Assessment of Poland’s fiscal position in the European Union in the face of crisis conditions

Abstract

Crisis conditions in the 21st century also reached the European Union countries, including Poland, and were reflected in the nominal and real economy. In particular, what suffered most was the fiscal condition of individual countries. To support the state of the economy, the economic authorities often took extraordinary, unconventional actions, which unfortunately resulted and still result in a deterioration of the state of public finances. It is therefore worth referring to this research and empirical problem from the perspective of the current and ongoing economic crisis.

Full text

Assessment of Poland’s scal posion
in the European Union
in the face of crisis condions
Sławomir Zwierzchlewski1
Abstract
Crisis condions in the 21st century also reached the European
Union countries, including Poland, and were reected in the
nominal and real economy. In parcular, what suered most was
the scal condion of individual countries. To support the state
of the economy, the economic authories oen took extraordi-
nary, unconvenonal acons, which unfortunately resulted and
sll result in a deterioraon of the state of public nances. It is
therefore worth referring to this research and empirical problem
from the perspecve of the current and ongoing economic crisis.
Keywords
• scal posion
• budget decit
• public debt
• crisis condions
• European Union
Arcle received 13 October 2023, accepted 22 February 2024.
Introducon
The 21st century has brought many unexpected phenomena to the global
economy, including those originang from the non-economic sphere. In the rst
decade, a crisis emerged in the banking and nancial sphere. At the turn of the
second and third decades, another crisis occurred in the medical sphere. In the
third decade, yet another crisis arose in the military sphere. The common feature
1 Poznań University of Economics and Business, al. Niepodległości 10, 61-875 Poznań, Poland,
s.zwierzchlewski@ue.poznan.pl
Suggested citaon: Zwierzchlewski, S. (2024). Assessment of Poland’s scal posion in the European Union in
the face of crisis condions. Research Papers in Economics and Finance, 8(1), 7–20. hps://doi.org/10.18559/
ref.2024.1.1020
This work is licensed under a Creave Commons Aribuon 4.0 Internaonal License
hps://creavecommons.org/licenses/by/4.0
Sławomir Zwierzchlewski
Vol. 8, No. 1, 2024: 7–20
hps://doi.org/10.18559/ref.2024.1.1020
Research Papers in Economics and Finance
hps://ref.ue.poznan.pl

Sławomir Zwierzchlewski8
of all these types of crises is the fact that they undergo transformaon – rstly,
objecve, and secondly, subjecve/spaal. No maer where a crisis originates,
over me it has consequences in the socio-economic sphere and constutes a chal-
lenge to the economic policy of state authories. A crisis also has no geographi-
cal boundaries, because with globalisaon it spreads on an internaonal scale to
most countries around the world.
Crisis condions in the 21st century also reached the European Union coun-
tries, including Poland, and were reected in the nominal and real economy. In
parcular, what suered most was the scal condion of individual countries. To
support the state of the economy, the economic authories oen took extraor-
dinary, unconvenonal acons, which unfortunately resulted and sll result in
a deterioraon of the state of public nances. It is therefore worth referring to
this research and empirical problem from the perspecve of the current and on-
going economic crisis. In this context, the basic aim of the study is to assess the
scal situaon of Poland, especially the level of budget decit and public debt,
against the background of the European Union in the face of crisis condions
in the 21st century. The three crises menoned above have been taken into ac-
count. The research is based on the analysis of data, mainly regarding various
measures of the decit and debt of the public nance sector. In the empirical
sphere, a ranking of the EU countries has been made and Poland’s place in the
ranking has been assessed.
The study consists of two main parts. The rst part (point 1) is mainly theore-
cal and partly methodological in nature. It contains consideraons on the essence
of contemporary scal policy. It depicts how crisis condions constute challenges
for scal authories, in parcular with regard to redistribuve stabilisaon policy.
The second part (points 2 and 3) is mainly empirical in nature. It analyses data on
Poland’s scal situaon compared to the EU. In the inial phase of the study, ag-
gregated data and a broader period of 2000–2022 are taken into account (point 2).
However, in the next phase of the study (point 3), three crises are directly referred
to and individual EU member states are taken into account separately.
The arcle takes into account the author’s theorecal knowledge based on
many years of scienc experience, including various studies, conducted both
by the author himself as well as other researchers. In turn, stascal data comes
mainly from the Eurostat website, as well as the Central Stascal Oce and the
Naonal Bank of Poland.

