COMMISSION STAFF WORKING DOCUMENT Assessment of the 2013 national reform programme and convergence programme for POLAND Accompanying the document Recommendation for a COUNCIL RECOMMENDATION on Poland’s 2013 national reform programme and delivering a Council Opinion on Poland’s 2013 convergence programme for 2012-2016
Date: 2013-05-29
Institutions: European Commission
Subjects: Poland, budgetary equilibrium, consumer demand, economic recession, innovation, judicial reform, tax reform, transport infrastructure, youth unemployment

EUROPEAN 
COMMISSION 

Brussels, 29.5.2013  
SWD(2013) 371 final 

COMMISSION STAFF WORKING DOCUMENT 

Assessment of the 2013 national reform programme and convergence programme for 
POLAND 

Accompanying the document 

Recommendation for a COUNCIL RECOMMENDATION 

on Poland’s 2013 national reform programme and delivering a Council Opinion on 
Poland’s 2013 convergence programme for 2012-2016 

{COM(2013) 371 final} 

EN 

   EN 

 
 
 
 
  
 
TABLE OF CONTENTS 

Executive summary .................................................................................................................... 3 

1. 

2. 

2.1. 

2.2. 

3. 

3.1. 

3.2. 

3.3. 

3.4. 

3.5. 

4. 

5. 

Introduction .................................................................................................................. 5 

Economic developments and challenges...................................................................... 6 

Recent economic developments and outlook............................................................... 6 

Challenges .................................................................................................................... 7 

Assessment of policy agenda ....................................................................................... 9 

Fiscal policy and taxation............................................................................................. 9 

Financial sector .......................................................................................................... 14 

Labour market, education and social policies ............................................................ 15 

Structural measures promoting growth and competitiveness..................................... 19 

Modernisation of public administration ..................................................................... 23 

Overview table ........................................................................................................... 24 

Annex ......................................................................................................................... 28 

2 

 
 
 
 
EXECUTIVE SUMMARY 

Economic outlook  

According  to  the  Commission's  spring  2013  forecast,  Poland’s  economic  activity  is 
expected to slow down, after an already sluggish 2012, to 1.1% in 2013 on the back of 
falling domestic demand and a difficult global environment, the weakest outcome in two 
decades.  Growth  is  expected  to  pick  up  again  to  2.2%  in  2014.  The  unemployment  rate  is 
forecast  to  rise  from  10.1%  in  2012  to  10.9%  in  2013  and  again  to  11.4%  in  2014.  The 
current-account deficit is set to improve from 3.5% of GDP in 2012 to 2.4% of GDP in 2014. 
Inflation is projected to decrease strongly to 1.4% in 2013 (from 3.7% in 2012), in line with 
weak domestic demand, and to pick up to 2% in 2014 as domestic demand recovers. 

In  2012,  the  headline  government  deficit  amounted  to  3.9%  of  GDP,  which  means 
Poland did not comply with the deadline of 2012 for the correcting the excessive deficit. 
Poland  intends  to  correct  the  deficit  by  2014,  though  according  to  Commission  forecasts  it 
will stick at 3.9% in 2013 and rise to 4.1% in 2014. The structural deficit (minus one-off and 
temporary measures) was 3.8% in 2012 and is estimated to fall to 3.3% in 2013 and 2.9% in 
2014.  Poland's  medium-term  objective  is  for  a  structural  budget  deficit  of  1%  of  GDP  by 
2016,  though  there  is  considerable  uncertainty  over  this  target.  General  government  debt  is 
projected to remain below 60%, though it will rise from 55.6% of GDP in 2012 to 58.9% of 
GDP in 2014. 

Key issues 

Poland  is  the  only  economy  in  the  EU  that  has  posted  positive  growth  throughout  the 
crisis,  though  recent  economic  developments  are  less  encouraging.  Poland’s  good 
economic  performance  throughout  the  crisis  was  based  on  well  suited  macroeconomic 
policies, a strong manufacturing base and a price-competitive labour force. 

Poland  has  undertaken  reforms  to  tackle  some  of  the  challenges  identified  in  the  2012 
CSRs.  The  general  government  deficit  has  been  reduced,  but  at  3.9%  of  GDP  in  2012 
(Poland's  deadline  for  correction)  it  remains  above  the  EU's  3%  of  GDP  limit.  The 
government  has  reformed  the  pension  system,  implemented  vocational  training  reform  and 
proposed  further  changes  to  the  education  system,  which  should  help  to  address  high 
unemployment.  In  addition,  plans  to  liberalise  professional  services  and  improve  research 
funding have continued.  

However,  Poland  faces  many  other  challenges,  which  require  more  ambitious  and 
sustained  efforts  to  sustain  growth  and  create  jobs.  Challenges  are  concentrated  in  four 
areas:  public  finances,  labour  market  participation,  infrastructure  and  the  business  and 
innovation environment.  

•  Public finances: It is necessary to specify additional measures to correct the excessive 
deficit  by  2014,  particularly  in  the  light  of  lower  than  expected  growth,  in  order  to 
maintain the confidence of financial markets. Improving the efficiency of healthcare is 
crucial  to  ensure  the  long-term  sustainability  of  public  finances.  And  there  is 

3 

 
 
 
 
significant  room  for  improvement  on  tax  compliance,  in  particular  by  reducing  the 
administrative burden on taxpayers and improving the efficiency of tax administration. 
Finally,  reforms  to  improve  budgetary  coordination  between  the  different  layers  of 
government are necessary. 

•  Labour market, education and social policy: Despite recent increases in the overall 
employment  rate  (to  64.7%  in  2012),  older  workers,  especially  women,  are  not 
benefitting,  owing  partly  to  a  lack  of  affordable  childcare  and  care  for  dependent 
adults.  Youth  unemployment  is  growing  (rising  to  26.5%  in  2012  from  17.2%  in 
2008),  mainly  due  to  insufficient  match  between  education  and  the  labour  market 
needs.  The  labour  market  is  divided  into  those  that  work  under  permanent  contracts 
with  a  higher  level  of  protection  and  those  that  are  working  under  temporary 
employment contracts with limited possibilities to transit into permanent work. Fixed-
term  employment  is  particularly  widespread  among  the  young  and  often  results  in 
lower pay and limited access to vocational training. The share of population living at 
risk of poverty and social exclusion is high, notably among children and working poor 
(27.2%  of  the  population  in  2011).  A  special  pension  scheme  for  miners  and  an 
overly-generous social security system for farmers hold back productivity growth and 
prevent workers moving between regions and sectors. 

•  Infrastructure:  Despite  sizeable  investments  in  the  road  network,  the  country’s 
infrastructure,  particularly  its  railway  system  as  well  as  the  energy  networks  and 
generating capacity, remains underdeveloped, which hinders growth. Poland still lags 
considerably  behind  other  Member  States  when  it  comes  to  information  and 
communication technology, and fixed broadband coverage is among the lowest in the 
EU.   

•  Business  environment  and  innovation:  Public  and  private  research  spending  was 
0.77% of GDP in 2011, compared to an EU average of around 2%, and further efforts 
are needed if Poland is to reach the national R&D target of 1.7% by 2020. Measures 
taken so far have not led to a visible improvement in innovation capacities of Polish 
companies  which  continue  to  underinvest  in  research  and  innovation.  In  particular, 
public  instruments  to  support  innovation  are  not  well  targeted;  grant  financing  is 
predominant and more efficient instruments such as tax incentives or credits are hardly 
used.    Poland  performs  worse  than  the  EU  average  in  terms  of  the  efficiency  of  its 
public administration; reforms needs are most pressing in the judicial system and the 
tax administration. 

4 

 
 
 
 
 
1.  INTRODUCTION 

In  May  2012,  the  Commission  proposed  a  set  of  country-specific  recommendations  (CSRs) 
these 
for  economic  and  structural  reform  policies  for  Poland.  On 
recommendations,  the  Council  of  the  European  Union  adopted  six  CSRs  in  the  form  of  a 
Council Recommendation in July 2012. These CSRs concerned public finances, the pension 
system, education and training, the labour market, the business environment, energy, transport 
and deregulation. This Staff Working Document (SWD) assesses the state of implementation 
of these recommendations in Poland. 

the  basis  of 

The  SWD  assesses  policy  measures  in  light  of  the  findings  of  the  Commission’s  Annual 
Growth Survey  (AGS)1 and the Alert Mechanism Report  (AMR),2 which were published in 
November  2012.  The  AGS  sets  out  the  Commission’s  proposals  for  building  the  necessary 
common  understanding  about  priorities  for  action  at  national  and  EU  level  in  2013.  It 
identifies five priorities to guide Member States to renewed growth: pursuing differentiated, 
growth-friendly  fiscal  consolidation;  restoring  normal  lending  to  the  economy;  promoting 
growth and competitiveness for today and tomorrow; tackling unemployment and the social 
consequences  of  the  crisis;  and  modernising  public  administration.  The  AMR  serves  as  an 
initial  screening  device  to  determine  whether  macroeconomic  imbalances  exist  or  risk 
emerging in Member States. The AMR found positive signs that macroeconomic imbalances 
in  Europe  are  being  corrected.  To  ensure  that  a  complete  and  sustained  rebalancing  is 
achieved, 14 Member States were selected for a review of developments in the accumulation 
and unwinding of imbalances.3 

Against  the  background  of  the  2012  Council  Recommendation,  the  AGS  and  the  AMR, 
Poland  presented  updates  of  its  national  reform  programme  (NRP)  and  of  its  convergence 
programme  on  30  April  2013.  These  programmes  provide  detailed  information  on  progress 
made since July 2012 and on the government’s plans. The information in these programmes 
provides the basis for the assessment made in this Staff Working Document. 

The  national  reform  programme  went  through  a  limited  consultation  process  involving 
different  stakeholders  including,  inter  alia,  representatives  of  local  and  regional  authorities, 
trade  unions  and  employers'  organisations.  No  consultation  process  took  place  for  the 
convergence programme. 

Overall assessment 

The analysis in this SWD leads to the conclusion that Poland has made limited progress on 
measures  taken  to  address  the  CSRs  of  the  Council  Recommendation.  On  the  positive  side, 
the  country  managed  to  reduce  further  its  fiscal  deficit.  It  implemented  the  reform  of  the 
pension system, made progress on its vocational training reform and proposed further changes 
to the education system. Notwithstanding these important achievements, reform efforts were 
limited,  particularly  as  regards  the  fiscal  framework,  childcare  facilities,  labour  market,  an 
innovation-friendly  business  environment,  energy,  transport  and  deregulation.  Therefore,  in 
these areas, the challenges identified in July 2012 and reiterated in the AGS remain valid. 

1 COM (2012) 750 final. 
2 COM (2012) 751 final. 
3  13  in-depth  reviews  were  published  on  10  April  2013.  While  selected  for  an  in-depth  review  in  the  AMR, 
Cyprus  was  ultimately  not  reviewed  under  the  Macroeconomic  Imbalance  Procedure  in  view  of  the  advanced 
preparations for a financial assistance programme. 

5 

 
 
 
 
                                                 
Poland’s  most  pressing  challenges  are  in  public  finances,  labour  market  participation, 
infrastructure development, and the business and innovation environment. The budget deficit 
has  to  be  further  reduced  to  correct  the  excessive  deficit,  to  subsequently  make  progress 
towards  the  medium-term  objective  (MTO)  and  to  maintain  the  confidence  of  financial 
markets. There is significant room for improvement on tax compliance. 

Despite recent progress, the labour force participation rate, which is still low, is another major 
concern  in  the  medium  to  long  term,  given  an  ageing  population.  Only  64.7%  of  the 
population  between  the  ages  of  20  and  64  is  active  on  the  labour  market,  and  the  rates  are 
even  lower  for  youth  and  elderly  people  (notably  women).  Youth  unemployment  has 
continued to rise and there are signs of labour market segmentation affecting young people. 
The efficiency of public administration needs to be significantly improved. Despite sizeable 
investments in the road network, the country’s infrastructure, particularly its railway system, 
remains  underdeveloped  and  is  thus  a  factor  that  severely  hinders  labour  mobility,  foreign 
investment and growth. The low level of R&D spending and poor innovation performance is 
another important policy issue. Finally, in the light of persistent uncertainties in international 
financial  markets,  continued  prudent  and  pre-emptive  policies  in  financial  regulation  and 
supervision remain important. 

The policy plans submitted by Poland address most of the challenges identified in last year’s 
Staff Working Paper, and broad coherence between the two documents has been ensured. The 
national  reform  programme  confirms  Poland’s  commitment  to  address  shortcomings  in  the 
areas  of  low  employment,  youth  unemployment,  the  education  system  and  unjustified 
restrictions  on  professional  services.  The  convergence  programme  reiterates  Poland’s 
commitment  to  continue  fiscal  consolidation,  improve  the  budgetary  position  towards  the 
medium-term  objective  and  to  ensure  the  long-term  sustainability  of  public  finances  in  line 
with the Stability and Growth Pact. However, in some areas, in particular innovation-friendly 
business  environment  and  the  quality  of  fiscal  consolidation,  the  programmes  lack  the 
ambition to address the challenges in a comprehensive way. 

2.  ECONOMIC DEVELOPMENTS AND CHALLENGES 

2.1. 

Recent economic developments and outlook 

Recent economic developments 

In 2012 and early 2013, growth and employment in Poland were strongly affected by the 
general weakening of global activity and on-going fiscal consolidation. The year 2012 saw 
a  steady  decline  in  economic  performance  and  a  growth  rate  of  only  1.9%.  While  exports, 
driven  by  sustained  price-  and  non-price  competitiveness  gains,  supported  the  economy, 
domestic demand was sluggish. In particular, private consumption growth was disappointing 
as  labour  market  prospects  worsened,  real  wages  declined  and  consumer  sentiment 
deteriorated. 

Against this backdrop, investment growth was negative and further hampered by worsening 
financing  conditions  and  a  slowdown  in  public  investment.  Consumer  price  inflation 
remained  high  at  3.7%  in  2012  as  a  result  of  currency  depreciation,  high  commodity  prices 
and a rise in administered prices. Faltering economic growth limited labour demand and the 
unemployment  rate  rose  from  9.7%  in  2011  to  10.1%  in  2012.  The  current  account  deficit 
improved from 4.9% in 2011 to 3.5% to 2012, mainly on account of cyclical factors. 

6 

 
 
 
 
 
Economic outlook 

According  to  the  Commission  2013  spring  forecast,  a  weak  economic  outlook  for 
Poland’s main trading partners is expected to hamper domestic confidence, worsen the 
situation of exporters and ultimately constrain the growth of domestic demand in 2013. 
Real GDP is forecast to rise by 1.1% in 2013. Economic activity is set to get no support from 
sluggish  public  investment,  due  to  fiscal  consolidation  needs  and  completion  of  EU  co-
financed projects in previous years. Uncertain demand prospects and weak global sentiment 
are expected to impede private investment. Moreover, private consumption is likely to suffer 
from weak growth in disposable income and a rise in household savings. 

