Fitch: Article 7 procedure could affect future EU subsidies

The European Commission's recommendation that Article VII procedures should be launched against Poland should not have a material short-term impact on growth or public finances, but can affect the negotiations for the next EU funding cycle, Fitch Ratings agency said. “Cuts in EU funds and/or additional conditionality placed on their disbursement would aggravate the impact of the departure of the UK, one of the biggest net contributors to the EU budget. Poland is the largest recipient of EU funds in nominal terms, and has been allocated €86 billion over the current cycle (2014-2020), equivalent to 19 percent of 2017 GDP). Lower inflows of EU funds would hit growth, and if the government compensated for some lost funds by borrowing, weaken public finances,” Fitch report said. On Wednesday, the European Commission asked other EU member states to declare that Poland’s judiciary overhaul constitutes “a clear risk of a serious breach of EU values.” If the states agree, although it’s an unlikely scenario, Warsaw’s voting rights would be suspended.