Green transformation and security in one budget. Government changes priorities in KPO

On Monday, a two-day conference of the National Economy Bank addressed to local government units began in Warsaw; its theme is "The role of local governments in building resilience".

BGK President Mirosław Czekaj, opening the conference, assessed that such a number of applications submitted under the Green Transformation of Cities Instrument (IZTM) shows that financing resilience, among others, to climate change is important. "To this we need to add new mechanisms, new tools, such as the emerging Security and Defense Fund," Czekaj noted.

First Vice President of BGK Marta Postuła expressed hope that all applications submitted under IZTM will be "soon (...) assessed". She recalled that out of PLN 40 billion allocated for this instrument, the government transferred PLN 26 billion to the Security and Defense Fund (FBiO). However, she assured that "actions are being taken" to ensure that all submitted applications are processed. She also emphasized that the Bank is preparing for the entry into force of the act that will officially establish FBiO. She informed that, with the consent of the European Commission, the fund does not have a "rigid division" of funds into the loan part and the so-called own contribution.

Speaking about the Instrument for Enhancing the Security of Europe (SAFE), which will finance urgent and large-scale investments in the European technological and industrial base of the defense sector, she recalled that the budget of this program is EUR 150 billion. She added that last year, PLN 389 billion was transferred to the economy through the activities of the Bank Gospodarstwa Krajowego.

The Green Transformation of Cities Instrument is part of the KPO, and its goal is to reduce the negative impact of people on the natural environment. Investments implemented within its framework include greening urban areas, counteracting the loss of biodiversity, mitigating climate change and reducing the level of pollution.

The post also announced that the Ministry of National Defense, the Ministry of Internal Affairs and Administration, and the Ministry of State Assets are jointly creating a purchase plan, which will allow Poland to apply for these funds. "At this point, we need to have good projects within which we will finance the development of military potential in the context of both defense companies, but also (...) building a comprehensive view of this phenomenon," said the vice-president of BGK.

EU finance ministers accepted changes to the Polish National Reconstruction Plan (KPO) on Friday, primarily assuming the creation of a Security and Defense Fund. The fund will finance the construction of shelters, among other things, and money in the amount of almost PLN 26 billion will be shifted from the part intended for the green transformation of cities. The revision also included replacing the contribution to civil law contracts provided for in the KPO with a reform strengthening the National Labor Inspectorate (PIP).

The creation of the Fund is associated with two innovations. Thanks to it, Poland will be able to spend money on defense after the reconstruction fund ends in August 2026. The EC agreed - and on Friday the finance ministers approved it - that the mere transfer of money to the account of the special purpose company at the Bank Gospodarstwa Krajowego will be considered as the achievement of the so-called milestone.

The second issue concerns the transfer of EU defence funds. Article 41 of the EU Treaty prohibits "expenditure arising from operations having military or defence implications". However, the EC concluded that the regulation governing the KPO itself does not provide for any special treatment of defence-related funds, and the money that Poland will transfer to the Security and Defence Fund will not be allocated for military purposes, but for so-called dual-use purposes.