Domestic  demand  is  likely  to  pick  up  only  in  2014,  when  the  euro  area  is  expected  to 
recover.  Prospects  for  better  growth  in  the  global  economy  are  set  to  positively  impact 
prospects for Polish exporters, overall confidence and ultimately labour market conditions and 
consumer  sentiment  fuelling  growth  in  private  consumption.  Against  this  backdrop  and 
supported  by  accelerating  credit  supply,  private  investment  is  also  expected  to  rise.  Imports 
are  expected  to  grow  in  parallel,  due  to accelerating  domestic  demand.  The  current  account 
deficit  is  set  to  improve  from  3.5%  of  GDP  in  2012  to  2.4%  of  GDP  in  2014.  Inflation  is 
projected to  decrease  strongly  to  1.4% in 2013, in line with weak domestic  demand, and to 
pick up to 2% in 2014 as domestic demand recovers. 

National  reform  programme  and  convergence  programme 
same 
macroeconomic  outlook.  For  2013,  the  authorities  project real  GDP  growth  of  1.5%  and  a 
stronger increase in private consumption and private investment compared to the Commission 
2013 spring forecast. The contribution of domestic demand to growth (+0.8 pp) is therefore 
over optimistic. Moreover, for 2014, the Polish authorities forecast real GDP growth of 2.5%, 
higher than the Commission 2013 spring forecast (+2.2%). The macroeconomic scenario does 
not include an estimate of the impact of structural reforms on macroeconomic variables. 

share 

the 

2.2. 

Challenges 

Poland  faces  significant  challenges  as  regards  public  finances, 
labour  market 
participation,  youth  unemployment,  education,  efficiency  of  healthcare,  business 
environment, and efficiency of public administration and innovativeness of the economy. 
These  challenges  were  identified  in  the  2012  SWD  and  reflected  in  the  Council 
Recommendations  issued  for  Poland.  As  suggested  by  the  AGS  and  the  AMR,  these 
challenges remain fully or partly relevant. In addition, new  challenges have appeared in the 
light of recent economic developments. 

One major challenge relates to public finances. Continued fiscal consolidation is required 
to  correct  the  excessive  deficit  and  subsequently  make  progress  towards  the  medium-term 
objective  and  to  maintain  the  confidence  of  financial  markets.  A  higher  share  of  growth-
enhancing  expenditure  (education,  research  and  innovation)  remains  a  prerequisite  for 
sustaining  good  macroeconomic  performance.  Improving  the  efficiency  of  healthcare  is 
crucial  in  view  of  the  long-term  sustainability  of  public  finances.  Moreover,  structural 
the  fiscal  framework  are  a  challenge:  poor  monitoring  of  budget 
weaknesses 
implementation,  discrepancies  between  the  public  accounting  and  reporting  system  and  the 
European  System  of  National  and  Regional  Accounts  (ESA95),  as  well  as  problems  with 
coordination between various tiers of the general government in the annual and multi-annual 
budgetary  planning  all  need  attention.  Tax  compliance  remains  a  focal  point  in  terms  of 
combating  the  shadow  economy.  Reducing  the  administrative  burden  on  taxpayers  and 
improving the efficiency of tax administration also need attention. 

in 

7 

 
 
 
 
In  the  labour  market,  low  employment  rates  of  older  workers,  women  in  particular, 
linked  to  a  relatively  low  effective  retirement  age  and  sector-specific  pension  systems 
pose a challenge. Despite the progress observed since 2005, employment rate of people aged 
55-64  is  the  fifth  lowest  in  the  EU,  and  the  average exit age from the  labour  market  is  still 
very low. A very marked gap with the EU average is observed in relation to older women out 
of whom only 29.2% are employed. Possibilities for early retirement have been significantly 
reduced,  but  there  is  still  a  generous  special  pension  scheme  for  miners.  Women’s 
participation in the labour market is very low, owing partly to the lack of affordable childcare, 
as  well  as  lack  of  quality  care  for  dependant  adults.  While  some  positive  steps  have  been 
taken to increase the availability of childcare facilities, the childcare system still fails to take 
into  account  the  geographical  distribution  of  demand  and  there  are  still  too  few  places 
available. The overly generous social security system for farmers (KRUS) creates incentives 
for  small-scale  farmers  to  remain  in  the  agricultural  sector.  This  results  in  hidden 
unemployment  in  rural  areas,  holding  back  productivity  growth  and  keeping  regional  and 
sectoral labour mobility at bay. 

Subdued growth puts strains on the employment prospects of the young. Unemployment 
among young people is growing and the youth employment rate is below the EU average. In 
addition, the widespread use of civil law contracts and fixed-term employment often results in 
lower  pay  and  limited  access  to  vocational  training;  barriers  to  move  to  more  sustainable 
forms of employment should be removed. Public Employment Services focus too narrowly on 
administrative  tasks,  while  activation,  job  search,  career  guidance  and  retraining  are  still  of 
relatively  low  quality  and  do  not  satisfy  employers’  needs.  This  aggravates  the  mismatch 
between  the  supply  of  skills  and  labour  market  needs,  because  of  the  low  quality  and 
relevance  of  higher  education  and  poor  access  to  good  quality  apprenticeships  and  work-
based learning. 

Poland lacks an effective social protection system. It invests a very low share of its GDP 
(below  10%)  in  social  protection  (excluding  pensions),  the  coverage  and  the  level  of  social 
benefits and housing support are low. The benefits are poorly targeted with only 7.5% of non 
age related social protection benefits means-tested (compared to the EU27 average of 14.7% 
in  2010)  The  share  of  the  population  living  at  risk  of  poverty  and  social  exclusion  is  high, 
notably  among  children  and  the  working  poor.  Having  a  job  is  not  a  sufficient  safeguard 
against  poverty  and  social  exclusion.  On  the  other  hand,  in-work  benefits  are  limited  and 
insufficient to prevent slipping into long-term unemployment.  

Regarding the structure of the economy, Poland’s export capacities are concentrated at 
the  lower  end  of  the  value  chain,  while  the  innovation  and  R&D  framework  is 
fragmented  and  suffers  from  underinvestment.  Poland’s  good  economic  performance 
throughout  the  crisis  was  based  on  a  strong  manufacturing  base  and  a  price-competitive 
labour  force.  In  a  medium-term  perspective,  however,  a  shift  towards  an  innovation-driven 
economy seems warranted. Measures adopted so far have not led to a visible improvement in 
the innovativeness of Polish companies. Low public R&D spending, weak linkages between 
science and industry, a low level of in-house technological innovation, fragmentation of R&I 
policies and severe underinvestment in research and innovation in the private sector are key 
challenges in this respect. 

Low  level  of  domestic  savings  hampers  the  creation  of  an  innovative  economy.  So  far, 
Poland has relied largely on continued inflows of foreign capital, while domestic savings were 
less  important.  Although  capital  inflows  have  an  important  role  to  play  in  financing 
investments,  dependence  on  foreign  capital  in  the  current  context  of  heightened  financial 
market volatility points to the importance of vigilant financial supervision as well as carefully 

8 

 
 
 
 
designed  prudential  regulation  to  avoid  abrupt  capital  reversals.  Moreover,  Poland’s  low 
domestic  savings  rate  poses  a  challenge,  as  an  increase,  for  example,  through  more 
widespread  use  of  long-term  savings  instruments,  would  support  growth  potential  of  the 
economy. 

Finally,  a  burdensome  business  environment  and  lengthy  as  well  as  complicated 
interaction with the public administration impede growth and competitiveness. Limited 
competition  among  incumbent  electricity  suppliers,  insufficient  interconnections  with  other 
Member  States  and  ageing  energy  generation  capacity  keep  energy  prices  high.  Moreover, 
Poland’s underdeveloped  and neglected transport infrastructure, especially in the rail sector, 
continues  to  be  a  major  growth  bottleneck.  Businesses  would  greatly  benefit  from 
improvements  in  tax  administration,  further  streamlining  of  procedures  for  granting 
construction permits, starting up and closing down businesses, faster insolvency proceedings 
and  appeals  procedures  in  the  second  and  highest  instance  administrative  courts,  as  well  as 
from  better  contract  enforcement  and  property  registration.  Finally,  lifting  unjustified 
restrictions  in  the  field  of  professional  services  would  reduce  costs  of  doing  business  and 
boost productivity in the economy. 

3.  ASSESSMENT OF POLICY AGENDA 

3.1. 

Fiscal policy and taxation 

Budgetary developments and debt dynamics 

In  its  2013  convergence  programme,  Poland  confirms  its  plans  to  further  improve  its 
fiscal position and to progress towards correcting the excessive deficit and meeting the 
medium-term budgetary objective (MTO). The objective of the budgetary strategy outlined 
in the programme is to improve the general government balance to 3.5% in 2013 and 3.3% in 
2014. The planned consolidation path is thus not sufficient to bring the headline deficit below 
3% of GDP by the end of 2014. The programme confirms the previous MTO of -1% of GDP 
and  aims  to  reach  it  by  2016  (compared  to  2015  in  the  previous  programme).  The  MTO 
reflects the objectives of the Stability and Growth Pact. 

In  2012,  the  general  government  deficit  amounted  to  3.9%  of  GDP,  well  above  the 
reference  value  of  the  Treaty  and  the  2.9%  projected  in  the  previous  year’s  programme. 
This  was  mainly  due  to  the  economic  slowdown  in  2012,  which  had  a  negative  effect  on 
revenues,  in  particular  indirect  and  direct  tax  revenues.  With  the  deficit  reaching  3.9%  in 
2012,  Poland  did  not  comply  with  the  deadline  of  2012  for  the  correcting  of  the  excessive 
deficit, even after taking into account the direct costs of pension reform. 

The general government deficit projected in the programme is lower than the projected 
deficits  of  3.9%  and  4.1%  of  GDP  in  the  Commission’s  2013  spring  forecast.  The 
difference stems mainly from the Polish authorities’ higher GDP growth forecast. Moreover, 
the Commission forecast does not take into account the decision to keep VAT rates at their 
current  level  instead  of  lowering  them  back  to  their  pre-2011  level,  as  provided  for  in 
legislation.  This  was  announced  in  the  2013  update  of  the  Polish  Convergence  Programme. 
The  (recalculated)  structural  balance4  from  the  convergence  programme  improves  by  1%  in 

4 Cyclically adjusted balance net of one-off and temporary measures, recalculated by the Commission services 
on the basis of the information provided in the programme, using the commonly agreed methodology. 

9 

 
 
 
 
                                                 
2013  and  0.5%  in  2014.  The  difference  in  the  structural  balance  between  the  convergence 
programme and the Commission 2013 spring forecast is 0.6% in 2013 and 0.7% in 2014.   

The adjustment envisaged by the programme is front loaded, with an improvement in the 
headline deficit by 0.4% in 2013 and 0.2% in 2014. It is based on the expenditure side, with 
the  expenditure-to-GDP  ratio  falling  by  1.8  pps  in  2012–2014  and  a  simultaneous  fall  in 
revenue-to-GDP  ratio  by  1.2  pps.  The  main  downside risk to budgetary targets in 2013 and 
beyond  is  weak  budget  implementation  and  strong  pro-cyclicality  of  indirect  and  direct  tax 
revenues. 

Box 1. Main measures 

Main budgetary measures 

  Revenue 

Increase 

•  •  Changes in excise duty regulations (+0.1%) 
•  Tax on copper and silver extraction (+0.1%) 
•  Freeze of PIT thresholds (+0.1%) 
• 
in  dividends  from  state-owned 
companies  due  to  exceptionally  high  profits 
(+0.1%) (one-off) 
•  2013 
•  Freeze of PIT thresholds (+0.1%) 
•  Amendment of the pension reform (-0.1 %) 
•  Digital dividend (+0.1%) (one-off) 
• 
companies (+0.2%) (one-off) 
•  2014 
•  Maintaining the VAT rates raised temporarily 
in 2011 (avoiding -0.4%) 
•  Reinstatement of VAT reimbursement on the 
purchase of cars and fuel (-0.1%) 
•  Freeze of PIT thresholds (+0.1%) 

Increase  in  dividends  from  state  owned 

•  2015 

•  •  Freeze of PIT thresholds (+0.1%) 

•  2016 
•  Freeze of PIT thresholds (+0.1%) 

Expenditure

2012 
•  Expenditure rule (including nominal freeze in wage 
fund) (-0.1%) 
•  Decrease in complementary payments to farmers (-
0.1%) 

•  Expenditure rule (including nominal freeze in wage 
fund) (-0.1%) 
•  Wage increases for university teachers and soldiers 
(+0.1%) 

•  Expenditure rule (including nominal freeze in wage 
fund) (-0.1%) 
•  Extension of maternity leave (+0.2%) 
•  Wage increases for university teachers and soldiers 
(+0.1%) 
•  Reduction in national direct payments to farmers (-
0.1%) 

•  Expenditure rule (including nominal freeze in wage 
fund) (-0.2%) 
•  Reduction of national direct payments to farmers (-
0.2%) 
•  Wage increases for university teachers and soldiers 
(+0.1%) 

•  Expenditure rule (including nominal freeze in wage 
fund) (-0.3%) 
•  Reduction in national direct payments to farmers (-
0.1%) 

  Note:  The  budgetary  impact  in  the  table  is  the  impact  reported  in  the  programme,  i.e.  by  the  national 
authorities. A positive sign implies that revenue / expenditure increases as a consequence of this measure. 
The  degree  of  detail  reflects  the  information  made  available  in  the  convergence  programme  and,  where 
available, of a multiannual budget.  

• 

After correcting the excessive deficit by 2014, Poland intends to reach the MTO of -1% 
by  2016.  However,  there  is  considerable  uncertainty  over  this  target.  According  to  the 
information  provided  in  the  programme,  the  (recalculated)  structural  balance  is  projected  to 
improve  by  0.3  pp  in  2015  and  0.7  pp  in  2016.  At  the  same  time,  the  growth  rate  of 
government expenditure, net of discretionary revenue measures, over the years 2015–2016 is 

10 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
expected to be below the reference medium-term rate of potential GDP growth of 2.45% and 
to  respect  the  expenditure  benchmark.  Following  an  overall  assessment  of  the  budgetary 
plans, with the structural balance as a reference, including an analysis of expenditure net of 
discretionary  revenue  measures,  the  minimum  adjustment  path  towards  the  MTO  in  2015-
2016 is respected but does not enable Poland to reach the MTO by 2016, as the (recalculated) 
structural balance is projected to reach -1.2% that year. 

General government debt is projected to remain below 60% of GDP in Poland over the 
programme period. The national authorities forecast a slightly increase, from 55.6% of GDP 
in  2012  to  55.7%  of  GDP  in  2014  (then  a  decrease  to  54.5%  by  2016),  whereas  the 
Commission, taking account of possible risks to the consolidation plans and debt decreasing 
items,  expects  an  increase  to  58.9%  of  GDP  in  2014.  Medium-term  debt  projections  (see 
Graph below Table V in annex) indicate that full implementation of the programme would put 
debt on a downward path by 2020. 

Box 2. Excessive deficit procedure for Poland 

On 7 July 2009, the Council decided that there was an excessive deficit in Poland. The most 
recent  Council  Recommendation  under  104  (7)  TEC  was  adopted  on  the  same  date.  The 
Council recommended that the Polish authorities should put an end to the present excessive 
deficit  situation  by  2012.  To  bring  the  general  government  deficit  below  3%  of  GDP  in  a 
credible  and  sustainable  manner,  the  Council  Recommendation  called  on  the  Polish 
authorities  to  implement  fiscal  consolidation  measures  in  2009  as  planned,  to  ensure  an 
average  annual  structural  budgetary  adjustment  of  at  least  1¼%  percentage  points  of  GDP, 
starting  in  2010,  and  to  spell  out  detailed  measures  needed  to  bring  the  deficit  below  the 
reference value by 2012. Reforms to contain primary current expenditure over the following 
years were also recommended. 

