15% of Poland's budget next year will be spent on debt service. This is the third largest item in the budget, almost equal to the funds received from the EU. The threefold increase in the cost of debt over the past three years is beginning to pose a threat to the security of the state and the well-being of citizens.
“Looking for a formula to describe the times before the First World War, I think the most appropriate name for them is “the golden age of certainty and security.” Everything in our millennia-long without little Austrian monarchy seemed firmly established, and the state itself - the supreme guarantor of this permanence. [...] Any radicalism, any violence seemed downright impossible in this age of reason.”
So wrote Stefan Zweig in his most famous book on the Habsburg empire The World of Yesterday. The speed with which the “world of today” became the “world of yesterday” surprised him and his contemporaries twice a century ago. The accumulation of changes we are witnessing, coupled with Poland's dramatically deteriorating fiscal situation, poses the risk that our time of today's growing prosperity could also quickly become yesterday's time.
Uncertainty about the future creates space for freedom. If the future is not determined, then individual choices are possible. At the same time, for planning the future - necessary for development and investment - it is essential that there be a certain amount of predictability. At the individual level, the greater the degree of uncertainty about the future, the greater the anxiety. The greater the anxiety, the less willingness to take risks.
The development of states and societies thus takes place between the need for a certain amount of predictability and building space for individual choices and risk-taking opportunities. Each of us has a different appetite for risk. However, it seems that the majority of citizens want security in moments of particular helplessness or experiencing the fragility of existence. This refers to stages of life when we are unable to provide for our own livelihood: illness, old age, childhood, unemployment.
Following this need, over the past two centuries we have created pension, social security and public education systems. The continued existence of these systems in their current form is threatened by depopulation - leading to a reduction in the number of citizens contributing to the system - and Poland's fiscal situation. The sense that the social contract may be broken, that certainty and security may be threatened, leads to radicalism and the violence cited by Zweig. Hence, the need to repair the state's finances is becoming an increasingly important and urgent challenge.
State revenues in 2024 will amount to EUR 149 billion. The cost of debt service is EUR 20.2 billion, so 13.5% of the budget will be spent on debt service. In comparison, the revenue of the European funds budget is less than EUR 20.7 billion. So we can say that we have reached a level where all European funds are spent on debt service.
In 2025, revenues will increase by EUR 1.7 billion, and the cost of debt service - by EUR 2.4 billion. As much as 15% of the budget will be spent on debt service. Only spending on health and armaments will be higher in the budget than the cost of debt service, which has become the 3rd highest item when it comes to Polish state spending.
At the same time, we are taking on new debt at a very fast pace. The budget deficit is reported in relation to GDP. However, it is also worth comparing it to budget revenues. In 2024 we have already borrowed 40%, and in 2025 we will borrow as much as 45% of budget revenues. The result of this rate of borrowing year after year is one of the highest debt service costs in the EU. It has tripled in three years - from EUR 7.4 billion in 2021 to EUR 22.6 billion next year.
If this trend doesn't change, soon in order to pay the interest on the increasingly expensive debt, we will have to cut spending on health care, education and defense. When there is a lack of prudence in the management of public money, radicalism and rape can occur, impossible to imagine in today's world - the age of reason.