COMMISSION STAFF WORKING DOCUMENT Analysis by the Commission services of the budgetary situation in Poland in response to the Council Recommendation of 7 July 2009 with a view to bringing an end to the situation of excessive deficit
Date: 2012-01-11
Institutions: European Commission
Subjects: Poland, budget deficit, budget policy, public debt, stability pact

EUROPEAN COMMISSION 

Brussels, 11.1.2012 
SEC(2012) 50 final 

COMMISSION STAFF WORKING DOCUMENT 

Analysis by the Commission services of the budgetary situation in Poland in response to 
the Council Recommendation of 7 July 2009 with a view to bringing an end to the 
situation of excessive deficit 

Accompanying the document 

COMMUNICATION FROM THE COMMISSION TO THE COUNCIL 

Assessment of budgetary implementation in the context of the ongoing Excessive Deficit 
Procedures after the Commission services' 2011 Autumn Forecast 

{COM(2012) 4 final} 
{SEC(2012) 49 final} 
{SEC(2012) 51 final} 
{SEC(2012) 52 final} 
{SEC(2012) 53 final} 

 
 
 
 
  
 
COMMISSION STAFF WORKING DOCUMENT 

Analysis by the Commission services of the budgetary situation in Poland in response to 
the Council Recommendation of 7 July 2009 with a view to bringing an end to the 
situation of excessive deficit 

Accompanying the document 

COMMUNICATION FROM THE COMMISSION TO THE COUNCIL 

Assessment of budgetary implementation in the context of the ongoing Excessive Deficit 
Procedures after the Commission services' 2011 Autumn Forecast 

1. 

INTRODUCTION 

In  2009,  as  part  of  the  European  Economic  Recovery  Plan  (EERP),  the  Polish  authorities 
implemented  a  fiscal  stimulus  programme  to  cushion  the  impact  of  the  global  economic 
slowdown on the Polish economy. As a consequence, the general government deficit widened 
sharply from 3.7% in 2008 to 7.3% of GDP in 2009. Against this background, on 7 July 2009, 
the Council decided in accordance with Article 104(6) of the Treaty establishing the European 
Community  (TEC)1  that  an  excessive  deficit  existed  and  addressed  recommendations  to 
Poland, in accordance with Article 104(7) TEC with a view to bringing an end to the situation 
of an excessive government deficit by 2012. In particular, the Council recommended that the 
Polish authorities should: (a) implement the fiscal stimulus measures in 2009 as planned, in 
particular the public investment plan, while structuring a supplementary budget in such a way 
that any further deterioration in public finances is avoided; (b) ensure an average annual fiscal 
effort  of  at  least  1¼%  of  GDP  starting  in  2010;  (c)  spell  out  the  detailed  measures  that  are 
necessary  to  bring  the  deficit  below  the  reference  value  by  2012,  and  reforms  to  contain 
primary  current  expenditure  over  the  coming  years.  The  macroeconomic  and  budgetary 
projections  underlying  the  recommendation  were  those  of  the  Commission  services'  2009 
Spring Forecast.  

On  3  February  2010,  the  Commission  concluded  that  Poland  had  taken  action  towards  the 
correction of the excessive deficit within the time limits set by the Council. The conclusion 
was based on an assessment of the 2010 budget and the letter of 7 January 2010 from Polish 
Finance Minister Jacek Rostowski to the Commissioner for Economic and Monetary Affairs 
Joaquin Almunia, in which the fiscal consolidation plan for 2010-2012 was presented. While 
the  Commission  recognised  that  Poland  introduced  a  2010  budget  with  measures  to  contain 
the  deficit,  announcing  first  elements  of  a  fiscal  consolidation  programme  for  the  period 
2010-2012  and  initiating  the  work  to  facilitate  consolidation  in  the  years  ahead,  it  also 
emphasised the "considerable risks attached to the fiscal strategy of the Polish authorities" and 
noted that "further sizeable consolidation measures will be needed to bring the deficit below 
3% in 2012". 

1 

The corresponding article in the Treaty on the Functioning of the European Union, which entered into 
force on 1 December 2009, is Article 126(7). 