An overview of the current state of excessive deficit procedures, including additional steps 
adopted after the finalisation of this Staff Working Document, is available on: 
http://ec.europa.eu/economy_finance/economic_governance/sgp/deficit/index_en.htm (please 
refer to country sections at the bottom of the page). 

Long-term sustainability 

Overall, Poland appears not to face a risk of fiscal stress in the short run. Nonetheless, 
there are some indications that the macro-financial and competitiveness side of the economy 
could  pose  potential  challenges.  The  country  is  at  medium  sustainability  risk  in  a  medium-
term  and  a  long-term  perspective,  conditional  upon  full  implementation  of  the  planned 
ambitious  fiscal  consolidation  and  on  maintaining  the  primary  balance  well  beyond  2014  at 
the level expected to be reached in that year. Government debt (55.6% of GDP in 2012 and 
expected to rise to 58.9% in 2014) is below the 60% of GDP Treaty threshold. Risks would be 
higher in the event of the structural primary balance reverting to lower values observed in the 
past, such as the average for the period 1998-2012. 

11 

 
 
 
 
 
 
Pressing  issues  to  be  addressed  in  the  Polish  healthcare  system  relate  to  limitations  in 
access  to  care  and  cost  inefficiencies.5  This  is  of  particular  importance,  as  healthcare 
spending is expected to grow considerably in the medium to long term, increasing the burden 
on  public  finances.  Poland  has  limitations  in  access  to  care,  especially  for  specialised 
treatment.  The  country  has  an  above  EU  average  number  of  acute  hospital  beds  per  1000 
inhabitants (4.4 in Poland versus 3.6 in the EU), but relatively few general practitioners. This 
implies  cost-saving  potential  by  shifting  relatively  costly  hospital  care  towards  primary  and 
ambulatory care and strengthening the role of general practitioners as gate-keepers to further 
levels  of  care.  In  recent  years,  the  Polish  health  sector  has  been  undergoing  a  restructuring, 
with  incentives  to  commercialise  hospitals,  some  privatisation  of  healthcare  institutions  and 
recent  attempts  to  improve  the  indebtedness  of  medical  entities.  However,  more  efforts  are 
needed to enhance the efficiency and quality of public spending. In particular, cost efficiency 
within hospitals could be improved, for example, by linking remuneration to performance and 
improving  management  skills.  Enhanced  computerisation,  leading  to  better  information, 
communication  and  monitoring  systems  could  further  foster  cost  efficiency  gains  in  the 
sector. 

Fiscal framework 

The  Polish  fiscal  framework  is  composed  of  three  main  elements:  (i)  fiscal  rules, 
applicable  to  general  and  local  levels  of  government  separately,  (ii)  medium-term 
programming (based on the Multiannual Financial Plan of the State and Multiannual Financial 
Projections  for  local  governments),  and  (iii)  performance  budget  system.  At  the  level  of 
general government, a debt rule, set out in the Constitution and Public Finance Law, puts a 
ceiling  on  the  general  government  debt-to-GDP  ratio,  while  a  temporary  expenditure  rule 
limits  the  annual  nominal  growth  of  all  newly  enacted  expenditure  items  and  existing 
discretionary items to the inflation rate (CPI) plus 1%. At the local level, there is a complex 
set  of  deficit,  expenditure  and  debt  rules,  not  compatible  with  the  rules  applying  to  central 
government. 

As  of  mid-2013,  the  Polish  government  has  not  yet  implemented  a  permanent 
expenditure  rule  consistent  with  the  ESA  by  2013,  as  recommended  by  the  Council  in 
2012. The convergence programme provides a broad outline of the planned expenditure rule 
without  specifying  an  exact  date,  but  mentions  an  obligation  to  introduce  it  by  2013.  The 
current  outline  mentions  a  nominal  target,  instead  of  a  structural  one.  There  is  still  no  draft 
law, and details are not known and thus, so progress depends on whether the government will 
ultimately deliver. There has also been no progress in medium-term planning and improving 
coordination among different levels of government when it comes to the budgetary process. 
The government has dropped plans to enact a new deficit rule for local government, arguing 
that the current fiscal framework has been successful in containing the fiscal balance of local 
government. It is also not yet known whether compatibility between the local and the central 
expenditure rules and the mechanisms to implement and monitor the process will be ensured. 

5 See: Joint EC(ECFIN)-EPC Report on Health Systems at: 
http://ec.europa.eu/economy_finance/publications/occasional_paper/2010/pdf/ocp74_en.pdf, 
and Annual National Report 2012: Pensions, Health Care and Long-term Care at  
http://www.socialprotection.eu/files_db/1276/asisp_ANR12_POLAND.pdf  

12 

 
 
 
 
 
 
                                                 
 
Tax system 

Overall composition of tax revenue in Poland compares favourably to the EU average. In 
2011 (latest available data), 42.7% of tax revenues came from growth-friendly taxes (i.e. taxes 
on  consumption  and  recurrent  property,  which  are  less  detrimental  to  growth),  compared  to 
the EU GDP-weighted average of 36.7%. Of that, a significant share is raised from indirect 
taxes.  Poland  has  one  of  the  highest  levels  of  revenue  from  consumption  taxes  other  than 
value-added  tax  (VAT),  such  as  excise  duties  on  alcohol  and  tobacco  (1.95%  of  GDP 
compared  to  0.9%  EU  GDP  weighted  average),  recurrent  property  taxes  (1.2%  of  GDP 
compared to 1.3% in the EU) or energy taxes (2.2% of GDP, compared to 1.8 % in the EU). 
The rise in disability pension contributions (from 4.5% to 6.5%) and the nominal freeze of tax 
brackets  increased  the  tax-wedge  last  year.  However,  despite  an  increase  in  the  implicit  tax 
rate on labour since 2008 by 0.5 pp, the overall tax burden on labour in Poland Poland is still 
relatively low compared to the EU average. 

Poland has some potential for improving VAT efficiency by extending the scope of the 
standard 23% rate. The VAT revenue ratio (measuring actual VAT revenues as a percentage 
of theoretical revenue if the standard rate were applied to all final consumption) is 49.3% — 
well  below  the  EU  average  of  54.7%  [2011].  The  reduced  rates  (5%  and  8%)  apply  to  a 
relatively wide range of goods and services. At the same time, there is scope for broadening 
the tax base in direct taxation by cutting tax expenditure. 

There is scope to improve the effectiveness of environmental (‘green’) taxation through 
better targeting. For instance, Poland applies an excise duty rate on passenger cars with an 
engine capacity above 2000 cm3 that is six times higher than on other passenger cars, but is 
one  of  the  very  few  Member  States  applying  vehicle  taxes  without  explicit  CO2  or  fuel-
efficiency  differentiation.  Moreover,  some  excise  duty  exemptions  or  lower  rates  are 
applicable to certain users and uses of fossil fuels, driven by reasons other than environmental 
considerations. 

The  development  and  implementation  of  a  comprehensive  tax  compliance  strategy 
remains a key challenge. At least three elements are of importance: combating the shadow 
economy, reducing the administrative burden on taxpayers and increasing the efficiency of tax 
administration.  A  report  published  in  November  2012  on  the  transformation  of  the  Polish 
revenue administration into an efficient, electronic-oriented service appears to be a good basis 
for  future  action.  Moreover,  Poland  has  started  work  on  a  general  anti-avoidance  rule 
(GAAR) as well as on the simplification of some procedures. In 2012, some compliance rules 
were  relaxed  and  more  electronic  filing  could  be  expected  in  2013  due  to  removal  of  the 
certified  signature  condition  for  VAT  returns.  Still,  Poland  remains  one  of  the  most 
burdensome  administrations  in  the  EU  in  terms  of  time  needed  to  comply  with  tax 
requirements and the high administrative cost of revenue collection (1.72% of tax collected in 
2009).  A  recent  Ministry  of  Finance  survey  showed  that  the  Polish  tax  authorities  face  a 
heavy  workload  on  tasks  related  to  debt  enforcement  and  recovery  for  other  government 
bodies and communes. It appears that 78% of such tasks are not tax-related. This could point 
in the direction of an issue with tax administration efficiency. The Ministry of Finance plans 
to address this by reorganising of the tax administration possibly starting as of 2014. Progress 
on  a  comprehensive  tax  compliance  strategy  would  enable  Poland  to  comply  with  the  2012 
country  specific  recommendations,  as  improved  efficiency  in  tax  collection  and  lower  tax 
evasion would mean higher revenues, given the existing tax structure. 

13 

 
 
 
 
3.2. 

Financial sector 

In  recent  years,  Poland’s  financial  sector  has  been  profitable  and  increased  its  capital 
buffers despite a recent increase in non-performing loans. The capital adequacy ratio (Tier 
1) for the banking sector as a whole increased to 13.1%, well above the level required under 
the Basel III agreement. Financial institutions in Poland continued to benefit from relatively 
benign  macroeconomic  conditions  and  increased  their  profits  by  4%  in  2012.  However,  the 
loan  portfolio  quality  deteriorated:  the  proportion  of  non-performing  loans  (domestic 
definition)  increased  from  8.2 %  in  2011  to  8.8 %  in  2012  and  is  bound  to  rise  throughout 
2013.  The  weakening  of  the  economy  in  2012  negatively  affected  both  loans  to  the 
construction sector and mortgages. Lending to the non-financial sector grew by 1.2% year-on-
year  to  December  2012,  driven  mainly  by  domestic  currency  lending  to  corporates,  while 
lending to households stagnated. 

Nevertheless, Poland implemented measures to address credit risk in the banking sector, 
stemming  from  the  fact  that  32%  of  the  outstanding  loan  portfolio  comprises  foreign 
currency  loans  (mainly  housing  loans  in  Swiss  francs).  In  2012,  the  Polish  financial 
supervisor  (KNF)  introduced  a  supervisory  resolution  increasing  the  risk  weight  for  foreign 
currency-denominated loans from 75% to 100%. Moreover, it plans to revise recommendation 
S,6  which  should  result  in  almost  full  abolishment  of  these  loans  in  2013.  These  regulatory 
and legal changes are relevant and effective, as the supply of new foreign currency housing 
loans was brought to a standstill in 2012. The stock of outstanding foreign currency housing 
credit  fell  from  24.7%  of  the  outstanding  loan  portfolio  in  2011  to  22%  in  2012.  However, 
these  regulatory  changes,  in  conjunction  with  recommendation  T7  tightening  the  rules  for 
consumption  credit  resulted  in  stagnation  in  the  lending  rate  to  households  in  2012.  To 
counterbalance this negative effect for domestic currency credit to households, the authorities 
changed  recommendation  T,  easing  the  rules  for  obtaining  consumer  credit.  Moreover,  the 
revised recommendation S sets the maximum loan-to-value ratio for all housing loans at 80%, 
while easing some other rules (e.g. less stringent debt-to-income ratios). 

Poland made progress in tackling the problem of the positive funding gap in the banking 
sector. The average funding gap (difference between loans granted to domestic non-financial 
sectors and deposits collected) in the banking sector declined from 15.2% in 2011 to 12.7% in 
2012,  as  gradual  deleveraging  of  foreign  parent  banks  ultimately  led  domestic  banks  to 
compete  for  deposits.  However,  some  subsidiaries  of  foreign  financial  institutions  have  a 
higher funding gap and often depend on the ability and willingness of their parent entities to 
continue  funding.  To  address  this  dependency,  which  could  pose  a  risk  to  the  financial 
system, the KNF has recommended retaining 2011 and 2012 profits, depending on the capital 
situation of individual banks. Moreover, both the National Bank of Poland and the financial 
regulator  are  actively  monitoring  the  financial  situation  of  banks  and  have  taken  steps  to 
revive  the  market  for  long-term  bank  securities.  These  steps  are  intended  to  strengthen  the 
liquidity and capital positions of banks and to facilitate access to long-term funding. Overall, 
the country should continue with its prudent and pre-emptive regulatory policy, though more 
ambitious  efforts  to  increase  domestic  deposits,  ultimately  lowering  further  the  loan-to-
deposit ratio, might be useful. 

6 Recommendation S, enacted by the KNF, sets the rules to be followed by the banks granting mortgages. 
7  Recommendation  T,  enacted  by  the  KNF,  sets  the  rules  to  be  followed  by  the  banks  granting  consumption 
loans. 

14 

 
 
 
 
 
                                                 
Poland  made  limited  progress  in  improving  the  availability  of  credit  to  small  and 
medium enterprises (SMEs). The debt financing gap of SMEs was addressed by a national 
scheme  of  credit  guarantees  operated  by  the  BGK  (public  bank)  and  regional  and  local 
guarantee or loan funds. However, the national guarantee system is still under reconstruction 
and has so far been offering guarantees on a commercial basis only, with guarantee fees too 
high to be attractive to businesses. Therefore, a new guarantee scheme for SMEs (de minimis 
scheme)  was  put  in  place  in  2013,  targeting  working  capital  only,  but  at  significantly 
improved  conditions.  The  venture  capital  market  is  still  not  well  developed.  Innovative 
companies  at  the  early  stages  of  their  development  in  particular  have  difficulties  in  getting 
financing. The National Capital Fund active in this area became operational in 2010. By the 
end  of  2012,  15  funds  received  co-financing  and  made  investments  in  36  companies. 
Moreover,  the  Polish  Growth  Fund  of  Funds,  created  in  2013  by  the  European  Investment 
Fund (EIF) and BGK, intends to stimulate investments into venture capital, private equity and 
mezzanine funds. 

3.3. 

Labour market, education and social policies 

One  of  the  strengths  of  the  Polish  economy  is  its  endowment  with  labour  and  the 
regulatory  set-up  of  the  labour  market.  Compared  to  the  EU-27,  the  labour  force  is 
relatively  cheap8,  labour  taxes  are  comparatively  low9  and  labour  laws  provide  for  a 
substantial  degree  of  flexibility10.  Employment  has  been  growing  continuously  since  2004, 
and the labour force has been growing recently. However, the economic slowdown resulted in 
a  rise  in  the  unemployment  rate,  especially  among  the  young,  and  stagnating  real  wages, 
partly  driven  by  the  nominal  freeze  on  public  sector  employees’  salaries,  contributing  to  an 
increase in the poverty rate. 

In 2012, the Council Recommendations for Poland included a CSR concerning availability of 
apprenticeships  and  work-based  learning,  the  quality  of  vocational  training,  matching  of 
education outcomes with labour market needs, quality of teaching, and unjustified use of civil 
law contracts. There was also a CSR addressing low female labour market participation and 
entrenched practices of early retirement, as well as phasing out special pension schemes for 
miners and farmers. 

