Poland’s President and the head of the central bank have proposed a “sovereign, Polish” alternative to the government’s legislation to facilitate borrowing €44 billion for defence spending from the European Union’s Security Action for Europe programme (SAFE).
President Karol Nawrocki and Adam Glapiński, the central bank (NBP) chief, both of whom are allied with the opposition Conservatives (PiS), called their idea “Polish SAFE 0%”.
That is in contrast to the loan to be taken out under EU’s SAFE programme that commands an interest rate of three per cent and which the centre-left government led by Prime Minister Donald Tusk wants to access.
Several EU states, including Germany, have declined to access the SAFE mechanism as they can access loans at a lower interest rate.
The Polish Government-supporting parliamentary majority passed legislation in parliament in February to facilitate accessing the SAFE loan.
Nawrocki and the PiS have signalled opposition to the measure on the grounds that it is covered by the EU’s conditionality mechanism, which means tranches of the loan could be stopped if the European Commission deems Poland to be in violation of EU values and policies.
Poland’s post-pandemic funding was blocked during the lifetime of the last PiS government for alleged rule of law violations. It was unblocked immediately on the arrival of the current Tusk government despite the fact that no new legislation was likely to be passed.
The present administration argues that the legislation on SAFE is vital for Poland’s security and for the development of the Polish arms industry and claims that more than 80 per cent of the funds will be spent on Polish-produced arms.
According to the defence ministry, Poland has submitted 139 projects under the EU programme including the purchase of Polish arms and the possible purchase of aerial refuelling tankers produced by European aerospace company Airbus.
Tusk has argued there is no danger of the EU money being stopped because the conditionality mechanism was aimed “only at avoiding corruption”.
The PiS opposition, though, says that not only is there a danger of Brussels stopping the funding should a right-wing government come to power but that Poland has been buying most of its arms from the US and South Korea.
That is because they are fully compatible with domestic systems and meet all NATO standards and the PiS says that switching to European suppliers preferred by the SAFE programme would entail risks regarding compatibility and delivery times.
The government’s legislation on accessing SAFE is now in Nawrocki’s hands. He has 21 days to sign it, veto it or send it to the constitutional court.
At a press conference yesterday, Nawrocki and Glapiński announced they had agreed on a plan for “a Polish effective and sovereign alternative to SAFE”. They said it would unlock the same amount as envisaged in the EU loan and. would be sourced in country and allow more flexibility on how the money is spent.
“This is a sovereign alternative that will not involve any interest, a loan lasting until 2070, or dependence on the political situation in the European Union,” the President stated.
Nawrocki added that, in his view, SAFE was “inconsistent with Article 4 of the Treaty on European Union, where security clearly belongs to the EU member states, not to the European Union itself”.
Nailing his colours firmly to the alliance with the US, Nawrocki said: “The war in Iran and the recent operations of the United States also demonstrate what they demonstrate: above all, the effectiveness of American equipment.”
The President and the NBP chief did not reveal the details of the scheme but Glapiński said that the NBP “transfers most of its profits to the government”.
“They are used for a specific purpose. In this case, we expect it to be specifically to strengthen Polish defence,” he added.
Nawrocki said the scope of the central bank to act was also enhanced by the “purchase and accumulation of Polish gold by the National Bank of Poland”.
The NBP has built up considerable gold reserves during the lifetime of Glapiński’s almost 10-year tenure at the bank and he has said that “NBP reserves belong to all Poles”.
Asked how the central bank plans to finance “Polish SAFE 0%”, Glapiński gave little explanation, saying only that it was not possible to use the country’s foreign exchange reserves and that more details would come in the future.
“We are only stating and have calculated that such possibilities exist,” Glapiński said, adding that he would want to undertake work on the proposal alongside senior government ministers.
Poland’s Constitution forbids the use of NBP funds and reserves to fund budgetary spending but it does allow the bank to transfer its annual profits to the government and has done so on several occasions in the past.
In recent years, though, NBP has not reported any profits as its surpluses were used to build up gold and foreign currency reserves.
Nawrocki has said he is inviting Tusk and his ministers to discuss the scheme.
The funding plan was met with scepticism from the defence minister Władysław Kosiniak-Kamysz. He said that, while he was open to “additional” funding instruments, they were not, in his opinion, an alternative to SAFE which he. said “provides the fastest and most concrete measures for modernising the Polish army”.