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According  to  the  Commission  services'  2010  Autumn  Forecast,  the  general  government 
deficit  in  Poland  was  expected  to  increase  from  7.2%  in  2009  to  7.9%  in  2010  despite  a 
considerable  acceleration  in  real  GDP  growth  from  1.7%  to  3.5%  over  the  same  period. 
Against  this  background,  on  14  January  2011,  Commissioner  for  Economic  and  Monetary 
Affairs  Olli  Rehn  sent  a  letter  to  Finance  Minister  Jacek  Rostowski  asking  him  to  present 
measures  allowing  Poland  to  comply  with  the  Council  recommendations  and  reducing  the 
general government deficit below a 3% of GDP reference value in the Treaty by 2012. In his 
response of 2 March 2011, the Minister presented consolidation measures to be implemented 
in  2011  and  2012.  The  Commission  considered  these  measures  to  be  sufficient  to  ensure  a 
correction  of  the  excessive  deficit  by  2012  and  decided  to  maintain  the  excessive  deficit 
procedure (EDP) in abeyance.  

The Commission services' 2011 Autumn Forecast projects the deficit in Poland at 4% of GDP 
in  2012,  which  is  1  pp.  above  the  3%  of  GDP  reference  value  in  the  Treaty.  Against  this 
background, on 11 November 2011 Vice-President Rehn sent a letter to Minister Rostowski 
urging  him  to  adopt  with  no  delay  a  2012  budget  that  would  ensure  a  timely  and  lasting 
correction  of  the  excessive  deficit,  and  informing  him  that  in  the  absence  of  corrective 
measures  spelled  out  in  detail  and  adopted  by  mid-December  2011,  a  Commission 
recommendation  for  a  Council  decision  under  Article  126(8)  followed  by  new 
recommendations  under  Article  126(7)  of  the  Treaty  would  become  unavoidable.  On  8 
December 2011, the Polish government revised the 2012 draft Budget Law and supplemented 
it with additional measures. The Polish Minister of Finance, Mr Rostowski, replied to Vice-
President Rehn's letter on 21 December 2011 and provided additional information on actions 
taken or planned in order to reduce the general government deficit.  

This paper examines progress made by Poland towards a timely and sustainable correction of 
the  excessive  deficit.  In  particular,  it  analyses  the  budgetary  developments  since  the 
Commission communication to the Council on action taken of 3 February 2010 and takes into 
account  all  budgetary  decisions  of  the  Polish  government  that  were  announced  publically, 
including  the  additional  measures  contained  in  the  2012  draft  Budget  Law  and  the 
explanations provided by Minister Rostowski in writing on 21 December 2011.  

2. 

ECONOMIC DEVELOPMENTS AND OUTLOOK 

The  macroeconomic  situation  in  Poland  over  the  period  2009-2012  turned  out  better-than-
expected at the time when the Council recommendations were issued, i.e. in the Commission 
services'  2009  Spring  Forecast.  With  real  GDP  growth  at  1.6%,  Poland  was  the  only  EU 
member state with positive growth in 2009. Economic activity continued to be stronger than 
projected by the Commission services' 2009 Spring Forecast, with real GDP growth in 2010 
reaching 3.9% compared to 0.8% in the 2009 Spring Forecast. According to the Commission 
services’ 2011 Autumn Forecast, the recovery is on course to strengthen further in 2011, with 
real  GDP  expected  to  increase  by  4%  (for  details  see  Table  1).  The  main  drivers  of  the 
recovery in 2010 and 2011 were a gradually improving labour market, rebounding consumer 
and  business  confidence  and  increased  foreign  capital  inflows.  However,  the  growth  is 
expected  to  slow  down  to  2.5%  in  2012  on  the  back  of  faltering  external  demand  and 
weakening  confidence.  These  developments  are  set  to  result  in  moderate  investment 
(including public investment slowing down towards the end of the EU  financial perspective 
2007-2013) and weaker private consumption growth. 

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Table 1: Comparison of macroeconomic developments and forecasts 

2009 

2010 

2011 

2012 

2013 

Outtur
n 

Outtur
n 

1.6 

3.9 

COM 
AF 
2011 

4.0 

1.3 

-2.5 

2.7 

0.4 

3.7 

2.7 

1.9 

-0.7 

0.5 

1.4 

3.7 

0.3 

0.0 

1.0 

3.4 

National 
projections 

4.0 

n.a. 

n.a. 

n.a. 

1.9 

2.8 

COM 
AF 
2011 

2.5 

2.2 

-0.3 

0.6 

0.2 

2.0 

National 
projections 

2.5 

n.a. 

n.a. 

n.a. 

0.8 

2.5 

COM 
AF 
2011 

2.8 

National 
projection
s 

3.4 

2.6 

0.0 

0.2 

0.4 

2.0 

n.a. 

n.a. 

n.a. 