Labour market policies 

Poland  has  only  partially  addressed  the  challenge  of  low  employment  rates  of  older 
workers  and  phasing  out  special  pension  schemes  for  miners  and  farmers.  The gradual 
increase and equalisation of the statutory retirement age between men and women will have a 
positive  impact  on  the  employment  rates  of  older  workers,  but  its  implementation  is 
protracted  (equalisation  to  be  reached  in  2040).  Moreover,  there  are  still  two  remaining 
special retirement regimes. First, Poland has not delivered on the long-standing commitment  
to  reform  the  special  pension  system  for  miners.  The  government,  together  with  the  social 
partners, has been working for the past year on a draft law limiting the early retirement age of 

8 Real unit labour costs in Poland declined by 3.4% between 2005 and 2011, while remained unchanged in the 
EU. 
9 Tax wedge on labour (amounting to 35.5% for a single individual in 2012) is slightly below the OECD average 
and much below the average for those EU member states which are also members of the OECD (41.8%). 
10  Poland's  rules  for  hiring  and  firing  workers  are  relatively  flexible,  as  measured  by  the  OECD  employment 
protection legislation (EPL 2008) indicators which for Poland amounts to 2.4 (OECD average is 2.25), the level 
of unionization is low and the wage bargaining system is highly decentralised (conducted mostly at the company 
level).    

15 

 
 
 
 
                                                 
miners  who  do  not  work  underground,  but  the  law  has  not  yet  been  adopted.  Second,  the 
oversized  agricultural  sector  still  employs  almost  13%  of  the  working  population.  A  major 
reason  for  this  is  an  ineffective  social  security  scheme  for  farmers  (KRUS)  that  hampers  a 
sectoral  shift  away  from  agriculture  towards  more  productive  sectors  and  hinders  regional 
mobility. Minor temporary changes introduced in 2011 (owners of farms larger than 6ha pay 
health contributions themselves) will be prolonged into 2013, but no permanent and credible 
solution has been proposed to solve the problem. 

Poland  started  to  implement  a  couple  of  short-term  measures  to  improve  the  social 
activity of people over 60 years. These measures are credible, but only partially relevant, as 
their aim is not an increase in employment, but better participation of the elderly in social life. 
An integrated active ageing strategy to encourage older workers (notably women) to stay in 
employment longer and to raise the effective retirement age is still not being pursued. Such an 
approach  would  combine  workplace  improvements,  labour  market  measures,  reforms  in  the 
healthcare system, tax-benefit incentives and lifelong learning.   

In terms  of  early childcare,  government efforts  concentrated on  the implementation of 
the ‘Toddler programme’. As a result, the number of nurseries almost doubled over the last 
two years, but the total number remains extremely low in relative terms11 and does not satisfy 
needs  (36000  places  compared  to  400000  children  born  annually  in  Poland).  Furthermore, 
most investment is concentrated in metropolitan areas and selected municipalities (more than 
90%  of  the  total).  In  2013,  expenditure  on  early  childcare  is  expected  to  double,  reaching 
EUR  25  million.  Despite  a  government  declaration  on  increasing  spending  for  pre-school 
education to EUR 80 million in 2013, this has been postponed to 2014. Thus, the government 
target of ensuring a place in pre-school education for every eligible child by 2016 may not be 
met. In spite of growing demand for pre-school education, Poland has not yet fully addressed 
the  need  for  qualified  teaching  staff.  The  measures  targeting  childcare  facilities  are  only 
partially  relevant  and  lack  credibility.  Furthermore,  they  need  to  be  sustained  over  time  to 
have  a  tangible  impact  on  women's  participation  in  the  labour  market.  This  is  all  the  more 
important  considering  the  role  that  quality  childcare  can  play  in  supporting  child 
development, breaking the cycle of disadvantage. 

In parallel, the government has decided to extend parental leave by six months, paid at 
60%  of  salary,  in  addition  to  the  current  six  months  of  maternity  leave  with  full  pay  and 
unpaid  parental  leave  of  maximum  three  years.  This  prolonged  six-month  leave  is  optional, 
can  be  shared  between  both  parents  and  combined  with  part-time  work.  The  effects  of  the 
planned  increase  of  parental  leave  on  the  re-integration  of  mothers  into  the  labour  market 
should  be  assessed.  Furthermore,  given  the  substantial  funding  for  the  proposed  solution 
(rising from a maximum of EUR 850 million in 2014 to EUR 1.1 billion in 2018) and the lack 
of  childcare  infrastructure,  the  question  arises  as  to  whether  funding  priorities  are  set 
correctly. 

Another  major  concern  is  growing  unemployment  among  the  young,  reaching  26.7% 
(2012).  The  government  has  acknowledged  this  and  a  further  EUR  163  million  in  ESF 
funding  has  been  deployed  to  support  young  people.  Through  the  Youth  Employment 
Initiative,  the  ESF  will  reinforce  its  action  targeting  to  young  people  not  in  employment, 
education or training. It will be important to successfully implement a Youth Guarantee.12 In 

11 2% of children aged 0-3 years have a place, while the EU-average is 28% (Eurostat, EU-SILC 2010) 
12 Council Recommendation of 22 April 2013 on establishing a Youth Guarantee (2013/C 120/01) to ensure that 
all young people under the age of 25 years receive a good-quality offer of employment, continued education, an 
apprenticeship or a traineeship within four months of becoming unemployed or leaving formal education. 

16 

 
 
 
 
                                                 
addition, the Ministry of Labour has been implementing a pilot project ‘Your Career – Your 
Choice’, which aims to test innovative tools for labour offices to deal with young unemployed 
people.  The  pilot  project  is  relevant  and  credible,  but  its  scale  remains  limited,  given  the 
importance of the problem. 

Further  efforts  were  undertaken  to  improve  placement  services  and  to  reduce  the 
workload  of  the  Public  Employment  Services.  A  pilot  project,  ‘Partnership  for  Jobs’  for 
outsourcing employment services to private agencies, has been implemented in three regions. 
A  draft  law  introducing  job  efficiency  monitoring  of  active  labour  market  policies  through 
rewarding the most successful labour offices has been sent to social consultations. Proposed 
changes are relevant and ambitious, but the reform is as yet at a very early stage and its effects 
remain to be seen. 

Poland  took  only  minor  steps  to  address  the  extensive  use  of  temporary  employment. 
The  country  has  the  third  highest  share  of  involuntary  fixed-term  employment  in  the  EU, 
especially in the 15-24 age group. Often seen as an instrument for the unemployed to re-enter 
the  labour  market  and  later  move  into  a  permanent  contract,  this  does  not  appear  to  be  the 
case for most workers in Poland. Contracts with a probationary period, which could be used 
as  a  ‘screening  device’  by  employers  and  might  allow  for  a  smoother  transition  between 
unemployment  and  permanent  employment,  cannot  pay  this  role,  as  they  are  of  limited 
duration.  The  extensive  use  of  fixed-term  contracts  appears  to  work  against  the  quality  of 
human  capital  and  productivity,  as  temporary  employees  tend  to  have  less  access  to 
vocational training. In addition, the use of so-called civil law contracts that have significantly 
reduced  social  protection  rights  compared  to  standard  employment  contracts  is  widespread. 
According to the government report ‘Youth 2011’, over 50% of young workers (18-32 years) 
are employed on the basis of civil law contracts. The government is taking part in a discussion 
with  social  partners  on  possible  changes  to  labour  law  as  regards  fixed-term  contracts, 
permanent  contracts  and  a  contract  for  a  probationary  period.  However,  these  discussions 
have  not  yet  led  to  concrete  results  and  the  issue  of  labour  market  segmentation  in  Poland 
remains unaddressed. 

Education policies 

There  is  growing  unemployment  among  the  young  because  the  low  quality  of  teaching 
does  not  match  labour  market  needs.  The  reform  of  the  education  and  science  system 
introduced in 2010-2011 was a first step in addressing the skills-jobs mismatch, strengthening 
university-business links and making the courses available more flexible. This was followed 
by  further  legislative  amendments  presented  by  the  authorities  in  2012,  which  differentiate 
between  academic  and  vocational  higher  education  institutions  and  introduce  dual  studies 
linking academic studies with practical training in companies. The authorities plan to reduce 
the number of graduates without jobs by publishing a list of faculties that received a negative 
opinion  from  accreditors.  Finally,  the  European  Social  Fund  (ESF)  and  the  European 
Regional  Development  Fund  (ERDF)  are  contributing  to  raising  student  numbers  in 
mathematics, science and technology. All of these reforms are going in the right direction, but 
there needs to be more emphasis on enhancing structured and formalised cooperation between 
higher  education  institutions  and  enterprises,  raising  the  qualifications  of  teachers  and 
improving the quality of teaching materials, teaching soft skills and career guidance. 

17 

 
 
 
 
Regarding  the  need  to  increase  the  availability  of  apprenticeships  and  work-based 
learning,  a  reform  of  vocational  education  and  training  came  into  force  in  September 
2012.  This  aims  to  involve  employers  in  the  education  and  examination  system  and  to 
encourage schools to customise their curricula to labour market requirements. A new flexible 
formula of vocational exams has been introduced. The reform is credible, but companies need 
to be more involved in creating curricula and to be invited to sit on vocational education and 
training (VET) schools boards, and there need to be more quality training. Participants need to 
focus on improving transversal skills (ICT, communication, problem solving). 

Further efforts are also required to enhance the skills profile of the workforce, focusing 
on older workers, low-skilled workers and the unemployed. The draft strategic document 
‘Prospects  for  Lifelong  Learning’  has  not  yet  been  approved  and  the  responsibility  for  the 
strategy  is  continuously  shifting  between  ministries.  Thus,  the  recommendation  calling  on 
Poland to adopt a lifelong learning strategy has not been implemented. 

Social policies 

Poland  is  among  the  countries  with  the  lowest  real  household  income  per  capita  and 
with  one  of  the  lowest  statutory  minimum  wages  in  the  EU.  The  wage  penalty  (the 
difference  between  average  pay  of  employees  on  open-ended  and  fixed-term  contracts)  on 
fixed-term contracts, at nearly 28%, is the highest in the EU. Thus, nearly 12% of employees 
with  fixed-term  contracts  face  in-work  poverty,  which  is  double  the  rate  among  employees 
who hold a permanent contract13. Poland increased its minimum wage from PLN 1500 (EUR 
375) to PLN 1600 (EUR 400) and the raised income ceilings for social assistance and family 
benefits, thereby raising the level of benefits. These measures are only partially relevant and 
are  not  sufficient  to  address  the  scale  of  the  challenge,  as  many  workers  employed  on  civil 
law contracts are not covered by the minimum wage. The higher income ceilings conferring 
entitlement to social assistance and family allowances (the first since 2006) are only a partial 
adjustment.  The  change  has  not  been  coupled  with  any  significant  changes  to  the  social 
protection system. Poland is one of the Member States whose spending on social transfers is 
the  lowest  and  has  the  lowest  impact  on  poverty  reduction.  The  coverage  of  the 
unemployment benefit system in Poland is one of the lowest in EU (23.3% compared to the 
EU-average  of  53.5%).  The  situation  is  not  getting  better,  if  one  takes  into  account  other 
benefits (such as sickness and disability): the rate is 34.2% - the lowest in the EU. The system 
is also characterised by low adequacy and coverage of social assistance and housing support. 

Although  the  pension  system  in  Poland  currently  provides  a  high  degree  of  adequacy, 
this may become an issue in future, notably for low-wage earners and those with short 
working careers, predominantly women. The average duration of women’s working life is 
only  29  years,  thus  adversely  affecting  their  future  pension  entitlements,  since  accruals  are 
tied to earnings-related lifetime contributions. The recent pension reform gradually increasing 
and equalising retirement age is a step in the right direction, though the so-called partial early 
retirement  is  available  to  men  at  65  and  women  at  62.  However,  its  long  implementation 
period will have less favourable implications both for sustainability and for the adequacy of 
women’s pension entitlements. 

13 Source: SILC, 2011 

18 

 
 
 
 
                                                 
3.4. 

Structural measures promoting growth and competitiveness 

Poland  has  steadily  experienced  gains  in  its  external  competitiveness  and  further 
improvement  is  likely  over  the  near  term,  though  at  a  slower  pace.  The  real  effective 
exchange  rate  based  on  unit  labour  costs  depreciated  by  nearly  7%  over  the  last  two  years, 
while Poland’s world export market share stabilised at around 1%. Further advances can be 
expected, but at a slower pace, as Poland is already close to the technology frontier. Although 
the  business  environment  in  Poland  has  improved  in  recent  years  (the  country  advanced  19 
ranks  in  the  World  Bank’s  2013  Doing  Business  survey  from  74th  to  55th,  out  of  183 
economies), Poland still significantly lags behind compared to the rest of the EU. 

In 2012, the Council Recommendations for Poland included two CSRs concerning structural 
measures  promoting  growth  and  competitiveness.  These  refer  to  creating  an  innovation-
friendly business environment and to access to finance for research and innovation activities. 
The  CSRs  also  cover  investment  in  energy  generation  and  efficiency,  development  of  the 
electricity grid, cross-border exchange of electricity and competition in the gas sector. 

Transport infrastructure 

Despite  some  progress,  Poland’s  underdeveloped  transport  infrastructure  remains  a 
major  bottleneck  to  growth.  While  major  road  infrastructure  projects  advanced,  railway 
investment projects are still largely delayed. 

The  degraded  rail  infrastructure  requires  substantial  and  increasing  investment  since 
only  36%  of  approximately  20000  km  of  rail  lines  in  operation  are  in  good  technical 
condition.14 Improving the railway infrastructure through effective and swift implementation 
of co-financed railway projects still requires a lot of effort. In 2012, the government replaced 
the  management  board  of  the  state-owned  railway  operator  holding  (PKP  SA);  the  new 
management  is  expected  to  improve  PKP’s  corporate  governance  and  profitability  and 
presented  a  reform  plan  in  late  2012.  While  actions  are  indeed  required,  the  plan  to  reduce 
costs  by  closing  several  thousand  kilometres  of  unprofitable  railway  lines  raised  some 
controversies15  and  would  be  likely  to  lead  to  a  further  displacement  of  rail  transport  onto 
roads. The functioning of the railway market also poses a significant challenge, with obstacles 
such as high railway infrastructure charges (despite its very poor state), the weak position of 
the  rail  regulator  (UTK)  and  problems  with  access  to  freight  terminals  and  rail-related 
services faced by new entrants. 

As  regards  road  infrastructure,  progress  has  been  made,  but  not  all  regions  have 
benefited  to  the  same  extent.  Overall,  more  than  620  km  of  new  motorways  and 
expressways were completed in 2012, and another 600 km are currently under construction. 
The government has substantially improved traffic conditions and road safety on some of the 
major  transport  corridors,  including  the  TEN-T  network.  However,  due  to  higher-than-
expected construction costs, the network is still quite underdeveloped in a number of regions, 

14  The  condition  of  railway  infrastructure  is  reflected  by  poor  consumer  assessment  of  train  services  (second 
lowest in the EU). Trust in providers, comparability of offers and overall consumer satisfaction are amongst the 
four lowest ratings in the EU and the incidence of problems is above EU average. See 8th Consumer Markets 
Scoreboard, December 2012, European Commission, DG SANCO, 
http://ec.europa.eu/consumers/consumer_research/editions/cms8_en.htm. 
15  First,  the  plan  might  constitute  a  breach  of  the  rule  on  durability  of  EU  co-financed  operations,  second,  it 
would  contravene  various  national  and  EU  plans  and  objectives,  including  to  increase  the  share  of  rail  in 
passengers  and  freight  transport  and  third,  several  of  the  lines  have  important  feeder  functions  to  the  TEN-T 
network. 

