Two years ago, the European Commission deemed Poland’s spending excessive and placed the country under the Excessive Deficit Procedure. Today, instead of moving closer to the EU’s threshold, Warsaw still has one of the largest public finance gaps in the bloc. Analysts warn that the toughest part is still ahead.
On Sunday, July 26, exactly two years have passed since the EU Council subjected Poland to the Excessive Deficit Procedure (EDP) – a mechanism triggered when a country’s general government deficit exceeds the 3% of GDP limit. The procedure does not automatically imply sanctions, but it obliges the government to present and implement a credible fiscal consolidation plan under the supervision of the European Commission and the EU Council. Poland committed to gradually reduce its deficit and, under the Council’s decision, must exit the procedure by 2028 at the latest, while keeping its expenditure growth in line with the agreed medium-term fiscal-structural plan.
Deficit remains stubbornly high
The problem is that, despite having started fiscal consolidation, the deficit itself remains very high. According to the latest government forecasts, it will reach around 6.5% of GDP in 2026 and only drop to about 5.8% in 2027 – still nearly double the EU’s threshold. This means the road to having the excessive deficit procedure lifted is still a long one. The Ministry of Finance insists that Poland, although still under the EDP, is following the fiscal repair path agreed with Brussels. The ministry points out that after the reform of EU fiscal rules in 2024, the assessment of member states no longer relies solely on the deficit level but primarily on compliance with the agreed net expenditure growth path.
On January 21, 2025, the EU Council adopted a recommendation for Poland on eliminating the excessive deficit, stating that the condition for exiting the procedure is the implementation of the assumptions contained in the Medium-Term Budgetary-Structural Plan for 2025–2028. At the same time, since July 2025, Poland has been using the so-called National Escape Clause, which allows a temporary deviation from the standard fiscal path to increase defense spending by up to 1.5% of GDP annually.
The Ministry of Finance notes that on June 3, 2026, the European Commission, in its spring package, found that Poland’s fiscal policy remains in line with the EU Council’s recommendations. Consequently, the Commission maintained the suspension of further steps in the excessive deficit procedure regarding Poland. The ministry also announced that in the fall it will present an updated forecast of the public finance situation in the Public Finance Sector Debt Management Strategy for 2027–2030 and a further report to the European Commission on the implementation of the EDP recommendations.
Experts warn against wishful thinking
Michał Ostrowski, an analyst at the Institute of Taxes and Public Finance, believes that reality is increasingly diverging from the assumptions of the medium-term plan the government presented to the European Commission just a few months ago. – The plan assumed that already in 2025 the deficit would fall from 5.7% to 5.5% of GDP. Instead, it rose to 7.3% of GDP. This year it was supposed to be 4.5% of GDP, but according to government forecasts it will reach around 6.8% of GDP. This shows that Poland is moving further and further away from the goal of bringing the deficit below 3% of GDP in 2028 – Ostrowski said.
Piotr Arak, chief economist at VeloBank, recalled that Poland has spent most of its EU membership under the excessive deficit procedure. – Poland has been under the excessive deficit procedure for most of its EU membership. Many member states are in this group, and so far none have been penalized for it. The closest to sanctions was Romania – Arak noted. He added that a much more significant signal than the mere duration of the procedure is the deteriorating condition of public finances. For the first time in the history of the Third Polish Republic, the general government debt has exceeded the 60% of GDP threshold defined in the Maastricht criteria, reaching 61.6% of GDP in the first quarter of 2026. – In terms of fiscal balance, Poland now has the worst situation in the entire European Union. Last year the deficit was 7.3% of GDP, and this year it will most likely be at least 6.5% of GDP. It is hard to talk about lasting improvement – he said.
Prof. Paweł Wojciechowski, chief economist at Business Centre Club and a former finance minister, said that halfway through the procedure, the scale of needed consolidation is greater today than it was two years ago. – Defense spending has risen, but consolidation in other areas of public finances has been lacking. Each successive year of delaying action increases the scale of the necessary adjustment, which already exceeds PLN 160 billion – he said. – If the current fiscal policy continues, reducing the deficit to 3% of GDP by 2028 will be very difficult. In practice, this could mean a revision of the medium-term budgetary-structural plan and an extension of the fiscal consolidation path – Wojciechowski concluded.
The International Monetary Fund forecasts that, if the current course is maintained, general government debt will rise from 55.1% of GDP in 2024 to over 71% of GDP in 2028, and by the beginning of the next decade it will approach 78% of GDP. At the same time, debt servicing costs, which will already exceed PLN 80 billion this year, could near PLN 100–110 billion annually by the end of the decade. This would leave less and less room for financing investment, healthcare or education, while increasing pressure for a much more painful fiscal consolidation later.
Źródło: WNP.PL, Fot. Piotr Nowak / PAP
