Suspension of funds for the implementation of the National Reconstruction Plan (NRP) harms the Polish economy
The Court of Justice of the European Union has issued a sentence declaring the “money for the rule of law” mechanism compatible with EU law, but is it also in line with the European economic interest? The Warsaw Enterprise Institute is of the opinion that funds allocated to the reconstruction of the economy in the time of a pandemic or the implementation of the EU climate policy should not be held hostage in a political dispute. Such actions will be painful not for politicians, but for ordinary citizens and entrepreneurs.
The dispute over the approval of the National Reconstruction Plan has been going on for several months, the document was officially sent to the European Commission in May 2021. However, the Commission set the necessary conditions for its approval – the Plan was to include obligations to liquidate the Disciplinary Chamber, to introduce changes in the disciplinary system for judges and to initiate the reinstatement process of judges removed from adjudication. Concern over the condition of the rule of law in Poland has become an argument influencing the suspension of the payment of funds, which were intended, in particular, to rebuild the economy after the pandemic.
The actions of the Polish government, especially in the area of the judiciary, may raise many doubts. However, should these strictly political actions justify the exclusion of Poland and Poles from the possibility of receiving support in a difficult, pandemic reality? The delay in implementing the NRP is primarily a further increase in inflation, especially acute for the poorest, whose consumption expenditures constitute the largest part of their income, a reduction in the competitiveness of the Polish economy, including small and medium-sized enterprises, and the lack of funds for the implementation of EU policies.
According to forecasts in the report The Price of Fear. How much do concerns about polexit cost us? the suspension of measures will lower GDP in Poland by PLN 7.3 billion in 2022 and PLN 12.7 billion in 2023. Additionally, it will weaken the zloty exchange rate against the euro, which may further deepen inflation in the indicated period by up to 0.5 percentage point, relative to a scenario in which the measures would be paid out. In terms of ordinary consumers, this will be a PLN 5.7 billion increase in spending in 2022, relative to the corresponding consumption in 2020.
Funds for the implementation of the National Reconstruction Plan are not a “prize” for politicians, but an opportunity to revive the Polish economy, so important for the general public. It should also be remembered that the NRP includes not only strictly economic objectives, but also health care or green energy.
One of the areas of the National Reconstruction Plan is the implementation of the agreements of European Union’s climate policy as a priority for current and future generations. Reducing energy consumption, popularization of alternative fuels and development of renewable energy sources are not only environmental concerns, but also an EU requirement. Withholding funds may limit the “green transformation” and thus a vicious circle appears – the European Commission requires the implementation of specific measures and, at the same time, the lack of approval of the NRP significantly hinders their implementation. Crucially, the consequences will be felt primarily by citizens, not politicians.
Leaving aside the issue of the rule of law, one has to ask whether measures that counteract the effects of a pandemic and are to serve the implementation of key EU policies should be held hostage in such a situation? Are the measures taken proportionate and effective, and are there no other methods that would not cause such harm?