19 

 
 
 
 
                                                 
 
hampering  their  attractiveness  for  businesses.  Problems  with  the  road  infrastructure 
programme  included  the  bankruptcies  of  several  road  construction  companies  due  to  fierce 
price  competition,  often  in  public  tenders,  and  allegations  of  irregularities  in  tender 
procedures, leading to a suspension of some EU funds in December 2012. 

Information and Communication Technologies 

Despite recent efforts, Poland still lags considerably behind other Member States when 
it comes to seizing the growth potential of information and communication technologies 
(ICT). Fixed broadband coverage is among the lowest in the EU, both at national level and 
for  rural  areas.16  In  addition,  the  actual  award  of  spectrum  to  operators  for  the  rollout  of 
mobile  broadband  has  been  delayed  and  aggravates  the  problem  of  low  fixed  broadband 
coverage,  especially  in  rural  areas.17  Broadband  and  e-service  projects  co-financed  from 
structural funds are delayed and are at risk of non-implementation. Although Poland has lately 
advanced  to  ensure  full  implementation  of  over  EUR  1  billion  of  Structural  Funds  for 
broadband  roll-out  and  has  developed  a  first  draft  of  the  National  Broadband  Plan  for  the 
Commission,  significant  implementation  difficulties  remain.  These  could  be  addressed 
through better governance and coordination at national level. 

R&D and innovation 

Poland is among the EU countries with the lowest level of R&D expenditure and one of 
the  worst  performers  in  broader  innovativeness  indicators.  The  overall  ratio  of  (public 
and private) R&D expenditures to GDP in Poland, at 0.77% in 2011, was among the lowest in 
the  EU  (EU  average  is  approximately  2%).  Polish  enterprises  have  relied  largely  on 
technology absorption, i.e. application of already existing technologies through fixed capital 
investment18.  While  this  has  been  successful  in  ensuring  productivity  gains  and  economic 
growth, a transition towards a more indigenous innovation-based model is needed in future. 
However, business  R&D expenditure accounted for only  0.2% of  GDP in  2011.19 Poland is 
ranked  among  the  modest  innovation  performers  according  to  the  Innovation  Union 
Scoreboard 2013 (forth worse performer in the EU). Moreover, Poland is relatively weak in 
terms  of  high-impact  scientific  publications,  patent  applications,  intensity  of  business 
researchers and in the number of public-private co-publications.20 

The country has started to act. However, further efforts are needed if Poland is to reach 
the  national  R&D  target  of  1.7%  in  2020.  Reforms  of  the  science  and  higher  education 
systems  initiated  a  major  restructuring,  including  support  mechanisms  to  induce  science-
industry cooperation. The creation of two executive agencies — the National Science Centre 
for  basic  research  and  the  National  Centre  for  R&D  for  applied  research  —  is  intended  to 
boost more competitive allocation of funding. However, no concrete evaluations are available 
on the real effect of these reforms. A more holistic approach is needed, linking efforts under 

16  Based  on  the  latest  available  EU-wide  data  (as  of  December  2011),validated  in  the  Commissions’  Digital 
Agenda Scoreboard, 24 and 50 pps. below the EU average respectively. 
17 Poland has until 2015 to meet the requirements of Art. 6 of the Radio Spectrum Policy Programme (RSPP). So 
far, the country has assigned only 472 MHz of the required 1200MHz radio spectrum for wireless broadband. In 
particular, the 800 MHz band, essential for rural area coverage, has not been cleared and made available yet. 
18  According  to  ‘Science  and  Technology  2011’  by  Polish  Statistical  Office  (2013),  R&D  represented  13%  of 
Polish  firms’  innovation  spending  in  2011.  The  rest  was  capital  expenditure  on  fixed  assets,  acquisition  of 
external knowledge and software, training and marketing of new or improved products. 
19  However,  these  statistics  might  underestimate  private  R&D  due  to  the  lack  of  appropriate  incentives  for 
business to declare them. 
20  European  Commission,  Directorate-General  for  Research  and  Innovation,  ‘Research  and  Innovation 
performance in EU Member States and Associated countries. Innovation Union progress at country level 2013’. 

20 

 
 
 
 
                                                 
research,  innovation  and  industrial  policy,  and  ensuring  that  there  are  adequate  instruments 
supporting the whole innovation cycle. 

In  particular,  public  policy  instruments  are  not  well  targeted  and  are  not  tailored  to 
different stages of the innovation cycle. Public R&D funding has been concentrated largely 
on the absorption of new technologies, and has been less successful in promoting indigenous 
research  and  innovation,  especially  at  regional  level.  It  is  also  mostly  distributed  through 
grants, supporting less risky stages of the innovation cycle. However, grant financing would 
be more beneficial for early high-risk stages of technology development, whereas less risky 
projects would benefit from equity and debt financing. Moreover, fiscal instruments, such as 
tax incentives or credits, are hardly used. Appropriate mobilisation of public funds, including 
EU funds in 2014-2020, to stimulate business R&D is crucial in this context. More broadly, 
an appropriate business environment enabling successful SMEs to grow, innovate and move 
to higher value added is also important. 

Environment and energy 

Environmental challenges identified in the 2012 SWD remain valid. Recent reforms in the 
municipal  waste  system  are  expected  to  improve  its  coverage  and  separate  collection. 
However, low landfill taxes and insufficient use of other economic instruments such as ‘Pay-
as-You-Throw’ and producer responsibility schemes continue to compromise the potential of 
waste recycling. Insufficient investments in largely outdated water networks, especially in big 
cities,  endanger  continued  water  availability  for  households  and  industry.  Exposure  of  the 
urban  population  to  air  pollutants  from  energy  production,  transport  and  solid  fuel-based 
residential heating remains high. 

Poland  could  face  difficulties  in  delivering  on  its  commitment  to  limit  the  increase  of 
greenhouse  gas  (GHG)  emissions  in  non-ETS  sectors.  According  to  Poland’s  own 
projections,  there  will  be  no  change  in  emissions  by  2020  compared  to  2005,  but  inventory 
data  for  2011  show  that  emissions  are  higher  than  expected.  Therefore,  the  accuracy  of  the 
projections needs to be reassessed and further measures might be required to meet its target. 

With respect to energy generation, coal still remains the dominant source of fuel, while 
renewables  remain  at  low  levels.  The  share  of  renewable  energy  sources  in  final  energy 
consumption  was  10.4%  in  2011;  Poland  was  on  track  to  meet  its  national  action  plan 
trajectory, with the exception of the electricity sector. However, the country still has to make 
a  considerable  effort  to  ensure  continuous  growth  of  its  renewable  energy  sector  to  reach 
renewable energy targets for 2020. Thus, there needs to be faster removal of non-cost barriers 
to large-scale development of renewable energy, especially in the electricity sector, which is 
furthest  from  Europe  2020  target.  However,  the  necessary  legal  requirements  have  not  yet 
been  implemented,  because  the  legislation  including  the  Draft  Law  on  Renewable  Energy 
proposed by Ministry of Economy in December 2011 has still not been adopted. 

As far as energy efficiency is considered, potential gains remain very high in all sectors 
of  Poland’s  economy  and  achieving  them  could  support  green  growth.  Poland  set  an 
indicative national energy efficiency target to stabilise its primary energy consumption at the 
level  of  96  Mtoe21  in  2020.  According  to  Eurostat,  in  2010,  primary  energy  consumption 
excluding non-energy uses in Poland had already reached 96.9 Mtoe. Keeping this level for 
2020  could  be  a  challenge  because  of  projected  economic  growth,  so  further  efforts  in 
strengthening energy efficiency might be required. Large reductions could be achieved in the 

21 Million tonnes of oil equivalent. 

21 

 
 
 
 
                                                 
building  sector  through  better  insulation.  In  January  2013,  Poland  started  a  new  white 
certificate  scheme  intended  to  deliver  at  least  half  the  overall  targeted  energy  savings.  The 
start of the scheme is an important step in achieving energy efficiency. However, its progress 
requires close monitoring so that it is adjusted if the desired results are not delivered. 

The domestic electricity grid is still congested, but plans are  advancing  to create more 
interconnection  capacity  with  neighbouring  markets.  The  Polish  transmission  system 
operator (TSO) — Polskie Sieci Energetyczne (PSE) — has prepared an ambitious investment 
programme,  which  envisages  a  new  Poland-Germany  interconnector  and  an  upgrade  of  the 
two  existing  interconnections.  A  new  500MW  link  between  Poland  and  Lithuania 
(LitPolLink,  a  part  of  the  Baltic  Energy  Market  Interconnection  Plan  (BEMIP))  is  to  be 
completed by October 2015. It remains to be seen whether the ambitious programme can be 
implemented in a timely fashion. 

The key problem in the natural gas market remains a lack of diversification and lack of 
competition.  Almost  90%  of  natural  gas  imports  come  from  Russia.  However,  once  new 
investments  are  finalised,  this  situation  is  expected  to  improve.  These  investments,  co-
financed  by  the  EU,  comprise  an  LNG  import  terminal  (to  be  completed  in  2014),  a  new 
interconnection  with  the  Czech  Republic  and  Germany,  and  new  storage  facilities. 
Furthermore,  in  an  effort  to  introduce  more  competition,  the  Polish  authorities  strongly 
encourage  the  exploration  of  shale  gas  and  have  granted  over  100  shale  gas  exploration 
licences. Although a gas exchange platform was initiated in December 2012, the phasing out 
of  regulated  prices  is  still  to  be  implemented.  This  would  stimulate  competition  in  the  gas 
sector,  which  remains  very  strongly  concentrated,  with  the  incumbent  holding  a  share  of 
around 97% in both wholesale and retail markets. 

Professional services and competition 

Unjustified  restrictions  in  the  field  of  professional  services  have  been  hampering 
economic  growth.  According  to  the  European  Commission  database  on  regulated 
professions, Poland has the second highest number of regulated professions in the EU, more 
than double the EU average (368 in Poland compared to about 150 in the EU on average). In 
many  cases,  the  requirements  for  access  to  a  profession  create  unnecessary  barriers  to  job 
creation and competition with a negative impact on the competitiveness of the sector. At the 
same time, these barriers to entry allow incumbents charging high prices thereby increasing 
the costs for doing business in other sectors and undermining the competitiveness and growth 
potential of the whole economy. 

In 2012, Poland initiated a reform to facilitate access to regulated professions. However, 
the reform is less ambitious than initially announced,  and  behind schedule.  The draft of the 
first  (out  of  planned  three)  liberalising  laws,  covering  50  professions,  was  adopted  by  the 
Council  of  Ministers  in  September  and  is  in  the  process  of  being  adopted  by  parliament 
(according to the initial schedule, it was supposed to have been enacted by the end of January 
2013).  It  should  have  been  followed  by  two  other  laws  covering  the  remaining  targeted 
professions.  Competition  in  postal  services  still  encounters  substantive  regulatory  barriers, 
notably  with  the  broad  VAT  exemptions  given  to  the  incumbent  which,  in  effect,  prevent 
competitors from entering the postal market. 

22 

 
 
 
 
3.5.  Modernisation of public administration 

the 

field  of  modernisation  of  public  administration, 

In 
the  2012  Council 
Recommendations  for  Poland  mentioned  a  need  to  improve  tax  compliance  as  well  as  to 
simplify contract enforcement and requirements for construction permits. 

Overall, Poland’s performance in terms of the efficiency of its public administration is 
below  the  EU  average22.  Key  problems  include  transparency  of  the  public  administration, 
complexity  of  tax  compliance,  increasing  average  length  of  proceedings  in  civil  and 
commercial  cases,  long  insolvency  proceedings  and  low  recovery  rates.  The  use  of  e-
Government in the public administration also remains below the EU average. 

Improvements  in  public  administration  and  policy  design  and  delivery  continue  to  be 
crucial to enhance the business environment. Although Poland has lowered its regulatory 
burden in 2012,23 the country still scores significantly below the EU average on the costs and 
time needed to start up and wind up a business, the number of procedures and time necessary 
to  obtain  a  construction  permit,  and  the  ease  of  dealing  with  the  tax  administration.  Tax 
compliance rules remain complex, and taxpayers, as well as tax authorities, have difficulties 
in dealing with them. The construction sector is still waiting for the highly anticipated reform 
of  the  cumbersome  legislation  covering  construction  permits.  The  standard  procedure  to 
obtain  all  necessary  registrations  when  setting  up  a  limited  liability  company  is  overly 
lengthy,  and  take-up  of  internet-based  registration  is  low.  Bureaucracy  and  unproductive 
activities  persist  in  dealings  with  public  authorities,  as  the  legislation  on  the  reduction  of 
administrative  burdens  does  not  envisage  monitoring  mechanisms,  while  the  deregulation 
agenda  lacks  coordination.  The  deployment  of  e-services  and  e-administration  is  slow  and 
lacks  coherence,  and  citizens’  use  of  e-government  is  also  below  the  EU  average.  The 
November  2012  report  on  the  e-tax  system  (e-podatki)  notes  these  issues  and  proposes 
solutions. The finalisation of significant investments made to set up the Polish Point of Single 
Contact  would  bring  efficiency  gains  and  savings  both  for  public  administration  and 
businesses. 

There is scope for improvement in the justice system. The number of judicial proceedings 
is relatively high. Although the average length of proceedings in civil and commercial cases is 
still reasonable, it has been increasing steadily since 2007, which could become a matter of 
concern.  In  the  same  period,  the  duration  of  appeal  procedures  for  administrative  cases  has 
doubled  (445  days  in  the  second  and  highest  instances),  and  the  clearance  rate  is  very  low 
(75%). Insolvency proceedings are long and recovery rates low. ICT tools for communication 
between  courts  and  parties,  which  could  help  shorten  proceedings  and  improve  access  to 
justice  for  businesses  and  citizens,  are  not  very  well  developed.  In  2012,  a  legislative 
amendment to the code of civil procedure entered into force, making proceedings in business 
cases simpler and less formal. 

22 World Bank government effectiveness ranking (2012) ranks Poland 23rd among EU-27 member states. 
23 World Bank, Doing Business report 2013. 

23 

 
 
 
 
                                                 
4. 

 OVERVIEW TABLE 

2012 commitments 

Summary assessment 

Country-specific recommendations (CSRs) 

in 

effort 

CSR 1: Ensure planned progress towards the correction 
of the excessive deficit. To this end, fully implement the 
budget  for  the  year  2012  and  achieve  the  structural 
adjustment 
the  Council 
specified 
recommendations under the EDP. Thereafter, specify the 
measures  necessary  to  ensure  implementation  of  the 
budgetary  strategy  for  the  year  2013  and  beyond  as 
envisaged,  ensuring  an  adequate  structural  adjustment 
effort  to  make  sufficient  progress  towards  the  MTO, 
including meeting the expenditure benchmark. Minimise 
cuts  in  growth-enhancing  expenditure  in  the  future  and 
improve tax compliance. 