0.8 

2.5 

Real GDP (% change) 
Contributions to real GDP 
growth 
Final domestic demand 

Changes in inventories 

Net exports 

Employment (% change) 

GDP deflator (% change) 

Note: COM AF 2011 – Commission services’ 2011 Autumn Forecast; National projections – draft 2012 Budget Law 
Sources: National authorities and Commission services 

The Commission services’ 2011 Autumn Forecast assessment of the economic developments 
for  2011  is  in  line  with  that  of  the  Polish  authorities  presented  in  the  2011  update  of  the 
Convergence  Programme  (CP)  and  the  draft  2012  Budget  Law.  The  estimate  of  2.5%  real 
GDP  growth  for  2012  made  in  the  2011  Autumn  Forecast  is  much  lower  than  the  4% 
expected in the CP, as the latter could not take into account the adverse developments in the 
euro area. However, in its 2012 draft budget the Polish government has revised its projections 
for 2012 to 2.5%, in line with the Commission services' 2011 Autumn Forecast.  

3. 

BUDGETARY SITUATION AND PROJECTIONS FOR THE PERIOD 2011-2013 

3.1. 

Estimated outturn for 2011 

Following a significant deterioration in the general government deficit, from 3.7% of GDP in 
2008  to  7.8%  of  GDP  in  2010,  the  Polish  government  embarked  on  an  ambitious 
consolidation programme. This programme covered not only measures included in the 2011 
Budget  Law,  but  also  supplementary  ones,  which  were  implemented  outside  the  central 
government  budget.  Of  particular  importance  was  the  reduction  in  the  contribution  rate  to 
second  pillar  pension  funds  (from  7.2%  to  2.2%  of  gross  wages).  According  to  the  2011 
Autumn Forecast, these measures, in combination with a sharp economic rebound in 2011, are 
projected to bring the general government deficit down to 5.6% of GDP in 2011.  

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Table 2: Comparison of budgetary projections 

2011 

2012

2013

CP 2011 

COM AF 

CP 2011 

COM AF 

CP 2011 

COM AF 

% of 
GDP 

nominal 
rate of 
growth 

% of 
GDP 

nominal 
rate of 
growth 

% of 
GDP 

nominal 
rate of 
growth 

% of 
GDP 

nominal 
rate of 
growth 

% of 
GDP 

nominal 
rate of 
growth 

% of 
GDP 

nominal 
rate of 
growth 

Total government revenue 
Taxes on production and imports 
Taxes on income and wealth 
Social contributions 

Total government expenditure 
Compensation of employees 
Intermediate consumption 
Social transfers other than in kind 
Interest expenditure 
Subsidies 
Gross fixed capital formation 

40,1 
13,9 
7,3 
11,9 

45,7 
9,8 
6,1 
14,3 
2,8 
0,5 
6,6 

13,6 
10,4 
12,8 
14,6 

7,2 
4,5 
5,9 
3,2 
11,8 
6,9 
27,1 

39,6 
14,2 
7,3 
11,6 

45,2 
9,8 
6,1 
14,3 
2,8 
0,6 
6,4 

13,6 
12,0 
12,3 
12,9 

7,2 
4,5 
6,2 
3,3 
13,5 
12,7 
22,0 

40,7 
14,1 
7,6 
12,5 

43,7 
9,4 
5,9 
13,9 
2,8 
0,5 
5,8 

8,3 
8,2 
11,1 
12,1 

2,0 
2,3 
3,2 
3,7 
6,7 
6,7 
-6,2 

40.8 
14.3 
7.5 
12.2 

44.8 
9.7 
6.1 
14.2 
3.0 
0.5 
6.1 

7.5 
5.8 
8.2 
9.7 

3.5 
2.5 
4.7 
4.0 
9.2 
2.3 
0.5 

39,7 
13,9 
8,0 
12,5 

42,2 
9,2 
5,8 
13,7 
2,7 
0,5 
4,7 

3,6 
4,7 
11,8 
6,2 

2,6 
3,9 
4,4 
4,7 
2,4 
6,2 
-14,1 

41,0 
14,4 
7,7 
12,5 

44,0 
9,7 
6,1 
14,1 
3,0 
0,5 
5,4 

5,4 
5,3 
7,0 
7,1 

3,1 
4,8 
5,1 
4,3 
6,0 
3,1 
-7,0 

GG balance (% of GDP) 
Structural balance (% of GDP) 
GG gross debt (% of GDP) 

