Poland’s EU-Buoyed Economy May Be Hit By Change to Bloc’s Budget

  • EU may curb cohesion funds to raise cash for immigrant crisis
  • Planned move to cut flow of funds to Poland by 31%, ING says

A proposal to reduce European Union cohesion funds to deal with the immigration crisis next year will hurt Poland’s $475 billion economy, analysts at ING Bank Slaski SA said, after more than a decade of subsidies helping drive growth in the bloc’s biggest eastern member.

Economic, social and cohesion funds for EU members will be slashed by 24 percent in 2017 to 37.1 billion euros ($41.6 billion), according to a draft proposed by the bloc’s governments. Such a change implies that Poland, the EU budget’s biggest beneficiary, would get 35.7 billion zloty ($9.2 billion) next year, compared with 52 billion zloty envisaged by the Finance Ministry, ING said in a research note on Wednesday.

Poland’s gross domestic product expanded 3.1 percent in the second quarter, slower than anticipated by the government and economists, as investment shrank by the most since 2012. The government said slower absorption of EU funds was behind the decline as the country completes programs tied to the bloc’s previous, now expired budget and switches to its 2014-2020 fiscal plan.

“The news is negative for Poland’s growth in 2017,” chief economist Rafal Benecki and his team wrote, adding that the bank was sticking to its forecast of a 3.3 percent expansion next year. “It could mean that the acceleration of EU investments will be slower than envisaged.”

Shifts in EU spending priorities for a single year won’t affect the planed seven-year allocation to Poland, whose government is working to “speed up the absorption” of the bloc’s funds, according to an e-mail from the Development Ministry’s press service. Finance Ministry spokesman Waldemar Grzegorczyk declined to comment when reached by phone.

Any changes to the proposed 2017 EU budget will have to be resolved in negotiations between the bloc’s governments and the European Parliament. Under the bloc’s 2014-2020 fiscal plan, Poland is allotted 107 billion euros.

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