Polish parliament sends bill on €44bn EU defence loans to president for approval

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Notes from Poland is run by a small editorial team and is published by an independent, non-profit foundation that is funded through donations from our readers. We cannot do what we do without your support.

Parliament has given final approval to a government bill facilitating Poland’s receipt of almost €44 billion (185 billion zloty) in loans from the European Union’s SAFE programme to fund defence spending.

It remains unclear, however, if opposition-aligned President Karol Nawrocki, who has voiced concerns about SAFE, will sign the bill into law or veto it. The opposition has urged him to do the latter, as they claim the funds will bring Poland under greater control by Brussels.

The government insists SAFE will benefit Poland, providing a major boost to national security and the domestic defence industry. It says that, if Nawrocki vetoes the bill, the funds can still be accessed, but that the process will be more complicated and it may not be possible to spend all the money.

The Sejm, the more powerful lower house of parliament, earlier this month approved an initial version of the bill, which sets up a mechanism for Poland’s National Development Bank (BGK) to receive and disburse the SAFE funds.

The bill then went to the upper-house Senate, which introduced amendments that the ruling coalition said were intended to assuage opposition concerns regarding SAFE. Those changes were today accepted by the Sejm, meaning the bill passes to the president for final approval.

The amendments include a provision for expenses relating to repayment and servicing of the loans to be covered by a specially created reserve rather than counting towards defence spending limits. Another change requires Poland’s security agencies to conduct anti-corruption and counterintelligence oversight of the funds.

However, amendments proposed by the opposition were rejected by the Senate, reports news website OKO.press. They included a measure intended to thwart the EU’s ability to withhold the funds through its so-called conditionality mechanism, which the opposition says gives Brussels too much leverage over national affairs.

Speaking on Wednesday, Nawrocki echoed those concerns. Although Poland’s army needs the funds, “doubts arise from the programme’s sovereignty aspect”, he said. “We need to be sure that these funds will not be withheld or suspended [by the EU].”

PiS leader Jarosław Kaczyński has even argued that the attempt to bring defence spending under greater control by Brussels, and the fact that funds can be withheld, will be used to bring Poland “under German rule”.

PiS and the president’s chancellery have also warned that, because the majority of SAFE funds must be spent in Europe, Poland’s participation could damage its relations with the United States, a key security partner and military hardware supplier.

Now that the bill has been approved by parliament, the president has 21 days to decide whether to sign it into law, veto it, or send it to the constitutional court for assessment.

The government has urged him to approve the measures, saying that they are vital for national security and also will provide a major boost to Poland’s domestic defence industry because almost 90% of the money will be spent at home.

It also says that the loans are on favourable terms, with interest rates almost half of those taken by the former PiS government from South Korea to purchase Korean military gear.

PiS and Nawrocki have, however, questioned those figures, arguing that the government has shown a lack of transparency regarding the terms of the loans and where and how the money will be spent.

Earlier this week, the government’s plenipotentiary for SAFE, Magdalena Sobkowiak-Czarnecka, told newspaper Puls Biznesu that they have a contingency plan prepared in the event that Nawrocki vetoes the bill.

She said that, although the funds would still arrive, “it will be difficult to use their full potential”, in particular for spending outside the defence sector. For example, around €2 billion is meant to go to the interior ministry for spending on the police, border guard and security services, as well as for infrastructure.

On Wednesday, a group of 11 leading Polish defence firms, including the state-owned Polish Armament Group (PGZ), signed a joint statement in support of SAFE.

They called the programme a “huge opportunity for the Polish defence industry”, implementation of which would result in “a radical increase in defence production”, creating jobs and bringing more tax revenue for the state.

Notes from Poland is run by a small editorial team and published by an independent, non-profit foundation that is funded through donations from our readers. We cannot do what we do without your support.

Main image credit: European Parliament/Flickr (under CC BY-NC-ND  2.0)

Olivier Sorgho

Olivier Sorgho is senior editor at Notes from Poland, covering politics, business and society. He previously worked for Reuters.