EC’s recommendations pinpoint Poland’s system flaws

The European Commission has just published its country-specific recommendations indicating the macroeconomic areas on which the Member States need to focus on. The guidance is part of the European Semester economic policy coordination programme.

The aim of country-specific recommendations (CSRs) is to highlight the areas that each country needs to improve in order to boost its economic growth, create job opportunities, and facilitate investment and innovation. The document give directions for activity in the next 12-18 months.

The recommendations concern different areas for different Member States. CSRs for Poland touch on such issues as public finances, education, taxation, green energy and employment. The Commission’s assessed Polish reform programme and convergence programme that had been provided to Brussels in April.

In its guidance for Poland, the Commission focuses on the fiscal policy. Brussels warns that it is likely that Poland will fail to comply with the Stability and Growth Pack. The country will not meet its budget deficit objective before 2019. Preventive measures need to be taken so that the country does not fall deeper into debt. Moreover, it has been stressed that Poland needs a fiscal council.

A big challenge for Poland is closing the taxation gap and countering VAT fraud. Polish fiscal administration has been described in the document as inefficient. It has been stressed that Poland has a very high cost-of-collection ratio, i.e. the costs of collecting taxes are quite substantial.

Another important issue is the labour market. Poland’s working population is aging fast. What is more, the education system does not prepare young people for the challenges of modern economy and demands of the present-day labour market. Financing of higher education has also been criticised, as well as inadequate availability of pre-school education.

Poland should concern introducing changes to the state pension system. The country offers favourable treatment to farmers and those employed in the mining industry. Inequality of the pension system involves substantial budget spending. Actual retirement age is Poland is below the country’s statutory retirement age.

To sum up, the Commission recommends Poland to execute a stricter budget policy and improve tax collection, introduce a pension system reform and increase labour market participation (especially among women) and also boost investment in transport and energy infrastructure and increase the coverage of spatial planning.