Poland's finance minister is laying out a simple message: the checkbook is closed for now. "I don't see room for any 'gifts' that would increase public spending in the coming year," Andrzej Domanski told Bloomberg News, calling fiscal policy a challenge for the government. He also pushed back on worries about the currency slide, saying, "My job is to worry," but added, "But luckily a slight weakness of the zloty won't kill the economy."
In his view, the bigger hurdle is politics. Domanski said President Karol Nawrocki is trying to sabotage efforts to lift budget revenue by vetoing government bills. "The president wants to have low taxes, very high spending and low deficit. It doesn't work this way."
The latest flashpoint: the president blocked a windfall charge on oil and gas companies that was designed to help tamp down the jump in prices at the pump. Despite having campaigned on a promise of no new levies, Nawrocki labeled the measure unconstitutional.
The strain on public finances has multiple sources. Poland's widening gap stems from sizable social spending and increased defense outlays prompted by Russia's war next door in Ukraine. Moody's moved Poland down one notch on Sept. 18 and warned that "the continued standoff" between Prime Minister Donald Tusk's government and the opposition‑backed president, together with a national election scheduled for late 2027, narrows the space for "meaningful fiscal consolidation." The deficit is on track to top 7% of GDP, already among the largest in the European Union.
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In a pre‑election proposal last month, the government pitched lighter taxes for the middle class in 2027, paired with some higher corporate taxes to fund it. The plan still needs the president's approval, and the ruling coalition lacks the three‑fifths majority in parliament to override a veto. On Tuesday, the cabinet is slated to approve the final draft budget during its regular weekly session.
Borrowing costs have climbed since the downgrade, with Polish bond yields moving higher. The zloty is hovering near its weakest level versus the euro seen since early 2024, which Domanski largely chalked up to global forces.
For everyday investors, the takeaway is straightforward: Poland's politics are steering its budget and its borrowing costs, and that can ripple into currency swings and returns on regional assets you might hold or track. Keep an eye on the Tuesday budget sign‑off and whether the revenue bills get through or run into another veto, because that will tell you how bumpy the path ahead could be.
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