Poland on its Way to Greece

Creative Public Finance
Poland on its Way to Greece

Link: http://www.strategy.xaa.pl/Poland-on-its-way-to-Greece.pdf

Fragments from the publication:

Polish public debt revaluation
Poland’s public debt, but also the citizens’ has been growing like an avalanche in the most recent period. Poles’ debt increased to 500 billion zloty, but the most important is the dynamics of the increase of the debt. Due to mortgage credits the private debt of the Poles grew from 34.5 billion PLN in March 2005 to the amount of 286 billion PLN in May 2011, so within 6 years, the mortgage debt of the Poles grew by 728%. It is the dynamics of debt increase translates into the dynamics of disposalble income of households.
For many years Poland will feel a great increase of obligations due to the increase of mortgage debt of its citizens. Every crisis and even a period of poorer market lookout will remind the Poles of the credit boom of the past 6 years. Even in the United States or Spain there has not been a similar percentage of increase of debt of the citizens resulting from mortgage credits.
The situation is even more dramatic in Poland because more than half of the value of mortgage credits is denominated in Swiss franc. The borrowers, apart from the purchase of the house, they have taken speculative positions in foreign exchange market. However, mortgage credit for a house or an apartment is not the best instrument to invest in the Forex market. (…)

Margin Analysis in Economy
The Union’s expenses for Poland in the amount of 2.3 percent of the Polish GDP influence the growth of the GDP by at least 6 percentage points. It is one of the symptoms of the multiplier effect of one event on another. However, the influence of the economic stimulus may be more diversified. (…)
Therefore if the increase of assistance from the Union had a multiplier effect on the growth of the GDP in Poland, there is probably also a reverse dependency. The fact that one is a net payer by Germany or France limits their GDP much more significantly than it appears from the amounts transferred. In case of Germany who pays the most into the Union budget, the net spending of 12 billion euro annually means that, already with the view of the perspective of next year, this expense lessens the GDP of Germany by about 40 billion euro. Since it is the life cycle of analysis, then the lack of means translates in a multiplier effect into subsequent years, etc. The final effect means that the long-term contribution of Germany may turn out to be an excessive burden that is visible only in 10-15 years. The amounts that the Germans are giving away to the Union budget now plus the multiplier effect in long-term may bring about the fact that the Germans will pay for the Union several hundred billion euro (near one trillion) expressed in current euro – this is the power of the multiplier effect in a long period of time. (…)