Polish president's rival bill heats up spat over EU defence scheme

Polish President Proposes Gold Reserves for Military, Defies EU Defence Plan

Poland's Defence Funding Debate: National Gold Reserves vs. EU Loans

Presidential Proposal and Political Reactions

WARSAW, March 10 (Reuters) - Poland will be able to use profits from central bank gold and foreign exchange reserves instead of EU loans to boost military spending, according to a bill proposed by the president on Tuesday that drew a rebuke from Prime Minister Donald Tusk.

Poland was the biggest beneficiary of the EU's 150-billion-euro Security Action for Europe (SAFE) initiative, but the nationalist opposition Law and Justice party (PiS) labelled it a German plot to meddle in Polish affairs that would saddle Warsaw with debt and limit its flexibility regarding arms purchases.

President Karol Nawrocki, an ally of PiS, has proposed a plan to use Polish funds instead of the European Union loans.

Details of the Presidential Bill

"The funds generated by the National Bank of Poland, resulting from the market valuation of Polish gold and currency reserves, are to be allocated directly to financing defence purposes through a newly established fund," according to Nawrocki's bill, which was submitted to parliament on Tuesday.

Parliamentary Dynamics and Political Divisions

Parliament, where Tusk's pro-European government has a majority, is unlikely to approve the bill, but the row highlights the deep divisions at the top of the Polish state.

Government's Position and SAFE Initiative

Prime Minister Tusk's Critique

Tusk says the cheap financing provided by SAFE is essential to Poland's security in the face of what it views as a rising threat from Russia.

"This (presidential) bill has no money - it has a new body, a council, new bureaucracy, and dozens of unnecessary regulations," Tusk told reporters.

SAFE Funds Disbursement Mechanism

Nawrocki has criticised the government's own bill, which creates a mechanism by which the 43.7 billion euros ($50.86 billion) made available to Poland under 'SAFE' would be disbursed. He has not yet said whether he will veto it.

Potential Veto and Government's Contingency Plan

If Nawrocki does veto that bill, the government is preparing a "plan B" that would still allow Poland to access SAFE funds, Tusk said earlier on Tuesday, without elaborating.

(Reporting by Alan Charlish, Pawel Florkiewicz, Marek StrzeleckiEditing by Gareth Jones)