9Assessment of Poland’s scal posion in the European Union…
1. Theorecal and methodological foundaons
of scal phenomena in crisis condions
The essence of scal policy is appropriate intervenon in the market (econo-
my) using the main tool, i.e. the budget, including income and expenditure. This
intervenon takes place in the context of the implementaon of appropriate so-
cio-economic funcons and goals, both at the central and local government levels
(Mormer-Lee, 2001). The scale of interference depends on the degree of market
defects (see micro- and macroeconomic defects of the market), as well as the ac-
cepted (formally or informally theory of social jusce) (König, 2001). Therefore,
there is no universal answer to the queson whether a more liberal approach
(less acve redistribuve scal policy) or a more social approach (more acve re-
distribuve scal policy) is beer in conducng scal policy. One can logically ac-
cept a dierent degree of scal intervenonism in me and geographical space,
as long as it is adapted to the given condions resulng from the current state of
the economy and the eciency of the market.
In condions of economic stability, micro- and macroeconomic market defects
are relavely small, and therefore scal intervenon should be smaller. Its measure
may be a lower rate of income redistribuon, both on the income and expendi-
ture sides (see the methodological notes on measuring the degree of scal policy
acvity below). In such condions, a desirable phenomenon is a reducon of the
budget decit, or even its balance or surplus. Therefore, the prolonged state of
relave economic stability will ulmately result in a reducon of the debt of the
public nance sector, or at least its rao to GDP. Looking from a long-term per-
specve, in the world’s economic history, periods of economic stability favoured
the dominaon of liberal, laissez-faire theories in economics, including A. Smith,
D. Ricardo and later M. Friedman (Friedman et al., 2002).
In condions of economic instability, micro- and macroeconomic market de-
fects are relavely greater, and therefore scal intervenon should be more ac-
ve. Its measure may be the growing rate of income redistribuon. An extreme
situaon requiring extraordinary scal intervenon is a crisis, understood not as
one of the phases of the “normal” business cycle, but as an extraordinary break-
down of the economy, manifested, among others, by a decrease in GDP. The eco-
nomic history of the world, including modern mes, shows that the sources of
economic crises do not have to be strictly economic in nature, but also military,
health, polical or social. In such condions, an increase in the budget decit is
a common phenomenon. A prolonged state of economic instability and/or crisis
will result in an increase in the debt of the public nance sector, including its ra-
o to GDP. Looking from a long-term perspecve, in the economic history of the

Sławomir Zwierzchlewski10
world, periods of economic stability favoured the dominance of social and inter-
venonist theories in economics, such as J. M. Keynes.
From a theorecal point of view, scal policy should be exible in relaon to
the condions. Its level of acvity (a more social versus liberal atude) should
depend on the state of the economy and the related scope of market defects.
Exemplary, countercyclical, stabilising scal policy, implemented through an ap-
propriate scale of redistribuon, should contribute to achieving the goal of stable
and lasng economic growth and social well-being (Süppel, 2003). In pracce, how-
ever, such a model/exemplary image of economic policy is distorted by polical
and electoral factors. While expansionary policy is polically jused, restricve
policy is undesirable for the economic authories seeking re-elecon. The redis-
tribuve policy becomes asymmetric (too expansive), resulng (as a side eect
of taking care of macroeconomic goals) in a poor scal situaon, including the
long-term perspecve.
Addionally, it should be noted that in the 21st century, in the face of crisis
condions, we oen deal with this type of atude in economic policy. The s-
cal authories must pursue an an-crisis, acve, unconvenonal budget policy
to migate the occurrence of micro- and macroeconomic market defects, which
became evident, among others, during the banking and nancial crisis of the rst
decade, as well as the COVID-19 pandemic and the military crisis at the turn of
the second and third decades of this century. However, these acons should be
carried out skilfully and take into account scal side eects in the long term. It
is recommended that when relavely stable economic condions occur, there
should be a return to an-cyclical, more restricve scal policy, including liming
the dynamics of the increase in the debt of the public nance sector. The policy
cannot be permanently one-direconal because it will make the economy “frag-
ile” and suscepble to crisis situaons, especially in the face of limited potenal
opportunies to conduct an expansive an-crisis policy based on an increase in
the decit and public debt. During “beer mes”, scal authories should build
a “protecve cushion” in the event of worse economic condions, including cri-
ses (Możdżeń & Zygmuntowski, 2022).
The above remarks show that measures of scal acvity may include revenues,
expenses and budget balance, as well as public debt. For the purposes of interna-
onal comparisons, it seems beer to take into account relave measures of the
indicated values in relaon to GDP (in %). In this way, we can compare countries
of dierent sizes and with dierent currencies (Giżyński, 2013).
Bearing in mind that scal policy can be conducted at various territorial and
geographical levels, both the central government (c.g.) and local government (l.g.)
levels should be taken into account when assessing the country’s scal situaon. It
is worth analysing the aggregate redistribuon of income in relaon to the overall
public nances (general government, g.g.) (Sokołowski, 2003).

