MNCs should closely monitor ongoing negotiations between Poland and the EC, as the economy’s high reliance on EU funding could lead to a significant dampening of domestic demand and investor confidence if there are further delays or if it is withheld. In such a scenario, Poland will have to find a way to subsidize its sizeable fiscal program through external debt, which may necessitate ad hoc budgetary revisions, putting pressure on B2G demand.


On October 7, 2021, the Polish Supreme Court ruled that Polish law has primacy over European law, threatening a constitutional crisis. Poland’s 66-billion-dollar COVID-19 recovery plan has yet to be approved by the EU commission because of concerns regarding the rule of law in the aftermath of the Polish Supreme Court’s ruling. The European Commission (EC) considered several options for penalizing Poland, from taking legal action to withholding funds.

Our View

Tensions between the EU and the Polish government remain high, especially in light of recent threats by the EC to consider a wide array of options to punish Poland for failure to comply with European law and for breaching the Maastricht agreement. While the government itself continues to maintain a tough stance against the EC, it has found itself in a difficult spot, given that the majority of the Polish population supports EU membership, and Poland’s dependency on the funding suggests that authorities will eventually need to take a softer stance and back away from more controversial policies. Furthermore, much of the government’s flagship program—dubbed the Polish New Deal—involves a slew of public investments that rely on the inflow of funding, including extra spending on infrastructure, energy, and digital innovation. However, the government will try to obtain some concessions from the EU and maintain some of its harsh rhetoric, which could lead to a potential political miscalculation that could signal a downside scenario for the market. In such a scenario, failure to tap into additional funding will translate into a contraction in public investments and significant volatility of the zloty.

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