Poland aims to use EU recovery funds for defence sector

WARSAW (Reuters) - Defence is a top spending priority for Poland, and the country may use European Union recovery funds to boost its arms industry, Polish cabinet members said on Friday.

The war in Ukraine prompted neighbouring Poland to modernise its army and boost weapons purchases. It has allocated 4.7% of gross domestic product (GDP) to defence expenditure this year - one of the highest levels in NATO.

Polish Minister of Funds and Regional Policy, Katarzyna Pelczynska-Nalecz, told reporters the country could allocate as much as 20 billion zloty ($5.04 billion) in cheap loans not taken up by local governments to boost the capacity of local defense industries.

Polish Prime Minister Donald Tusk called on Thursday for stronger defences of EU borders with Russia, and the swift adoption of new fiscal rules to fund improved European defence efforts, citing growing security concerns.

"I fully subscribe to the prime minister's calls, and this should also be reflected in the redirection of funds from the EU recovery facility to security," Pelczynska-Nalecz told reporters.

The EU's recovery facility provides Poland with nearly 60 billion euros in grants and cheap loans. The country has so far signed contracts to spend 25% of the amount, the minister said.

On Friday, the Minister of Finance Andrzej Domanski said defense spending "was, is and will be our priority" and urged EU countries to back a Polish proposal that would let them hike military spending without breaking the bloc's fiscal rules.

French President Emmanuel Macron hosted two meetings with European leaders earlier this week to discuss how to move faster to increase defence spending, and how to move more quickly as U.S. President Donald Trump's administration speeds up diplomacy to end the three-year-old Ukraine-Russia war.

(Reporting by Pawel Florkiewicz and Marek Strzelecki; Editing by Helen Popper and Philippa Fletcher)