Real GDP growth (%) 
Nominal GDP growth (%) 
GDP deflator (%)  

-5,6 
-5,5 
-54,9 

4,0 
7,4 
3,3 

-5,6 
-5,4 
-56,7 

4,0 
7,5 
3,4 

-2,9 
-2,9 
-54,1 

4,0 
6,7 
2,6 

-4,0 
-3,6 
-57,1 

2,5 
4,5 
1,8 

-2,5 
-2,4 
-52,4 

3,7 
6,2 
2,5 

-3,1 
-2,5 
57,5 

2,8 
4,8 
2,5 

Note:  COM  AF  2011  –  Commission  services'  2011  Autumn  Forecast;  CP  2011  –  April  2011  update  of  the  Convergence 
Programme  
Sources: National authorities and Commission services 

Since  the  macroeconomic  assumptions  underlying  the  budgetary  projections  for  2011  are 
similar  in  the  2011  Autumn  Forecast  and  in  the  2011  update  of  the  CP,  both  expected 
revenues and expenditures are forecast to grow at the same nominal rate in both projections, 
resulting  in  a  headline  deficit  of  the  same  magnitude.  However,  small  differences  in  the 
composition of expenditure can be observed (see Table 2), as the Commission services expect 
a  slightly  higher  nominal  rate  of  growth  for  intermediate  consumption,  offset  by  a  lower 
growth  rate  of  public  investment  expenditure,  because  the  profile  of  inflowing  EU  funds 
becomes flatter over the current EU multiannual financial framework.  

3.2. 

Deficit projections for 2012-13 

Since the Polish government did not announce any significant new reforms prior to the 2011 
Autumn Forecast, the Commission services projected under the customary no-policy-change 
assumption that the general government deficit would fall to 4.0% of GDP in 2012, i.e. 1 pp. 
above  the  3%  of  GDP  reference  value  in  the  Treaty.  Furthermore,  it  was  projected  that 
Poland's  average  annual  fiscal  effort  would  not  comply  with  the  respective  Council 
recommendation  (see  Table  3  for  details).  Taking  into  account  the  change  in  the 
macroeconomic scenario between the projections underlying the EDP recommendations and 
the  2011  Autumn  Forecast,  it  appears  that  the  current  estimate  of  the  fiscal  effort  (1.2%  of 
GDP) has benefited from an upward revision of underlying growth prospects; when correcting 

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for this upward revision, the average annual fiscal effort over the period 2010-20122 was, at 
0.9% of GDP, below the value of "at least 1¼% of GDP" recommended by the Council. 

Table 3: Comparison of fiscal efforts, change in the structural balance (% of GDP) 
based on the Commission services' 2011 Autumn Forecast 

Average annual change 
of structural balance 
2010-2011 

Average annual change 
of structural balance  
2010-2012 

Uncorrected  Corrected  Uncorrected Corrected

Additional 
average annual 
effort needed to 
correct the 
excessive deficit 

Average annual 
fiscal effort 
recommended by 
the Council 

Deadline 
for 
correction 

at least 1¼% in 
2010-2012 

1.0 

0.9 

1.2 

0.7 

1.0 
Notes:  
-  The  additional  average  annual  effort  (i.e.  on  top  of  measures  already  included  in  the  2011  Autumn 
Forecast) is calculated for the period from 2011 until the deadline for correction (2012).  
- The uncorrected average annual change in the structural balance is the estimated change in the structural 
balance from the Commission services' 2011 Autumn Forecast. The corrected average annual change in 
the structural balance is the uncorrected average annual change in the structural balance plus a correction 
factor capturing the effect of revisions to potential output growth between the projections at the time of the 
EDP recommendations and the Commission services’ 2011 Autumn Forecast (see European Commission 
(2004) Public Finances in EMU – 2004, European Economy, Brussels; and European Commission (2006) 
Public Finances in EMU – 2006, European Economy, Brussels). 
Source: Commission services 

2012 

Subsequently,  on  8  December  2011,  the  Polish  government  adopted  the  updated  2012  draft 
Budget Law and revised its forecast for economic growth considerably downwards, from 4% 
still expected in the CP, to 2.5%. The draft Budget includes additional consolidation measures 
(see Table 4), which according to the Commission services' estimates (including second round 
effects on growth) would bring down the general government deficit to 3.3% of GDP in 2012, 
still  above  the  3%  of  GDP  reference  value  in  the  Treaty3.  However,  the  deficit  of  3.3%  of 

