The European Commission has approved under EC Treaty state aid rules a Polish scheme intended to stabilise the financial system.
 
The measure would guarantee short and medium term debt to encourage inter-bank lending and offer liquidity to financial institutions under strict conditions.
 
The EC said on September 25 2009 that it had found the measure to be in line with its guidance communication on state aid to overcome the current financial crisis.
 
Poland’s economy has been the fastest-growing in Europe in 2009, and its economy grew a modest 1.1 per cent in the second quarter of 2009, while a recent HSBC forecast estimated total GDP growth by the end of 2009 to reach one per cent.
 
While not as hard-hit as several other European economies, Poland faces increasing unemployment – figures released on September 23 put joblessness at 10.8 per cent in August 2009, and a budget deficit expected to increase in 2010.
 
Poland had intended to join the euro zone in 2012 but senior officials have said that this is now in doubt.
 
The EC statement said that Poland’s financial system aid package "constitutes an adequate means to remedy a serious disturbance in the Polish economy while avoiding undue distortions of competition and is therefore compatible with…the EC Treaty".
 
The programme provides for non-discriminatory access for eligible financial institutions, is limited in time and scope and contains safeguards to minimise distortions of competition.
 
European Competition Commissioner Neelie Kroes said: "The Polish scheme is an effective instrument for boosting market confidence without unduly distorting competition."
 
The Polish scheme foresees two categories of support measures: State Treasury guarantees for the issuance of new senior debt by banks and liquidity support measures in the form of Treasury bonds, either as a loan or to be sold with deferred payment.
 
The EC concluded that the measure constituted an appropriate means to restore confidence in the creditworthiness of Polish financial institutions and to stimulate inter-bank lending.
 
In particular, the scheme is limited in time and scope and provides non-discriminatory access for financial institutions established in Poland.
 
The guarantees and loans will be provided for debt instruments with maturities from three months up to five years.
 
However, bank loans guaranteed by the State Treasury with a maturity exceeding three years will be restricted to maximum one-third of the value of all the beneficiary's bank loans that are supported by the scheme .
 
Debt guarantees on newly issued debt will be available only to credit institutions. Should the state guarantee be called upon by a beneficiary or should the beneficiary default on its liabilities related to treasury bonds, a restructuring plan will be submitted within six months.
 
The remuneration for the debt guarantees will be established in line with the European Central Bank recommendations and the remuneration for the lending of treasury bonds or for deferred payments for treasury bonds will be even higher then for the guarantees.
 
Eligible institutions may apply for the support under the scheme until December 31 2009, but support may be granted later, within the six-month period as from the day of the EC decision.
 
"Finally, in order to avoid an abuse of the measure, a ban on advertisements referring to the support provided by the State Treasury will be imposed on every beneficiary of the scheme," the EC said.