EU calls on Poland to recompose budget plans

The European Commission called on Poland to redraft its budget plans, saying Wednesday it has not laid out a strategy to cut its deficit below a 3 percent limit and advising it to take extra action this year. EU Economic and Monetary Affairs Commissioner Joaquin Almunia said he was sure Poland would follow new spending guidelines from the Commission so Poland would not face the loss of EU funding.

The EU can hold up funding to develop a country's infrastructure and economy if it does not follow budget rules. It advised Warsaw to do more this year to cut its deficit by putting any extra revenue or savings into reducing the budget deficit and reforming its pension system.

It criticized Poland for including contributions to funded pension plans as government revenue. This cannot be added to figures from next year on. Without these contributions, Warsaw 's deficit figures rise to 4.7 percent in 2005, and is projected to fall only slightly to 4.6 percent this year and hit 3.7 percent in 2008, ven though the economy is growing.

Poland 's plan aimed to gradually reduce the general government deficit by 2009, not 2007 as EU finance ministers ordered it to do, the EU said. Poland did not send a 2009 target.

"It is clear, therefore, that Poland does not plan for the correction of the excessive deficit by the deadline imposed by the council (of ministers)," the Commission said. The EU warns that Poland 's budget results could turn out worse than expected because its tax elasticity assumptions were rather optimistic, particularly for 2006 and its predictions for growth in 2008 were "rather favorable." It said Polish pension reform is being undermined by special treatment to certain groups and there was parliamentary support for spending initiatives that were incompatible with plans to cut the deficit, reports the AP.


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