently.

Poland has been the largest beneficiary of the current 2007-2013 budget, and the results of that €67bn in EU funds can be seen around the country, from new sewerage plants to hi-tech incubators, new computers for civil servants and, most visibly, an enormous construction programme that has seen Poland finally acquire the rudiments of a modern highway system. "Five years ago we hardly had motorways. We now have key motorways covering much of the country and will be completing the network to 2020," says Jacek Rostowski, the finance minister.

Growth contributor

Elzbieta Bienkowska, the regional development minister, estimates that about half of Poland's GDP growth in 2009 - when every other EU country was in recession but Poland managed to eke out a 1.7% expansion - was due to structural funds. She estimates that the country's growth rate over the last three years has been 0.7 percentage points higher than would be the case without the injection of structural funds.

Poland has been shoring up its case for a generous budget by arguing that the billions it receives in EU funds also benefits older member states, claiming that for every euro Poland is set to receive from 2004-2015, 46 euro cents flow back to the EU-15 in the form of sales and contracts.

So far Poland has signed contracts worth PLN223bn in EU funds, 79.6% of the country's allocation for the 2007-2013 budget, and there are few doubts that Poland will not manage to get all the money coming to it, in the same way that it absorbed all available EU funds in its first EU budget from 2004-2006.

Those kinds of figures have put the fight into Polish diplomats during the current negotiations over the next EU budget. A few weeks ago, Poland was fairly certain that the next budget would be even more generous than the current one. Jerzy Buzek, a former prime minister and head of the European parliament, said recently that he was confident that Poland would get as much as €80bn in the upcoming budget. "That is an enormous sum," he told the newseria agency. "Even if it turns out that Poland gets a few percent less - and at the moment I don't see such a possibility - that would mean we'd get €75bn or €77bn."

But those hopes now look to be in increasing danger in part due to British resistance and in part because of growing donor fatigue among the richer members of the EU. An added danger is the growing pressure to create a separate budget for the Eurozone, something that could be worth as much as €20bn - which the UK wants to link with the broader EU budget but which most member countries want to keep separate. "This, at least in the short term, does not create a danger for us," said Radoslaw Sikorski, the foreign minister.

Finance Minister Rostowski has been a bit more ambivalent, saying: "We feel that this would not be an especially good idea, although one can could imagine a situation where the current European budget would be the same even so. And if the Eurozone countries were to contribute towards an additional budget for just the zone then we would not have anything against that as it is in Poland's interest for the Eurozone to be stable and safe."

Warsaw is also trying to pressure the UK to give up its fight. In a hard-hitting interview with the Gazeta Wyborcza newspaper, Sikorski warned that Poland is paying towards the UK rebate won by Margaret Thatcher. "A generous budget and structural funds, used to finance infrastructure projects, is an effective way of stimulating economic growth and everyone benefits, because highways or internet networks built from EU funds benefit companies for all sorts of EU countries," said Sikorski.

Sikorski in October urged Euro MPs from the right-wing opposition, which sits in the European Conservatives and Reformists grouping in the European parliament together with the British Conservatives, to use whatever influence they have to sway the British. "This is the moment to use influence for a key issue for Poland," he said.

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