CSR 2: Speed up the reform of the fiscal framework by 
enacting  legislation  with  a  view  to  introducing  a 
permanent expenditure rule by 2013. This rule should be 
consistent  with  the  ESA.  Take  measures  to  strengthen 
the  mechanisms  of  coordination  among  the  different 
levels  of  government  in  the  medium-term  and  annual 
budgetary processes. 

lifelong 

CSR  3:  To  reduce  youth  unemployment,  increase  the 
availability of apprenticeships and work-based learning, 
improve the quality of vocational training and adopt the 
proposed 
learning  strategy.  Better  match 
education outcomes with the needs of the labour market 
and  improve  the  quality  of  teaching.  To  combat  labour 
limit 
market  segmentation  and 
excessive  use  of  civil  law  contracts  and  extend  the 
probationary period to permanent contracts. 

in-work  poverty, 

Limited  progress  in  the  implementation  of  the 
CSR. Poland did not correct the excessive deficit in 
2012, which came in at 3.9% of GDP. It made very 
limited  progress  in  minimising  cuts  in  growth-
enhancing  expenditure  as  significant  part  of  deficit 
reduction comes from cuts in investments (driven in 
turn by the EU funds cycle). The same applies to tax 
compliance — tax compliance rules will be relaxed 
as,  upon  taxpayer’s  request,  the  tax  authorities  will 
have  to  reduce  the  tax  advances  payable  and  tax 
base will be broadened. On 1 October 2012, the list 
of e-declarations which can be transmitted without a 
secure  e-signature  has  been  extended  to  some 
declarations for VAT and for civil law actions tax. 

Limited  progress  in  the  implementation  of  the 
CSR.  The  permanent  expenditure  rule  is  still 
pending and the government plans to enact it by the 
end of 2013. The current draft is not consistent with 
ESA.  Very 
limited  progress  on  strengthening 
mechanisms  of  coordination  among  different  levels 
of  government,  government  argues  that  no  further 
effort required. 

Some progress in the implementation of the CSR. 
While efforts have been undertaken to reduce youth 
unemployment, 
they  should  have  been  more 
ambitious  given  the  scale  of  the  challenge,  and  in 
light of establishing a Youth Guarantee. Poland has 
introduced  several  reforms  in  the  area  of  education 
and  training,  which  are  relevant  to  tackle  the 
challenges  identified  in  the  CSR.  There  need  to  be 
more  efforts  to  enhance  better  cooperation  between 
companies and schools and to raise the quality of the 
to 
Improving 
teaching 
apprenticeships  and  work-based  learning  remains  a 
priority.  The  adoption  of  the  lifelong  learning 
strategy is pending. The Government participated in 
a discussion with the social partners on the issue of 
labour  market  segmentation,  but  these  discussions 
did not lead to concrete results. Some measures have 
been taken to combat in-work poverty, but they are 
unlikely to bring any noticeable effect. 

access 

offer. 

the 

CSR  4:  Reinforce  efforts  to  increase  the  labour  market 
participation  of  women  and  raise  enrolment  rates  of 
children 
in  both  early  childcare  and  pre-school 
education, by ensuring stable funding and investment in 
public infrastructure, the provision of qualified staff, and 
affordable  access.  Tackle  entrenched  practices  of  early 
retirement to increase exit ages from the labour market. 
Phase out the special pension scheme for miners with a 
view  to  integrating  them  into  the  general  scheme.  Take 
more ambitious, permanent steps to reform the KRUS to 
better reflect individual incomes. 

Some progress in the implementation of the CSR 
The  number  of  childcare  places  is  growing,  but  the 
offer of  nurseries  remains  far  too  low  to  satisfy  the 
needs. Poland has set a target to offer a place in pre-
school education for every eligible child by 2016 but 
the  funding  to  meet  this  target  has  not  been 
increased.  The  Government  proposal  to  extend  the 
parental  leave  to  12  months  could  make  it  more 
difficult  for  mothers  to  come  back  onto  the  labour 
market  and  will  also  absorb  substantial  costs.  A 
permanent and credible reform of KRUS still needs 
to  be  implemented.  The  draft  Law  reducing  early 

24 

 
 
 
 
CSR  5:  Take  additional  measures 
to  ensure  an 
innovation-friendly  business  environment,  by  ensuring 
better  links  between  research,  innovation  and  industry, 
and  by  establishing  common  priority  areas  and 
instruments  supporting  the  whole  innovation  cycle; 
improve  access  to  finance  for  research  and  innovation 
activities through guarantees and bridge financing. 

CSR  6:  Intensify  efforts  to  improve  incentives  for 
investment in electricity generation capacity and energy 
efficiency  in  the  whole  energy  chain,  and  strengthen 
competition  in  the  gas  sector  by  phasing  out  regulated 
prices.  Strengthen  the  role  and  resources  of  the  railway 
market 
regulator  and  ensure  effective  and  swift 
implementation  of  railway  investment  projects  Reduce 
restrictions  on  professional  services  and  simplify 
contract  enforcement  and  requirement  for  construction 
permits. 

retirement  possibilities  only  for  miners  working 
underground has not yet been adopted. 

Limited  progress  in  the  implementation  of  the 
CSR.  The  reform  of  science  and  higher  education 
has  been  a  step  in  the  right  direction  but  only 
partially  addresses  the  problem  of  poor  innovation 
performance  of  Polish  companies  through  fostering 
science-industry 
holistic 
approach  is  needed  linking  efforts  under  research, 
innovation  and  industry  policy.  There  are  no  new 
initiatives  in  terms  of  facilitating  access  to  finance. 
Delays  in  the  adoption  of  key  strategic  documents 
(SIEG, PRP) hamper the implementation of possible 
improvements  in  access  to  finance,  especially  for 
innovative SMEs. 

cooperation.  More 

Some progress in the implementation of the CSR. 
The reforms in the area of energy are delayed. Most 
of  the  measures  in  this  sector  are  only  at  the 
preparation  stage  and  therefore  the  outcome  is 
unclear. However, in both electricity and gas sector 
some  progress  has  been  noticed,  with  launch  of 
some  projects  in  development  and  upgrade  of  the 
electricity  grid  (including  interconnectors)  and  gas 
trading  platform  opened  in  December  2012. Minor 
progress  with  expected  increase  of  resources  of  the 
investment 
railway  regulator 
projects  are  still  largely  delayed  and  a  Task  Force 
(Poland-European  Commission)  has  been  set  up  to 
monitor  the  progress  and  identify  obstacles  to 
implementation (some, but not sufficient progress in 
2012).  Poland  has  set  a  serious  reform  agenda  to 
eliminate or reduce qualification requirements for up 
to  230  professions,  although  the  reform  is  behind 
schedule. 

in  2013;  railway 

Contract  enforcement:  Implemented  changes  to  the 
legal  procedure,  greater  resources  for  enforcement 
lead to quicker procedures. Construction permits: no 
changes and progress. 

Concerning  energy  efficiency,  there  was  some 
progress  in  2012  mainly  as  regards  investments  in 
energy  efficiency  of  public  buildings  using  support 
from ERDF. However, in the view of the large needs 
for energy efficiency improvements in all sectors of 
economy,  it  may  be  necessary  to  consider  a  major 
increasing of energy efficiency allocations under the 
in the future financial framework 2014-2020 for EU 
Cohesion Policy Funds. One of the new main energy 
efficiency  measure  aimed  to  help  Poland  its  2020 
target  is  the  White  Certificate  system  and  it  started 
its  operation  in  January  2013  with  first  tenders  for 
delivering energy savings planned to be launched in 
April 2013. 

25 

 
 
 
 
Europe 2020 (national targets and progress) 

Employment rate target: 71% 

R&D target: 1.7% 

Greenhouse  gas 
target:  14% 
(compared  to  2005  emissions,  ETS  emissions  not 
covered by this national target). 

(GHG)  emissions 

Employment rate reached 64.6% in 2010 and 64.8% 
in  2011.  Government’s  efforts  concentrated  rather 
on  the  supply side  of  the  labour  market.  Resources 
directed  into  pro-employment  investment  are  still 
limited. Simple measures aimed at stimulating GDP 
growth  may  not  translate  into  an  increase  in  stable 
jobs and to reaching of the employment target 

Gross domestic expenditure on R&D (in % of GDP) 
reached  0.74%  in  2010  and  0.77%  in  2011. 
Marginal  progress  has  been  made  towards  the 
achievement of the target. 

to 

the 

Change  in  non-ETS  greenhouse  gas  emissions 
between  2005  and  2010:  +  9%  [provisional  data] 
According 
latest  national  projections 
submitted  to  the  Commission  and  when  existing 
measures  are  taken  into  account,  the  target  is 
expected  to  be  reached:  0%  in  2020  compared  to 
2005  (with  a  margin  of  14  percentage  points). 
However,  provisional  inventory  data  for  the  year 
2011 show that emissions are higher than expected 
in  the  projection.  With  a  9%  increase  since  2005, 
emissions  are  indeed  already  slightly  higher  than 
required  as  of  2013  under  the  Effort  Sharing 
Decision. Therefore, projections need to be revised 
to  assess  whether  Poland  will  be  able  to  meet  its 
2020 GHG emission target. 

Renewable energy target: 15% 

Share  of  renewable  energy  in  all  modes  of  transport: 
10% 

Indicative  national  energy  efficiency  target  for  2020: 
13.6  Mtoe  primary  energy  savings  in  2020.  The 
preliminary  data  suggests  that  the  primary  energy 
consumption level in 2020 would be 96 Mtoe. 

26 

Share  of  total  renewable  energy  in  gross  final 
energy consumption was 10.4 % in 2011 and 6.5 % 
in  the  transport  sector.  (Source:  Eurostat.  April 
2013.  For  2011,  only  formally  reported  biofuels 
compliant  with  Art.  17  and  18  of  Directive 
2009/28/EC are included).  

In 2011, Poland was on track of its national action 
plan 
trajectory,  except  electricity  sector.  No 
progress  has  been  made  on  transposition  of  the 
Renewable  Energy  Directive  and  development  of 
national  legislation  in  energy  sector  including 
renewable energy. 

of 

indicative  national  energy 
Poland  has  set  an 
efficiency  target  in  accordance  with  Articles  3  and 
24 
the  Energy  Efficiency  Directive 
(2012/27/EU). However, it has neither expressed it, 
as required, in terms of an absolute level of primary 
and  final  energy  consumption  in  2020,  nor  has 
provided  information  on  the  basis  on  which  data 
this has been calculated. 

 
 
 
 
 
 
 
 
Early school leaving target: 4.5 % 

Tertiary education target: 45% 

Target on the reduction of population at risk of poverty 
or social exclusion in number of persons: 1.500.000 

The  share  of  early  leavers  from  education  and 
training has slightly increased from 5.4% in 2010 to 
5.7%  in  2012.  Poland  is  already  well  below  the 
target  set  for  2020  for  the  EU  average  (10%). 
However,  the  national  target  is  very  ambitious  and 
progress  towards  reaching  the  target  has  been 
reversed recently.  

Tertiary  educational  attainment  reached  35.3%  in 
2010  and 39.1%  in 2012.  More  effort  is  needed  to 
reach the ambitious national target set above the EU 
target. 

In 2011 the number of people at risk of poverty and 
social  exclusion  was  reduced  by  213.000.  Poland 
has  made  a  limited  progress  towards  reaching  the 
target.  More  efforts  are  needed  to  develop  a 
comprehensive  strategy  of  reducing  poverty  and 
fighting social exclusion. 

27 

 
 
 
 
 
 
5.  ANNEX 

Table I. Macroeconomic indicators 

Core indicators
GDP growth rate
Output gap 1
HICP (annual % change)
Domestic demand (annual % change) 2
Unemployment rate (% of labour force) 3
Gross fixed capital formation (% of GDP)
Gross national saving (% of GDP)
General Government (%  of GDP)
Net lending (+) or net borrowing (-)
Gross debt
Net financial assets 
Total revenue 
Total expenditure
  of which: Interest
Corporations (%  of GDP)
Net lending (+) or net borrowing (-)

1995-
1999

2000-
2004

2005-
2009

2010

2011

2012

2013

2014

6.0
1.8
11.3
7.5
12.0
21.7
20.3

-4.1
42.8
0.1
42.3
46.4
4.4

3.2
-1.4
4.3
2.4
18.7
19.9
17.4

-5.0
41.8
-21.0
38.3
43.3
3.0

4.7
1.4
2.8
4.6
11.3
20.6
18.0

-4.1
47.6
-20.0
39.3
43.5
2.5

3.9
1.1
2.7
4.6
9.7
19.9
16.7

-7.9
54.8
-28.0
37.6
45.4
2.7

4.5
1.1
3.9
3.6
9.7
20.2
17.6

-5.0
56.2
-31.9
38.4
43.4
2.7

1.9
-0.7
3.7
-0.2
10.1
19.4
17.3

-3.9
55.6
n.a
38.4
42.3
2.8

1.1
-2.4
1.4
0.2
10.9
18.7
17.4

-3.9
57.5
n.a
37.6
41.6
2.7

2.2
-2.8
2.0
1.6
11.4
18.7
17.6

-4.1
58.9
n.a
36.9
41.0
2.5

-4.5

-1.8

0.6

4.4

5.3

5.8

5.3

5.5

n.a
n.a
11.7
25.7

n.a
n.a
11.5
25.0

n.a
n.a
11.4
25.2

-85.4
-6.2
12.5
22.3

-74.3
9.2
12.4
18.0

-74.7
10.3
14.7
14.7

-80.0
2.8
11.4
23.8

-82.5
-5.0
10.2
23.5

-3.2
n.a
31.3
2.4
19.7
0.9

0.7
50.0
32.6
3.2
19.5
5.4

6.3
37.1
35.1
5.6
20.4
10.5

0.1
55.9
32.5
3.5
19.4
4.8

3.4
47.6
34.2
5.4
20.6
8.1

-3.0
45.5
31.6
3.0
18.7
1.3

Net financial assets; non-financial corporations
Net financial assets; financial corporations
Gross capital formation
Gross operating surplus
Households and NPISH (%  of GDP)
Net lending (+) or net borrowing (-)
Net financial assets
Gross wages and salaries
Net property income
Current transfers received
Gross saving
Rest of the world (%  of GDP)
Net lending (+) or net borrowing (-)
Net financial assets
Net exports of goods and services
Net primary income from the rest of the world
Net capital transactions 
Tradable sector
Non tradable sector
  of which: Building and construction sector
Real effective exchange rate (index, 2000=100)
Terms of trade goods and services (index, 2000=100)
Market performance of exports (index, 2000=100)
Notes:
1 The output gap constitutes the gap between the actual and potential gross domestic product at 2005 market prices.
2 The indicator on domestic demand includes stocks.
3  Unemployed persons are all persons who were not employed, had actively sought work and were ready to begin working immediately or within two weeks. 
The labour force is the total number of people employed and unemployed. The unemployment rate covers the age group 15-74.

-2.7
66.9
-1.2
-3.8
1.6
50.8
37.3
7.1
103.9
101.9
120.0

-2.7
65.2
-1.2
-4.1
1.8
51.0
36.8
7.2
100.4
100.0
122.4

-1.3
n.a
0.3
-4.5
2.0
51.8
36.8
6.6
96.7
98.7
125.1

-2.3
27.5
-2.8
-0.8
0.1
53.1
35.2
7.3
100.5
103.5
76.9

-2.6
56.4
-1.9
-2.7
1.2
51.1
36.9
6.4
104.4
100.9
108.2

-0.9
n.a
1.5
-4.7
1.5
n.a
n.a
n.a
98.1
98.0
127.0

-3.1
39.1
-3.7
-1.0
0.1
51.3
37.4
6.0
104.7
96.9
89.0

-0.8
n.a
1.2
-4.6
1.7
n.a
n.a
n.a
98.4
98.7
126.6

-2.4
n.a
30.9
2.0
20.6
2.0

-2.3
n.a
31.2
2.3
20.3
1.9

Source :

Commission services’ 2013 spring forecasts (COM); Convergence programme (CP).

