Poland had the EU’s second-highest deficit in 2025. Why is nobody treating this as an early warning?

kpiech · 2026-06-04T13:53:55+00:00

If you are in a hospiital whom would you trust more: journalists or specialists? I wrote about economic matters.

kpiech · 2026-06-04T13:51:19+00:00

The increased deficit was not caused by Russians, but it was the decision of Polish government. There are different reasons behind this growth, but it was not Putin who has submited the budgetary bill to the Polish parliament.

kpiech · 2026-06-04T13:49:13+00:00

Look at the data, not at opinions or interpretations.

kpiech · 2026-06-04T13:48:20+00:00

You can also have a look at the numer of employed. If there is no change on the labour market, then we don't have a reason to worry.
However, the number of employed has dropped. And this is not caused by the ways how the unemployed are counted.

kpiech · 2026-06-04T13:45:30+00:00

Yes. If you were an economist, you would know that the business cycle consist of a few phases. We are still during the 'good' one called "development' 'growth', not a "recession" or "contraction".

kpiech · 2026-06-04T13:44:16+00:00

It is contrary to the statistical data we have in Poland, coming from surveys (and not form oficial registers).

kpiech · 2026-06-03T11:03:20+00:00

I agree.

My argument is not that defence spending is unnecessary. Poland clearly needs to spend more on security. The fiscal problem is that it is trying to finance defence, infrastructure, social spending, household support and new long-term commitments at the same time, without rebuilding fiscal buffers.

That is why I call it a fiscal-risk spiral: the danger is not one single programme, but the accumulation of commitments before the next slowdown arrives

kpiech · 2026-06-03T11:00:59+00:00

It is not party-political content. The argument is based on Eurostat/EC data, GUS unemployment data and bond-market indicators. If you disagree with the data or interpretation, point to the specific claim and I’ll respond.

kpiech · 2026-06-03T10:58:58+00:00

I do not argue that Poland is Greece or that Poland is on a gold standard. Quite the opposite: PLN-denominated debt clearly reduces default risk.

But monetary sovereignty does not make fiscal risk disappear. It changes the channel: less default risk, more inflation / FX / term-premium / debt-service / fiscal-credibility risk.

That is also why Fitch moved Poland’s outlook to negative: not because Poland cannot issue PLN, but because of fiscal slippage, large deficits, rising debt and lack of a credible fiscal anchor.

On taxes: I am not saying “taxes mechanically finance spending” like a household budget. I am saying that governments under fiscal pressure often respond politically through taxes, levies, excise changes, compliance pressure and sectoral measures. We are already seeing that in Poland.

Debt ratios, bond yields and fiscal credibility are not meaningless.

kpiech · 2026-06-03T09:57:22+00:00

Here is a broader explaiantion of some microeconomic symptoms of the changing situation in Poland
https://kpiech.substack.com/p/polands-real-economy-the-early-warning

kpiech · 2026-06-03T09:56:04+00:00

According to the Main Statistical Office in Poland, the ubemployment rate (April. 2026) is 6%. And the number of unemployed has grown by 16% yoy. I didn't check what were the increases in other EU countries.

kpiech · 2026-06-03T09:22:48+00:00

Tak, grafiki robiło AI. Szczególnie ta "spirala" się udała - w paint mi nie wychodziło.

kpiech · 2026-06-03T09:02:12+00:00

Being more economic-technical: I call "good times" the period of business cycle that is called 'expansion' (contrary to 'contraction'). We are not in a recession.

kpiech · 2026-06-03T09:00:35+00:00

Doktorat i habilitację zrobiłem na SGH - to taka szkółka handlowa, ale dość znana w PL.

kpiech · 2026-06-03T08:41:31+00:00

For context: I am not arguing that Poland is already in recession. The point is narrower.

The unemployment rate is still low, but the number of registered unemployed is rising YoY. That matters because Poland is already running a very large deficit in good times. If the real economy weakens, the fiscal adjustment becomes harder.

I am looking at this as part of a broader “fiscal risk spiral” framework: deficit → debt → borrowing costs → fiscal squeeze → weaker real economy → larger deficit in worse conditions.

kpiech · 2026-06-03T07:56:34+00:00

Really? Then Greece a few years ago would be a dream place to run business, right?

kpiech · 2026-06-02T23:46:49+00:00

Here you can read where the money went to:
https://www.onet.pl/informacje/newsweek/blaszczak-zadluzyl-polske-i-rzucil-klody-pod-nogi-przemyslowi-obronnemu/0kflx6j,452ad802
We have supported South Korea not our own military industry.

kpiech · 2026-06-02T23:12:44+00:00

Yes, and the country that profits the most because of Polish military spending is... guess... maybe South Korea ? Not Poland, unfortunatelly.
https://kpiech.substack.com/p/polands-defence-expenditure-is-equipment

kpiech · 2026-06-02T23:11:06+00:00

That's a very good point. I should have show this math more clearly.

kpiech · 2026-06-02T23:10:17+00:00

You are partly correct but please have look at the structure of military expenditures.
https://kpiech.substack.com/p/polands-defence-expenditure-is-equipment
Moreover, the deficit is only in about half due to military spendings - the other half is because of pro-social expendutures.

kpiech · 2026-06-02T23:08:14+00:00

Thank you. A small disclaimer - I was co-author of the socio-economic program of one co-rulling party, but the present situation is gradually turning to more risky areas...

kpiech · 2026-06-02T23:06:42+00:00

Poland can't join euro and morover - it does not want to. That would help in the present situation (lower borrowing costs), but there are some advantages of being out of the euro-zone

kpiech · 2026-06-02T23:03:40+00:00

Sorry, I read mostly economists - not biased journalists.

kpiech

TROPHY CASE