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The Warsaw Voice » Business » October 29, 2010
From the Business Editor
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Reforms Put Off?
October 29, 2010   
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Prime Minister Donald Tusk has promised that a “legislative offensive” will be in effect by the end of the year. Deputies of the Civic Platform (PO) and their coalition partners from the Polish People’s Party (PSL) plan to adopt over 40 draft laws, of which a dozen or so are key for the economy. The financial package will include legislation on the spending rule in the budget. The deputies also want to introduce amendments to the law on VAT and to streamline the public sector. In addition, the government has promised several deregulatory laws.

At the same time, Tusk says the government will not carry out any radical reforms—in defiance of advice from economists, but “for the good of people who live here and now” and “in the name of common sense.” This has drawn criticism from the opposition and experts who have repeatedly called for genuine reforms, especially since they are aware that the PO now holds almost all power in the country and is able to push any of the necessary bills through parliament.

Economists are most worried about the state of public finances. The government deficit will probably come close to 8 percent of GDP and in coming years the public debt will hover around the 55 percent of GDP permitted by law. So the threat that Poland will cross this threshold, perhaps due to sudden turbulence on global financial markets, is quite real.

This is why Finance Minister Jacek Rostowski has drawn up a rescue plan. Apart from two successive VAT hikes, if the debt crossed the 55-percent threshold, the family allowance, internet access allowance and preferential tax rules for artists, scientists and journalists would be suspended. These measures have been included in a draft amendment to the law on public finances.

The proposals have been rejected not only by the groups they affect, but also by some members of the coalition government. The proposal to suspend the family allowance received the sharpest criticism. Opponents, including the labor minister, say this would have a detrimental impact on population growth, one of Poland’s biggest problems. This decade will be the first to see a drop in population in Poland. If this trend continues for another 10 years, there would not be enough workers to support pensions and social benefits. Then the government would have much more trouble with public finances than now, and the reforms that would have to be carried out would be much more painful.
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