11Assessment of Poland’s scal posion in the European Union…
Such briey presented methodological remarks have been used in the empiri-
cal part of the study to assess the scal situaon in Poland against the background
of the European Union in the 21st century, in parcular in relaon to crisis situa-
ons. Three “epicentres” of crises are included in this work, dated by the author to:
–2009 – the nancial crisis,
–2020 – the COVID-19 pandemic,
–2022 – the military crisis.
The research took into account mainly the Eurostat data and addionally data
from the Central Stascal Oce and the Naonal Bank of Poland. The data was
imported into the study in June 2023. The study methodology also included a rank-
ing for the EU countries according to the indicated evaluaon criteria.
2. Outline of Poland’s scal situaon in 2000–2022
The assessment of Poland’s scal situaon in the face of crisis condions has
been made against the background of data for a broader period. Due to the avail-
ability of stascal data, the starng date is the year 2000 and the end date is
2022. First of all, it is worth referring to absolute scal measures. In this way, it is
possible to analyse the dynamics of changes in the scal situaon. Figures 1 and 2
present data on the value of the decit and debt of the enre public nance sec-
Figure 1. Budget decit value of public nance sector in Poland in 2000–2022
Source: based on: (Eurostat, 2023a).
0
20
40
60
80
100
120
140
160
180
2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022
billion PLN

Sławomir Zwierzchlewski12
tor for Poland for the period indicated above in the naonal currency (Polish zlo-
ty, in billions).
Even the basic data allow us to noce several important stages in the scal
policy in Poland in the 21st century. We may observe a mild downward trend in
the budget decit aer Poland’s accession to the EU, which was disturbed by the
global nancial crisis. The decit increased for three consecuve years starng
from 2007. We may then observe a second, more signicant downward trend in
the decit, which, in turn, was disturbed by the crisis related to the COVID-19
pandemic. While the decit increased slightly in 2019, the following year saw its
record increase in the 21st century. The year 2021 can be described as a post-
COVID-19 “thaw”, which, however, was “brutally” (also in the literal sense of the
word) disturbed by Russia’s invasion of Ukraine and the ensuing war. Currently,
the war is the main cause of pressure to deteriorate the scal situaon in the cri-
sis condions in Poland.
The dynamics of changes in the budget decit is reected in the values of public
debt. We may observe its growth every year, except for 2014, when it decreased
slightly in absolute terms compared to the previous year. Some debt stabilisaon
between the nancial crisis and the COVID-19 pandemic should be assessed posi-
vely. At that me, its growth dynamics was relavely low.
Connuing the scal assessment of Poland, the rao of the examined values
(decit and debt) to GDP (as a measure of the “economic size” of the country)
should be used, especially in the context of the European Union. At this point in the
study, we will also ulise aggregated data for the enre EU, and not just individual
member states. Figures 3 and 4 show the percentage rao of the decit and debt
of the public nance sector to GDP in Poland and the EU in the years 2000–2022.
Figure 2. Debt value of public nance sector in Poland in 2000–2022
Source: based on: (Eurostat, 2023a).
0
200
400
600
800
1
000
1
200
1
400
1
600
2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022
billion PLN

13Assessment of Poland’s scal posion in the European Union…
Figure 3. Rao of public nance sector budget decit to GDP in Poland
and the European Union in 2000–2022
Source: based on: (Eurostat, 2023a).
Figure 4. Rao of public nance sector debt to GDP in Poland and the European Union
in 2000–2022
Source: based on: (Eurostat, 2023a).
0
1
2
3
4
5
6
7
8
2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 202
2
%
EU Poland
0
10
20
30
40
50
60
70
80
90
2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 202
2
%
EU Poland