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According to Item 4 of the Council recommendation, "the assessment of effective action will take into 
account economic developments compared to the economic outlook in the Commission services' Spring 
2009 forecast". In the case of Poland, the positive potential growth surprise has been quite significant, 
i.e. it amounted to an average annual upward revision of 0.7 pps. Hence, the average annual change in 
the structural budget balance in the Commission services' 2011 Autumn Forecast includes a component 
that is not imputable to discretionary fiscal policy making. When correcting for the upward revision of 
the underlying growth prospects, the estimated average annual fiscal effort would be lower by 0.4 pps. 
amounting  to  0.9%  of  GDP  and  falling  short  of  what  was  recommended  by  the  Council.  Detailed 
information  for  the  underlying  methodology  can  be  found  at:  European  Commission  (2004)  Public 
Finances in EMU – 2004, European Economy, Brussels, available at: 
http://ec.europa.eu/economy_finance/publications/publication469_en.pdf  and  European  Commission 
(2006) Public Finances in EMU – 2006, European Economy, Brussels, available at: 
http://ec.europa.eu/economy_finance/publications/publication423_en.pdf. 
In his response to Vice-President Rehn's letter, Minister Rostowski estimated the general government 
deficit to be at 2.97% of GDP in 2012. However, this estimate does not take into account second round 
effects. In addition to the main measures (listed in Table 4 of this assessment), the response referred to 
new regulations limiting the local government subsector's deficit (local government deficit rule) as well 
as to a newly introduced road speed limit enforcement system. According to Minister Rostowski, these 
two  measures  would  have  an  impact  of  0.34%  and  0.08%  of  GDP  respectively.  However,  the 
Commission services note that the local government deficit rule has not been yet formally adopted by 
the  government  and  can  therefore  not  be  taken  into  account.  Moreover,  even  if  it  were  adopted,  the 
information provided does not allow assessing of the likely effect on the budget. The same applies to 

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GDP expected by the Commission service taking into account measures announced/adopted 
after the 2011 Autumn Forecast can be considered to be close to the reference value" and the 
debt-to-GDP ratio is below the 60% of GDP reference value in a sustained manner (on debt 
developments,  see  Section  3.3).  This,  according  to  the  Council  Regulation  (EU)  No 
1177/20114,  allows  to  take  into  account  the  cost  of  a  systemic  pension  reform.  National 
authorities  estimate  the  cost  (measured  as  the  amount  of  contributions  transferred  to  the 
second pillar private pension funds)5 at around 0.6% of GDP in 2012, which is higher than the 
gap between the expected deficit and the reference value.  

As  a  consequence  of  the  additional  consolidation  measures,  the  average  annual  fiscal  effort 
over the period 2010-2012 has increased from 0.9% of GDP according to the 2011 Autumn 
Forecast to 1.1% of GDP, approaching the level recommended by the Council. 

Table 4: Main budgetary measures for 2012  

Revenue  

Expenditure 

•  An 

in 

the 

increase 

security 
contribution rate by 2 pp. (from 6% to 8% of 
gross  wages)  to  be  implemented  as  of 
1 February 2012 (0.3% of GDP) 

social 

Decrease  in  complementary  national  direct 
payments to landowners (-0.1% of GDP) 

•  A 

royalty 

levy  on  minerals 

to  be 
implemented  as  of  1  April  2012  (0.1%  of 
GDP) 

•  Additional  dividends  due  to  good  results  of 
entirely  or  partially  state-owned  companies 
(0.2% of GDP) 

•  Adjustment to the law on the capital revenue 
tax,  preventing  tax  avoidance  on  one-day 
deposits (0.02% of GDP) 

Note:  Budgetary  impact  estimated  by  the  Commission  services.  A  positive  sign  implies  that  revenue  /  expenditure 
increases as a consequence of this measure. 
Sources: Draft 2012 Budget Law, government announcements 

The headline deficit is projected to keep falling in 2013 according to both national projections 
(2.5%  of  GDP)  and  the  Commission  services'  2011  Autumn  Forecast  (3.1%  of  GDP). 
Moreover, the structural measures announced in the draft 2012 Budget Law and in Minister 
Rostowski's  letter  (increase  in  social  security  contribution  rate,  royalty  levy  on  minerals, 
amended  law  on  the  capital  revenue  tax  and  decrease  in  complementary  national  direct 