28 

 
 
 
 
 
 
Table II. Comparison of macroeconomic developments and forecasts 

Real GDP (% change)
Private consumption (% change)
Gross fixed capital formation (% change)
Exports of goods and services (% change)
Imports of goods and services (% change)
Contributions to real GDP growth:
- Final domestic demand
- Change in inventories
- Net exports
Output gap1
Employment (% change)
Unemployment rate (%)
Labour productivity (% change)
HICP inflation (%)
GDP deflator (% change)
Comp. of employees (per head, % change)
Net lending/borrowing vis-à-vis the rest of the 
world (% of GDP)

2012
COM CP
1.9
0.8
-0.8
2.8
-1.8

1.9
0.8
-0.8
2.8
-1.8

2013
COM CP
1.5
1.1
-0.7
2.8
0.9

1.1
0.8
-2.6
2.6
0.6

2014
COM CP
2.5
2.1
4.4
4.3
4.9

2.2
1.5
2.2
5.5
4.3

0.3
-0.6
2.1
-0.7
0.2
10.1
1.7
3.7
2.5
3.1
-1.3

-0.2
-0.6
2.0
-0.8
0.2
10.1
1.7
3.7
2.5
2.7
1.3

0.2
0.0
0.9
-2.4
-0.4
10.9
1.5
1.4
1.4
2.6
-0.8

0.8
0.0
0.8
-2.2
-0.3
10.8
1.7
1.6
1.5
2.2
0.2

1.6
0.0
0.6
-2.8
-0.2
11.4
2.4
2.0
1.7
3.3
-0.9

2.7
0.5
-0.1
-2.7
0.0
11.0
2.5
2.4
2.2
3.2
1.1

2015
CP
3.8
3.2
7.8
5.0
5.5

4.0
0.4
-0.2
-2.0
0.6
10.6
3.1
2.5
2.5
4.7
2.4

2016
CP
4.3
3.5
9.2
5.1
5.9

4.6
0.4
-0.3
-1.1
0.6
10.3
3.6
2.5
2.5
5.2
3.8

Note:
1In percent of potential GDP, with potential GDP growth recalculated by Commission services on the basis of the programme 
scenario using the commonly agreed methodology.

Source :
Commission services’ 2013 spring forecasts (COM); Convergence programme (CP).

29 

 
 
 
 
 
 
Table III. Composition of the budgetary adjustment 

(% of GDP)

Revenue
of which:
- Taxes on production and imports
- Current taxes on income, wealth, etc.
- Social contributions
- Other (residual)
Expenditure
of which:
- Primary expenditure

of which:

Compensation of employees
Intermediate consumption
Social payments
Subsidies
Gross fixed capital formation
Other (residual)
- Interest expenditure
General government balance (GGB)
Primary balance
One-off and other temporary measures
GGB excl. one-offs
Output gap2
Cyclically-adjusted balance

2

3
Structural balance (SB)
Change in SB
Two year average change in SB 

3

Structural primary balance
Change in structural primary balance
Expenditure benchmark

Applicable reference rate

4

2012

2013

2014

2015

2016

COM COM
37.6
38.4

12.9
7.2
12.3
6.0
42.3

12.7
6.9
12.2
5.8
41.6

CP
37.8

12.8
6.9
12.2
5.9
41.3

1
COM
36.9

12.2
7.1
12.1
5.5
41.0

CP
37.2

12.8
6.9
12.0
5.5
40.5

CP
36.2

12.6
6.9
11.8
4.9
38.9

CP
35.6

12.3
7.0
11.7
4.6
37.2

39.5

38.9

38.6

38.4

38.1

36.7

35.1

9.7
5.6
16.4
0.4
4.6
2.9
2.8
-3.9
-1.1
0.1
-4.0

-0.7

-3.7

-3.8
1.7
2.3

-0.9

9.6
5.5
16.7
0.4
3.8
2.9
2.7
-3.9
-1.3
0.3
-4.2

-2.4

-3.0

-3.3
0.5
1.1

-0.6
0.3

9.7
5.5
16.4
0.3
3.8
2.9
2.7
-3.5
-0.8
0.1
-3.6

-2.2

-2.6

-2.7
1.0
1.4

0.0
0.9

9.5
5.5
16.7
0.4
3.6
2.8
2.5
-4.1
-1.5
0.0
-4.1

-2.8

-2.9

-2.9
0.3
0.4

-0.4
0.2

9.5
5.3
16.2
0.4
3.5
3.2
2.4
-3.3
-0.9
0.0
-3.3

-2.7

-2.2

-2.2
0.5
0.8

0.2
0.2

9.1
5.0
15.9
0.4
3.3
3.0
2.2
-2.7
-0.5
0.0
-2.7

-2.0

-1.9

-1.9
0.3
0.4

0.3
0.1

8.6
4.8
15.5
0.3
2.8
2.9
2.1
-1.6
0.5
0.0
-1.6

-1.1

-1.2

-1.2
0.7
0.5

0.9
0.6

2.57

2.57

2.57

2.45

2.45

2.45

2.45

Change: 
2012-2016

CP
-2.8

-0.6
-0.2
-0.6
-1.4
-5.1

-4.4

-1.1
-0.8
-0.9
-0.1
-1.8
0.0
-0.7
2.3
1.6
-0.1
2.4

-0.4

2.5

2.6
-
-

1.8
-

-

5

-1.4

-2.0

-1.1

-0.2

-0.6

-0.8

-0.6

-1.2

-1.6

-2.5

-0.7

-1.0

-0.7

 (% GDP)

Deviation
Two-year average deviation (% GDP)
Notes:
1On a no-policy-change basis.
2Output gap (in % of potential GDP) and cyclically-adjusted balance according to the programme as recalculated by Commission services 
on the basis of the programme scenario using the commonly agreed methodology.
3Structural (primary) balance = cyclically-adjusted (primary) balance excluding one-off and other temporary measures.
4 Reference medium-term rate of potential GDP growth. The (standard) reference rate applies from year t+1, if the country has reached its 
M TO in year t. A lower  rate applies as long as the country is adjusting towards its M TO, including in year t.The reference rates applicable 
to 2014 onwards have been updated in 2013. 
5 Deviation of the growth rate of public expenditure net of discretionary revenue measures and revenue increases mandated by law from the 
applicable reference rate. The expenditure aggregate used for the expenditure benchmark is obtained following the commonly agreed 
methodology. A positive sign implies that expenditure growth exceeds the applicable reference rate. 

-0.7

-
-

Source :
Convergence programme (CP); Commission services’ 2013 spring forecasts (COM); Commission services’ calculations.

30 

 
 
 
 
 
 
Table IV. Debt dynamics 

(% of GDP)

1
Gross debt ratio
Change in the ratio
Contributions 2 :

1. Primary balance

2. “Snow-ball” effect

Of which:

Interest expenditure

Growth effect

Inflation effect

3. Stock-flow adjustment

Of which:

Cash/accruals diff.

Acc. financial assets

Privatisation

Val. effect & residual

5,6

Gap to the debt benchmark
7
Structural adjustment
To be compared to:
Required adjustment8

Notes:

Average
2007-2011

50.8

1.7

2.7

-0.9

2.5

-2.0

-1.4

0.0

2012

55.6

-0.6

1.1

0.5

2.8

-1.0

-1.3

-2.2

COM

57.5

1.9

1.3

1.3

2.7

-0.6

-0.8

-0.7

2013

2014

COM

58.9

1.4

1.5

0.4

2.5

-1.2

-0.9

-0.5

2015
CP

55.6

-0.1

2016
CP

54.5

-1.1

0.5

-1.1

2.2

-2.0

-1.3

0.5

0.1

0.8

-0.1
-3.9

-0.5

-1.4

2.1

-2.2

-1.3

0.9

0.1

1.1

0.0
-3.9

CP

55.7

-0.1

0.9

-0.1

2.4

-1.3

-1.2

-0.8

0.1

-0.3

-0.1
-3.2

2014

2015

2016

2013

2012

COM / 

3

CP
n.r.
n.r.

n.r.

n.r.
n.r.

n.r.

COM / 

3

CP
n.r.
n.r.

4

CP

n.r.
n.r.

n.r.

n.r.

n.r.

CP

n.r.
n.r.

n.r.

CP

n.r.
n.r.

n.r.

CP

55.8

0.2

0.8

1.1

2.7

-0.8

-0.8

-1.7

0.3

-1.6

-0.1
-1.9

4

CP

n.r.
n.r.

1End of period.
2The snow-ball effect captures the impact of interest expenditure on accumulated debt, as well as the impact of real GDP growth 
and inflation on the debt ratio (through the denominator). The stock-flow adjustment includes differences in cash and accrual 
accounting, accumulation of financial assets and valuation and other residual effects. 

3 Assessment of the consolidation path set in CP assuming growth follows the COM  forecasts.
4Assessment of the consolidation path set in the CP assuming growth follows the CP projections.
5Not relevant for M ember Sates that were subject to an EDP procedure in November 2011 and for a period of three years 
following the correction of the excessive deficit.
6Shows the difference between the debt-to-GDP ratio and the debt benchmark. If positive, projected gross debt-to-GDP ratio 
does not comply with the debt reduction benchmark.
7Applicable only during the transition period of three years from the correction of the excessive deficit for EDP that were ongoing 
in November 2011.

8Defines the remaining annual structural adjustment over the transition period which ensures that - if followed – M ember State 
will comply with the debt reduction benchmark at the end of the transition period, assuming that COM  (SP) budgetary 
projections for the previous years are achieved.

Source :

Convergence programme (CP); Commission services’ spring 2013 forecasts (COM); Commission services’ calculations.

31 

 
 
 
 
 
Table V. Sustainability indicators 

S2

of which:

Initial budgetary position (IBP)

Long-term cost of ageing (CoA)

of which:

Pensions

Health care

Long-term care

Others

S1 (required adjustment)*

of which:

Initial budgetary position (IBP)

Debt requirement (DR)

Long-term cost of ageing (CoA)

S0 (risk for fiscal stress)**

Debt,  % of GDP (2012)

Age-related expenditure, % of GDP (2012)

PL

EU27

No-policy 
change 
scenario 

Programme 
(SCP) 
scenario

No-policy 
change 
scenario 

Programme 
(SCP) 
scenario

2.8

1.8

1.0

-0.8

1.5

0.6

-0.2

1.1

1.0

-0.1

0.2

1.5

0.3

1.2

-0.6

1.4

0.5

-0.2

-0.8

-0.6

-0.4

0.2

3.0

0.8

2.2

1.0

0.9

0.6

-0.4

2.2

0.0

1.9

0.3

1.3

-0.9

2.2

1.1

0.8

0.6

-0.3

0.5

-1.8

1.9

0.4

0.41

55.6

20.7

:

87.0

25.8

Note: 
The 'No-policy change' scenario depicts the sustainability gap under the assumption that the budgetary position evolves 
according to the Commissions' spring 2013 forecast until 2014. The 'Programme (SCP)' scenario depicts the sustainability gap 
under the assumption that the budgetary plans in the programme are fully implemented.
* The required adjustment of the primary balance until 2020 to reach a public debt of 60% of GDP by 2030.              
** The critical threshold for the S0 indicator is 0.44. 

Source : 
Commission services; 2013 stability programme.                                                                                                                               

(% of GDP)
90

Gross debt as % of GDP - PL - Medium term debt projections

80

70

60

50

40

30

20

10

0

0
9
9
1

2
9
9
1

4
9
9
1

6
9
9
1

8
9
9
1

0
0
0
2

2
0
0
2

4
0
0
2

6
0
0
2

8
0
0
2

0
1
0
2

2
1
0
2

4
1
0
2

6
1
0
2

8
1
0
2

0
2
0
2

2
2
0
2

4
2
0
2

6
2
0
2

8
2
0
2

0
3
0
2

COM no-policy change scenario

COM + Shock ( -1p.p. in the short-term/long-term interest rate on maturing and new debt from 2015)

COM + Shock (+1p.p. in the short-term/long-term interest rate on maturing and new debt from 2015)

COM consolidation scenario (0.5% per year on SB) in order to achieve MTO

COM consolidation scenario (1% per year on SB) in order to achieve MTO

SCP scenario

32 

 
 
 
 
 
 
Table VI. Taxation indicators 

Total tax revenues (incl. actual compulsory social contributions, % of GDP)

32.7

33.8

34.3

31.8

31.8

32.4

2002

2006

2008

2009

2010

2011

Breakdown by economic function (% of GDP)1
     Consumption

              of which:

              - VAT

              - excise duties on tobacco and alcohol

             - energy

             - other (residual)

     Labour employed

     Labour non-employed

     Capital and business income

     Stocks of capital/wealth

     p.m.  Environmental taxes

2

3
VAT efficiency
     Actual VAT revenues as % of theoretical revenues at standard rate

11.9

12.7

13.0

11.7

12.5

12.7

7.2

1.9

2.0

0.8

8.1

1.9

2.3

0.4

8.0

2.2

2.2

0.6

7.4

1.6

2.1

0.6

7.8

2.0

2.2

0.5

8.1

2.0

2.2

0.5

12.7

12.6

11.9

11.5

11.2

11.7

0.7

5.8

1.9

2.4

0.8

6.2

1.9

2.7

0.8

6.9

1.7

2.6

0.8

6.2

1.6

2.6

0.8

5.8

1.6

2.6

0.8

5.8

1.6

2.6

42.1

50.9

50.6

46.8

48.7

49.3

Note: 
1 Tax revenues are broken down by economic function, i.e. according to whether taxes are raised on consumption, labour or capital. See European Commission 
(2013) Taxation trends in the European Union, for a more detailed explanation.

2 This category comprises taxes on energy, transport and pollution and resources included in taxes on consumption and capital.

3 The VAT efficiency is measured via the VAT revenue ratio. The VAT revenue ratio is defined as the ratio between the actual VAT revenue collected and the 
revenue that would theoretically be raised if VAT was applied at the standard rate to all final consumption. A low ratio can indicate a reduction of the tax base due 
to large exemptions or the application of reduced rates to a wide range of goods and services ('policy gap') or a failure to collect all tax due to e.g. fraud ('collection 
gap'). See European Commission (2012), Tax reforms in EU M ember States, European Economy 6/2012 and Taxation Papers 34/2012 for a more detailed 
explanation.

