Poland’s Domanski blames presidential vetoes as S&P cuts outlook to negative

Poland's Finance Minister Andrzej Domański has criticized President Karol Nawrocki for damaging the country's credit profile following a downgrade by S&P Global Ratings. The downgrade shifts Poland's sovereign credit outlook to negative, signaling that institutional paralysis is hindering necessary fiscal consolidation ahead of the national elections.

S&P lowered Poland's A- sovereign rating outlook from stable to negative, pointing to persistent fiscal slippage and rising public debt. The agency specifically highlighted President Nawrocki's veto power as a major obstacle preventing Prime Minister Donald Tusk's pro-European coalition from implementing tax and structural reforms.

Despite the president's vetoes, Domański stated that efforts to strengthen state finances will continue on X, Poland's social media platform. This comes in the wake of a downgrade by Moody's Ratings two months ago, marking the country's first downgrade in over two decades. The negative outlook raises concerns that Poland may face a formal downgrade by S&P if political friction delays budget repairs into 2027.

Poland is currently projecting a general government deficit near 7% of its gross domestic product through 2027, an election year. This deficit is largely fueled by military spending, with Warsaw allocating nearly 5% of GDP to defense in response to Russia's war in Ukraine. However, the government has faced difficulty passing revenue-raising legislation due to repeated veto threats from President Nawrocki, who is aligned with the right-wing opposition Law and Justice (PiS) party.

The rating action comes amid a significant escalation in domestic political conflict between the executive branch and the presidency. Last week, tensions reached a boiling point when Tusk sent riot police to the Constitutional Tribunal following the suspension of the court's chief justice and deputy. S&P emphasized that the conflict over the judiciary, combined with parliamentary maneuvers to trial Central Bank Governor Adam Glapiński for alleged partisan meddling, has heightened institutional uncertainty.

Glapiński has denied any wrongdoing. While relations with the European Union have normalized under Tusk, S&P cautioned that Poland's relationship with the EU remains a central political fault line ahead of the 2027 vote. The rating agency concluded that the government is unlikely to curb popular post-pandemic welfare spending before the ballot, warning that entrenched political polarization will continue to hinder fiscal discipline and market confidence in the medium term.