Sławomir Zwierzchlewski14
The data presented in this work conrm previous observaons about a certain
cyclicality of the scal situaon, in parcular about the impact of crisis condions
on the scal sphere in Poland and the enre EU in 2009, 2020 and 2022. Looking
at both charts, Poland’s scal situaon against the EU background may already be
posively assessed at this stage. As regards public debt (Figure 4), the situaon is
extremely clear. Its rao to GDP is much lower in Poland in each year under anal-
ysis than the average for the enre EU. Addionally, in Poland this measure did
not exceed the recommended EU limit of 60% in any year under analysis (includ-
ing the threshold for accession to the euro area). For the EU, in turn, it exceeded
this limit in every year under analysis.
The situaon is similar when it comes to the decit to GDP rao. In this case,
however, the dierences between the values for Poland and the average values
for the EU are not so large, and in 2018 and 2021 the relaonship was reverse.
Considering the decit to GDP rao, it can be seen that the COVID-19 crisis was
most severe in Poland, and the nancial crisis was most severe in the EU in general.
Addionally, it should be noted that for the enre research period starng
from 2000, the recommended EU limit of 3% of the decit to GDP rao was ex-
ceeded many mes, especially in the face of crisis condions. On the one hand,
it is a manifestaon of the poor economic and scal situaon in these years, and
on the other hand, it is a manifestaon of the response of the scal authories
to economic problems. The nal assessment will be possible in the longer term,
in condions of economic stability. We will then see whether the eects of the
expansive, an-crisis scal policy will be long-term and whether they will be com-
pensated during good economic mes.
3. Fiscal ranking of Poland against the background
of the European Union based on selected criteria
At the next stage of the scal assessment of Poland in the face of crisis condi-
ons, a ranking of the EU countries was made based on appropriate criteria (see
points 3.1–3.2). The three previously indicated “epicentres” of crises were taken
into account, i.e. nancial, health and military, and the place of Poland was in-
dicated against this background. The main results of the study are presented in
Tables 1 and 2. To beer illustrate the ranking, each point is accompanied by a map
showing the geographical distribuon of countries, taking into account the crite-
rion under analysis for the current period. It should also be noted that the ranking
presented in this study is not considered in detail for all countries included in it. In
fact, this will be the subject of separate research conducted by the author. In this
work, the aenon is focused on Poland and its place in the ranking.

15Assessment of Poland’s scal posion in the European Union…
3.1. Budget balance
The rst ranking criterion is the rao of the budget balance (usually the decit)
to GDP. Figure 5 shows the current situaon in the EU for the appropriate rang-
es of values of the indicator used (see Legend). The darker the colour, the bet-
ter the budget situaon is. Several countries are currently recording budget sur-
pluses: Denmark, Cyprus, Ireland, Sweden, Croaa and Luxembourg. At the oth-
er extreme are the countries with the highest decit – above 5%: Italy, Hungary,
Romania and Malta.
Poland is one of the countries with a higher decit in relaon to GDP. These
data are conrmed in the last column of Table 1, where Poland ranks 19th among
Figure 5. Map of the European Union – rao of public nance sector budget decit
to GDP in 2022
Source: based on: (Eurostat, 2023b).

Sławomir Zwierzchlewski16
Table 1. Ranking of EU countries according to the rao of public nance sector budget
decit to GDP in crisis condions
Country 2009 – nancial crisis 2020 – health crisis 2022 – military crisis
Austria 12 20 17
Belgium 13 21 20
Bulgaria 8 5 15
Croaa 17 17 5
Cyprus 15 13 2
Czech Republic 14 12 18
Denmark 5 1 1
Estonia 3 10 10
Finland 4 11 11
France 18 22 22
Greece 27 26 13
Spain 25 27 23
Netherlands 11 4 7
Ireland 26 8 3
Lithuania 21 15 9
Luxemburg 1 3 6
Latvia 22 7 21
Malta 6 24 24
Germany 7 6 14
Poland 19 16 19
Portugal 24 14 8
Romania 23 23 26
Slovakia 20 9 12
Slovenia 16 19 16
Sweden 2 2 4
Hungary 9 18 25
Italy 10 25 27
Source: based on: (Eurostat, 2023b).
the EU countries in 2022. It is therefore among the countries that are strongly af-
fected by the military crisis. Poland was in the same place in the 2009 ranking.
However, it was three places higher in the case of the COVID-19 crisis in 2020.
Unfortunately, maintaining a relavely good situaon in the macroeconomic
sphere of the real economy (e.g. relavely high GDP dynamics and low unemploy-

17Assessment of Poland’s scal posion in the European Union…
ment rate) results in a not very good current situaon in the nominal sphere, in-
cluding the scal sphere examined here, and, more recently, also the monetary
sphere. Therefore, a classic theorecal interchangeability between nominal and
real variables may be noced here.
3.2. Public debt
The second ranking criterion is the size of public debt in relaon to GDP. Figure 6
shows the current situaon in the EU for the appropriate ranges of values of the
indicator used (see Legend). The darker the colour, the worse the debt situaon is.
Figure 6. Map of the European Union – rao of public nance sector debt to GDP
in 2022
Source: (Eurostat 2023b).

