Poland to Bring Deficit Below EU Limit in 2013, Rostowski Tells Parliament

Poland will more than halve its budget deficit over the next three years, bringing it below the European Union limit of 3 percent of economic output in 2013, Finance Minister Jacek Rostowski said.

The general government deficit, calculated under the EU’s accounting rules, will fall to 6.5 percent of gross domestic product next year, 4.5 percent in 2012 and 2.9 percent in 2013, Rostowski said today in Warsaw as parliamentary debate on next year’s budget began.

The EU’s largest eastern economy abandoned a 2012 euro adoption target after its deficit swelled to more than double the bloc’s limit last year. The shortfall may widen to 8 percent of GDP this year, Prime Minister Donald Tusk said Oct. 5.

Poland faced a choice between “gradual and determined” steps to curb the deficit or “shock” therapy, and it “decided to undertake gradual reforms as it assures higher efficiency,” Rostowski said in Parliament.

Poland’s main problem is its large structural deficit resulting from tax cuts and spending increases in 2006-2007, Rostowski said. The decision to increase the value-added tax by 1 percentage point next year was designed to “buy time” until overhauls of the pension and health-care systems bring savings, he said.

To contact the reporter on this story: Dorota Bartyzel in Warsaw at dbartyzel@bloomberg.net Monika Rozlal in Warsaw at dbartyzel@bloomberg.net

To contact the editor responsible for this story: Willy Morris in London at wmorris@bloomberg.net

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