Doubts over deficit

The Minster said she wants to add zł.1-2 billion to the 2006 deficit for investment in education and technology. The deficit had already been set at zł.30 billion and even at this level it is in excess of the EU ceiling for eurozone entry of three percent of GDP.

"I can never consider any increase in the deficit to be reasonable," said the European Commissioner for Economic and European Affairs, Jaoquin Almunia. "I think it has to continue with its efforts of fiscal adjustment and as soon as I'm able to establish contact with the new Polish authorities [and] the new Polish Finance Minister, I shall be saying that these commitments have to be adhered to and efforts to bring about consolidation have to be enforced."

Meanwhile, the outgoing Finance Minister announced that the budget deficit should not exceed four-fifths of the planned zł.35 billion this year. 

"We estimate that the budget gap will not be higher than 80 percent of the allowed shortfall," said ex-Finance Minister Mirosław Gronicki. His deputy minister, Elżbieta Suchocka-Roguska, said: "We estimate that at the end of October the deficit was around 62-63 percent of the plan."

Analysts said the lower shortfall this year confirms the economy is growing, but a smaller gap may oblige the new government to cap next year's deficit below zł.30 billion.

"This result is a challenge for the government because the 2006 deficit-to-revenue ratio cannot exceed the 2005 execution foreseen by Gronicki," said Piotr Bielski, an economist at Bank Zachodni WBK. Public-finance law says that since the 2004 public debt exceeded 50 percent of gross domestic product, the deficit in 2006 must be capped at the level of the Finance Ministry's forecast result - which will be lower than in the budget.

"This means that the shortfall, now seen at zł.30 billion by the new Prime Minister, should be lower next year," Bielski said. This does not take into account the hike planned by the new Finance Minister.  (Reuters)