Sławomir Zwierzchlewski18
Several countries with debt above 100% of GDP deserve a parcularly negave
assessment in this respect. They are mostly located in southern Europe: Greece,
Italy, Portugal, Spain, as well as France and Belgium.
Poland ranks slightly higher in this ranking compared to the previous one.
Currently, it is one of the countries with lower debt in relaon to GDP. Moreover,
Table 2. Ranking of EU countries according to the rao of public nance sector
debt to GDP in crisis condions
Country 2009 – nancial crisis 2020 – health crisis 2022 – military crisis
Austria 22 19 20
Belgium 25 21 22
Bulgaria 2 2 2
Croaa 13 20 16
Cyprus 16 22 21
Czech Republic 6 4 8
Denmark 10 7 4
Estonia 1 1 1
Finland 12 16 18
France 23 23 23
Greece 27 27 27
Spain 15 24 24
Netherlands 17 11 12
Ireland 18 13 9
Lithuania 5 8 6
Luxemburg 3 3 3
Latvia 9 6 7
Malta 19 10 13
Germany 20 15 15
Poland 14 12 11
Portugal 24 25 25
Romania 4 9 10
Slovakia 8 14 14
Slovenia 7 18 17
Sweden 11 5 5
Hungary 21 17 19
Italy 26 26 26
Source: own calculaons based on (Eurostat 2023b).

19Assessment of Poland’s scal posion in the European Union…
the ranking of the EU countries improved in the face of subsequent “epicentres”
of crises. However, we sll have to wait for the nal assessment in this respect.
Public debt is a cumulave amount that reects, with some delay, budget decits
from subsequent periods. In parcular, we sll have to wait for the scal conse-
quences of the military crisis, according to Table 2.
What is opmisc is the fact that the rather expansive an-crisis scal policy of
previous years is not yet reected in the long-term scal measure. We can hope
that countercyclical policy undertaken at the appropriate me, in post-crisis con-
dions, can alleviate the long-term eects of the 21st century crises. Addionally,
Polish scal decision-makers have not yet “hit a wall” in the form of the possibility
of greater scal expansion in the event of further crisis condions.
Conclusions
The 21st century has been marked by turmoil in many spheres of life. The glob-
al economy is experiencing crisis situaons, the sources of which are oen not
only economic and nancial but also military or health-related. Crisis condions
spill over into many aspects of cizens’ lives, causing micro- and macroeconomic
market defects, and at the same me forcing intervenon in the eld of econom-
ic policy. In parcular, scal authories are forced to take unconvenonal, oen
ad hoc and unplanned acons, the eects of which are dicult to predict, espe-
cially in the long term.
Three successive crises (nancial, health and military) have le their mark on
the scal situaon of the European Union. It has manifested itself in an increase
in the size of decits and debts of the public nance sector. Yet, some countries
seem to have managed beer (e.g. Scandinavian countries such as Sweden and
Denmark) and some worse (e.g. southern European countries including Greece,
Italy, Spain and Portugal). Nonetheless, it is probably too early to assess the nal
eects of the crisis condions, especially regarding the military crisis. Given the
experience of recent years, it would be worth considering formulang an emer-
gency plan in the event of subsequent crises, and addionally raonalising the
post-crisis policy. It should be countercyclical, i.e. it should also include a restric-
ve variant during good economic mes.
Poland is one of the countries which experience subsequent crises (primarily
nancial) relavely mildly from the point of view of the macroeconomic results,
including those relang to the real economy. In 2009, it was the only country with
posive dynamics of changes in real GDP, and since then it has also been charac-
terised by a low unemployment rate, not recorded since the systemic transfor-

Sławomir Zwierzchlewski20
maon at the turn of the 1980s and 1990s. In fact, Poland recorded a decline in
real GDP only in 2020, with the following years bringing GDP growth. It has been
shown in this work that achieving good macroeconomic parameters has side ef-
fects in the nominal sphere, including the scal one. Expansive budget policy at
both the central and local government levels leads to an increase in budget de-
cits and debt. However, as of today the situaon seems to be under control, even
thought it is dicult to assess the nal, long-term eects of crises, including the
ongoing military crisis. It is sll advisable to raonalise scal policy through, among
other things, increasing its exibility and striving to make it more countercyclical
and stabilising in nature (and not ad hoc and pro-elecon). Of course, changes
in this area must be spread over me and take into account, among others, such
problems as the rigidity of budget expenditures, the crowding out eect or the
Laer curve.
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