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the  case  of  the  road  speed  limit  enforcement  system.  Therefore,  the  Commission  services  decided  to 
take a prudent approach and assessed the government deficit without these two measures. 
See  Article  1(2c).  The  regulation  has  amended  the  modalities  according  to  which  budgetary  costs 
related  to  the  introduction  of  a  mandatory,  fully-funded  pillar  in  the  national  pension  system  can  be 
taken into account when assessing adequate progress towards a timely and sustainable correction of an 
excessive  deficit.  In  the  case  of  Member  States  in  the  EDP  where  the  excess  of  the  deficit  over  the 
reference value of 3% includes the effects of such a pension reform, the full net direct cost of the reform 
to  the  public  budget  will  be  taken  into  account  provided  (i)  the  deficit  declines  substantially  and 
continuously and comes close to the 3% of GDP reference value, (ii) the gross government debt ratio 
does not exceed 60% of GDP and (iii) overall fiscal sustainability is maintained. 
Pensions  which  would  have  been  paid  out  from  the  state  budget  to  people  who  have  moved  to  the 
private pension funds should be subtracted from the cost estimate, but for the moment the number of 
those people is negligible. 

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payments  to  landowners)  are  expected  to  reduce  it  further.  Adjusting  the  Commission 
services'  2011  Autumn  Forecast  for  these  additional  structural  measures  (excluding 
dividends), and assuming that no further measures are taken, the 2013 deficit would further 
decline to 2.6% of GDP (from 3.1% in the 2011 Autumn Forecast), and if the dividend-related 
revenues were to remain constant in 2013, it would reach 2.4% of GDP6. 

A  comparison  of  the  general  government  balance  projections  for  period  2010-2013  is 
presented in Table 5 below. 

Table 5: Comparison of budgetary projections, including impact of measures 
announced/taken post-Commission services' 2011 Autumn Forecast,  
general government balance (% of GDP) 

COM AF 2011 
CP 2011 
Draft 2012 Budget Law 
COM Jan 2012 
Notes: COM AF 2011 – Commission services' 2011 Autumn Forecast; CP 2011 – April 2011 update of 
the Convergence Programme, COM Jan 2012 – Commission services' assessment taking into account 
measures taken/announced after COM AF 2011. 

2012 
-4.0 
-2.9 
-2.9* 
-3.3 

2013 
-3.1 
-2.5 
n.a. 
-2.6 

2011 
-5.6 
-5.6 
n.a. 
-5.6 

2010 
-7.8 
-7.9 
n.a. 
-7.8 

* The budget balance presented in the draft 2012 Budget Law is calculated according to the national 
method based on cash accounting, which is not directly comparable to the ESA95 accrual accounting 
method. 

3.3. 

Debt developments 

The general government gross debt in Poland is projected to remain below the 60% threshold 
over  the  entire  period  under  consideration,  both  in  the  Commission  services'  2011  Autumn 
Forecast  and  the  national  projections  in  the  2011  update  of  the  CP.  While  the  national 
authorities  forecast  a  gradual  improvement  in  the  debt  position  (reduction  from  55.1%  of 
GDP  in  2010  to  54.9%  in  2011,  54.1%  in  2012  and  52.4%  in  2013,  according  to  the  2011 
update of the CP), the Commission services expect a slight increase until 2013 (from 54.9% 
of  GDP  in  2010  to  56.7%  in  2011,  57.1%  in  2012  and  57.5%  in  2013).  However,  the 
additional measures contained in the 2012 draft Budget Law are expected to slow down this 
trend.  

Beyond  2013  and  under  the  assumption  of  no  further  policy  changes  on  top  of  the 
Commission services' 2011 Autumn Forecast, the debt ratio would be fairly stable and reach 
56%  of  GDP  by  2020.  An  additional  annual  structural  fiscal  consolidation  of  0.5%  of  GDP 
from 2014 onwards in order to reach the Medium-Term Budgetary Objective (MTO) – in the 
case  of  Poland  a  deficit  of  1%  of  GDP  in  structural  terms  –  would  set  the  debt  ratio  on  a 
declining path, reaching 49% of GDP in 2020 in Poland7. 

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Second  round  effects  through  the  impact  of  the  additional  consolidation  on  the  budget  deficit  are 
estimated to be very limited. 
The underlying assumptions for economic growth and interest rates are those of the Joint Commission-
EPC 2012 ageing report. 

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8 

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