Source: Commission

33 

 
 
 
 
 
Table VII. Financial market indicators 

Total assets of the banking sector (% of GDP)

Share of assets of the five largest banks (% of total assets)

Foreign ownership of banking system (% of total assets)
Financial soundness indicators:
              - non-performing loans (% of total loans)1)
              - capital adequacy ratio (%) 1)
              - return on equity (%) 1), 2)
Bank loans to the private sector (year-on-year % change)

Lending for house purchase (year-on-year % change)

Loan to deposit ratio

CB liquidity as % of liabilities

Banks' exposure to countries receiving official financial assistance  (% of GDP)

Private debt (% of GDP)
Gross external debt (% of GDP)3)
            - Public
            - Private

Long term interest rates spread versus Bund (basis points)*

Credit default swap spreads for sovereign securities (5-year)*
Notes: 

2008

2009

2010

2011

2012

72.3

44.2

84.9

4.4
11.2

20.7

24.4

41.6

88.2

43.9

64.1

7.9
13.3

11.2

8.0

11.8

87.8

43.4

…

8.8
13.9

13.2

5.9

19.3

83.8

43.7

…

8.2
13.1

16.6

5.9

8.8

93.4

…

…

5.1
14.1

14.5

7.3

6.8

108.4

105.2

107.1

105.4

101.7

2.0

…

43.6

13.4
23.1

2.1

1.6

…

54.7

19.5
28.7

2.9

0.1

…

53.4

23.0
27.6

3.0

0.0

…

53.5

24.2
27.8

3.3

0.0

…

…

29.1
28.7

3.5

226.0

190.8

129.6

171.6

154.8

1) Latest data (September 2012).
2) After extraordinary items and taxes. Accumulated income of the last 12 months. Tier 1 capital. Branches of foreign banks are excluded.
3) Latest data 2012Q3.

* M easured in basis points.
Source :

Bank for International Settlements and Eurostat (exposure to macro-financially vulnerable countries), IMF (financial soundness indicators), 
Commission (long-term interest rates), World Bank (gross external debt) and ECB (all other indicators).

34 

 
 
 
 
 
Table VIII. Labour market and social indicators 

Labour market indicators
Employment rate
(% of population aged 20-64)
Employment growth 
(% change from previous year)
Employment rate of women
(% of female population aged 20-64)
Employment rate of men 
(% of male population aged 20-64)
Employment rate of older workers 
(% of population aged 55-64)
Part-time employment (% of total employment, 
15 years and more)
Part-time employment of women  (% of women employment, 15 
years and more)
Part-time employment of men  (% of men employment, 15 years 
and more)
Fixed term employment (% of employees with a fixed term 
contract, 15 years and more)
Transitions from temporary 
to permanent employment
Unemployment rate1 (% of labour force, 
age group 15-74)

Long-term unemployment rate2 (% of labour force)

Youth unemployment rate 
(% of youth labour force aged 15-24)

Youth NEET rate (% of population aged 15-24)

Early leavers from education and training (% of pop. 18-24 with at 
most lower sec. educ. and not in further education or training)
Tertiary educational attainment (% of population 30-34 having 
successfully completed tertiary education)
Formal childcare (from 1 to 29 hours; % over the population less 
than 3 years)
Formal childcare (30 hours or over; % over the population less 
than 3 year)

Labour productivity per person employed (annual % change)

2007

2008

2009

2010

2011

2012

62.7

65.0

64.9

64.6

64.8

64.7

4.5

55.5

70.2

29.7

9.2

3.9

57.3

73.0

31.6

8.5

0.4

57.6

72.6

32.3

8.4

0.5

57.7

71.6

34.0

8.3

1.0

57.6

72.2

36.9

8.0

-1.6

57.5

72.0

38.7

8.0

12.5

11.7

11.6

11.5

11.1

11.3

6.6

5.9

5.8

5.7

5.5

5.3

28.2

27.0

26.5

27.3

26.9

26.9

4.6

9.6

4.9

21.6

10.6

5.0

4.6

7.1

2.4

17.2

9.0

5.0

5.8

8.1

2.5

20.6

10.1

5.3

4.2

9.7

3.0

23.7

10.8

5.4

:

9.7

3.6

25.8

11.6

5.6

:

10.1

4.1

26.5

11.8

5.7

27.0

29.7

32.8

35.3

36.9

39.1

0.0

2.0

2.2

0.0

3.0

1.2

0.0

2.0

1.2

-0.9

2.2

-0.2

2.2

-1.4

0.0

2.0

3.4

0.0

3.0

3.3

-0.2

-0.5

3.6

3.3

1.3

3.8

0.9

0.7

:

:

3.7

0.0

3.7

2.1

1.0

-0.1

-2.3

-1.6

Hours worked per person employed  (annual % change)

-0.1

-0.2

Labour productivity per hour worked (annual % change; constant 
prices)

Compensation per employee (annual % change; constant prices)

Nominal unit labour cost growth (annual % change)

Real unit labour cost growth (annual % change)

Notes:

2.3

0.9

2.6

-1.3

1.4

5.6

7.5

4.3

1 Unemployed persons are all persons who were not employed, had actively sought work and were ready to begin working immediately or within 
two weeks. The labour force is the total number of people employed and unemployed.

2 Long-term unemployed are unemployed persons for at least 12 months.

Sources: 
Commission (EU Labour Force Survey and European National Accounts) 

35 

 
 
 
 
 
Expenditure on social protection benefits (% of 
GDP)
Sickness/Health care

Invalidity

Old age and survivors

Family/Children

Unemployment

Housing and Social exclusion n.e.c.

Total

of which:  means tested benefits
Social inclusion indicators
At-risk-of-poverty or social exclusion1 
(% of total population)
At-risk-of-poverty or social exclusion of children 
(% of people aged 0-17)
At-risk-of-poverty or social exclusion of elderly 
(% of people aged 65+)
At-Risk-of-Poverty rate2 (% of total population)
Severe Material Deprivation3  (% of total population)
Share of people living in low work intensity households 4 (% of 
people aged 0-59)
In-work at-risk-of poverty rate (% of persons employed)
Impact of social transfers (excluding pensions) on reducing 
poverty
Poverty thresholds, expressed in national currency at constant 
prices5

2006

2007

2008

2009

2010

3.84

1.88

11.52

0.82

0.57

0.11

18.97

0.99

3.93

1.64

10.77

0.79

0.40

0.09

17.79

0.90

4.45

1.52

10.93

0.73

0.35

0.06

18.22

0.78

4.72

1.32

11.43

0.75

0.40

0.06

18.83

0.70

4.51

1.37

11.33

0.79

0.42

0.06

18.63

0.70

2007

2008

2009

2010

2011

34.4

37.1

27.3

17.3

22.3

10.0

11.7

34.7

30.5

32.9

26.9

16.9

17.7

7.9

11.5

32.7

27.8

31.0

25.8

17.1

15.0

6.9

11.1

27.5

27.8

30.8

24.4

17.6

14.2

7.3

11.5

27.9

27.2

29.8

24.7

17.7

13.0

6.9

11.1

26.6

8187

9196

10048

10291

10555

Gross disposable income (households)

743459

806098

863531

903723

949586

Relative median poverty risk gap (60% of median equivalised 
income, age: total)

24.0

20.6

22.7

22.2

21.4

Notes:

1 People at-risk-of poverty or social exclusion (AROPE): individuals who are at-risk-of poverty (AROP) and/or suffering from severe 
material deprivation (SM D) and/or living in household with zero or very low work intensity (LWI).

2 At-risk-of poverty rate (AROP): share of people with an equivalised disposable income below 60% of the national equivalised median 
income. 

3 Share of people who experience at least 4 out of 9 deprivations: people cannot afford to i) pay their rent or utility bills, ii) keep their 
home adequately warm, iii) face unexpected expenses, iv) eat meat, fish, or a protein equivalent every second day, v) enjoy a week of 
holiday away from home once a year, vi) have a car, vii) have a washing machine, viii) have a colour tv, or ix) have a telephone.

4 People living in households with very low work intensity: share of people aged 0-59 living in households where the adults (excluding 
dependent children) work less than 20% of their total work-time potential during the previous 12 months.

5 For EE, CY, M T, SI, SK, thresholds in nominal values in Euros; HICP -  index 100 in 2006 (2007 survey refers to 2006 incomes)

Sources: 
For expenditure for social protection benefits ESSPROS; for social inclusion EU-SILC.

36 

 
 
 
 
Table IX. Product market performance and policy indicators 

Performance indicators

Labour productivity1 total economy (annual 
growth in %)
Labour productivity1 in manufacturing (annual 
growth in %)
Labour productivity1 in electricity, gas, steam and 
air conditioning supply (annual growth in %)
Labour productivity1 in the construction sector 
(annual growth in %)
Total number of patent2 applications per million of 
labour force

2003-
2007

2.7

n.a.

2008

2009

2010

2011

2012

1.2

3.1

1.2

9.4

3.4

11.0

3.3

9.4

3.7

n.a.

n.a.

-10.9

-9.6

21.1

14.3

n.a.

n.a.

-8.8

5.7

9.0

5.2

3.9

8.3

13.6

15.4

17.4

n.a.

n.a.

Policy indicators

Enforcing contracts 3 (days)
Time to start a business 3 (days)
R&D expenditure (% of GDP)
Tertiary educational attainment 
(% of 30-34 years old population)
Total public expenditure on education 
(% of GDP)

2003-
2007
958

31

0.6

2008

2009

2010

2011

2012

830

31

0.6

830

32

0.7

830

32

0.7

830

32

0.8

22.4

29.7

32.8

35.3

36.9

5.28

5.08

5.10

n.a.

n.a.

685

32

n.a.

n.a.

n.a.

Product market regulation4, Overall
(Index; 0=not regulated; 6=most regulated)
Product market regulation4, Retail
(Index; 0=not regulated; 6=most regulated)
Product market regulation4, Network Industries 5
(Index; 0=not regulated; 6=most regulated)

2007

2008

2009

2010

2011

2012

n.a.

n.a.

2.3

3.2

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

2.3

n.a.

n.a.

n.a.

n.a.

n.a.

Notes:
1 Labour productivity is defined as gross value added (in constant prices) divided by the number of persons employed.
2 Total number of patent applications to the European Patent Office (EPO) per million of labour force
3 The methodologies, including the assumptions, for this indicator are presented in detail on the website 
http://www.doingbusiness.org/methodology. 
4 The methodologies of the product market regulation indicators are presented in detail on the website 
http://www.oecd.org/document/1/0,3746,en_2649_34323_2367297_1_1_1_1,00.html. The latest available product market 
regulation indicators refer to 2003 and 2008, except for Network Industries.
5 Aggregate Energy, Transport and Communications Regulation (ETCR).
*figure for 2007.

Source :
Commission, World Bank - Doing Business  (for enforcing contracts and time to start a business) and OECD (for the 
product market regulation indicators). 

37 

 
 
 
 
 
Table X. Green Growth  

Green Growth performance

Macroeconomic
Energy intensity 
Carbon intensity 
Resource intensity (reciprocal of resource productivity)
Waste intensity 
Energy balance of trade 
Energy weight in HICP
Difference between change energy price and inflation 
Environmental taxes over labour taxes
Environmental taxes over total taxes

Sectoral 

Industry energy intensity 
Share of energy-intensive industries in the economy
Electricity prices for medium-sized industrial users**
Gas prices for medium-sized industrial users***
Public R&D for energy 
Public R&D for the environment
Recycling rate of municipal waste
Share of GHG emissions covered by ETS*
Transport energy intensity
Transport carbon intensity
Security of energy supply
Energy import dependency
Diversification of oil import sources 
Diversification of energy mix
Share renewable energy in energy mix

kgoe / €
kg / €
kg / €
kg / €
% GDP
%
%
ratio
ratio

kgoe / € 
% GDP
€ / kWh
€ / kWh
% GDP
% GDP
ratio
%
kgoe / €
kg / €

%
HHI
HHI
%

2002-
2006

0.45
1.85
2.56
n.a.
-1.9%
n.a.
n.a.
19.9%
8.0%

0.34

11.5
n.a.
n.a.
n.a.
n.a.
4.7%
n.a.
n.a.
n.a.

n.a.
n.a.
n.a.
n.a.

2007

2008

2009

2010

2011

0.40
1.66
2.56
n.a.
-2.6%
16
1
20.8%
7.8%

0.28
5.6
0.09
0.03
0.01%
0.01%
7.7%
51.3%
0.86
2.47

25.6%
0.58
0.41
5.0%

0.38
1.56
2.50
0.54
-3.1%
13
5.7
19.8%
7.6%

0.24
5.6
0.09
0.03
0.01%
0.01%
10.5%
50.7%
0.91
2.58

30.6%
0.58
0.39
5.6%

0.36
1.46
2.36
n.a.
-2.3%
13
6.8
21.1%
8.2%

0.22
5.9
0.09
0.03
0.01%
0.00%
17.4%
49.9%
0.92
2.56

31.7%
0.62
0.38
6.6%

0.37
1.47
n.a.
0.59
-2.7%
13
1.4
22.6%
8.2%

0.21
n.a.
0.10
0.03
0.01%
0.00%
21.4%
49.6%
n.a.
n.a.

31.5%
0.64
0.38
7.2%

0.36
n.a.
n.a.
n.a.
-3.3%
14
3.4
n.a.
n.a.

n.a.

n.a.
0.10
0.03
0.01%
0.00%
n.a.
50.6%
n.a.
n.a.

33.7%
n.a.
0.37
8.1%

Country-specific notes: 
The year 2012 is not included in the table due to lack of data.
General explanation of the table items:
Source: Eurostat unless indicated otherwise; ECFIN elaborations indicated below
All macro intensity indicators are expressed as a ratio of a physical quantity to GDP (in 2000 prices)
          Energy intensity: gross inland energy consumption (in kgoe) divided by GDP (in EUR)
          Carbon intensity: Greenhouse gas emissions (in kg CO2 equivalents) divided by GDP (in EUR)
          Resource intensity: Domestic M aterial Consumption (in kg) divided by GDP (in EUR)
          Waste intensity: waste (in kg) divided by GDP (in EUR)
Energy balance of trade: the balance of energy exports and imports, expressed as % of GDP  
Energy weight in HICP: the share of the "energy" items in the consumption basket used in the construction of the HICP
Difference between energy price change and inflation: energy component of HICP, and total HICP inflation (annual %-change)
Environmental taxes over labour or total taxes: from DG TAXUD's database "Taxation trends in the European Union"
Industry energy intensity: final energy consumption of industry (in kgoe) divided by gross value added of industry (in 2005 EUR) 
Share of energy-intensive industries in the economy: share of gross value added of the energy-intensive industries in GDP
Electricity and gas prices medium industrial users: consumption band 500  - 2000M Wh and 10000 - 100000 GJ;  figures excl. VAT.
Recycling rate of municipal waste: ratio of municipal waste recycled over total municipal waste
Public R&D for energy or for the environment: government spending on R&D (GBAORD) for these categories as % of GDP
Share of GHG emissions covered by ETS: based on greenhouse gas emissions as reported by M ember States to EEA (excl LULUCF)
Transport energy intensity: final energy consumption of transport activity (kgoe) divided by transp industry gross value added (2005 EUR)
Transport carbon intensity:  greenhouse gas emissions in transport activity divided by gross value added of the transport sector
Energy import dependency: net energy imports divided by gross inland energy consumption incl. energy consumption international bunkers

Diversification of oil import sources: Herfindahl index (HHI), calculated as the sum of the squared market shares of countries of origin 

Diversification of the energy mix: Herfindahl Index over natural gas, total petrol products, nuclear heat, renewable energies and solid fuels

Share renewable energy in energy mix: %-share in  gross inland energy consumption, expressed in tonne oil equivalents

*Provisional data (15 April 213). Commission Services and EEA.

** For 2007 average of S1 & S2 for DE, LU, NL, FI, SE & UK. Other countries only have S2.

*** For 2007 average of S1 & S2 for IT, NL, FI, SE & UK. Other countries only have S2.

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