WARSAW, March 12 (Reuters) - Poland's president said on Thursday that he would not sign legislation creating a mechanism to spend 43.7 billion euros ($50.30 billion) in European Union loans to boost the military, triggering condemnation from the government.
The clash between nationalist President Karol Nawrocki and the pro-EU government of Prime Minister Donald Tusk over the 150 billion-euro Security Action for Europe initiative is the latest example of the deep divisions complicating policymaking at Poland's highest levels of state.
"The SAFE mechanism is a massive foreign loan taken out for 45 years in a foreign currency, with interest costs that could reach up to 180 billion zlotys," Nawrocki said in a televised address to the nation.
"Poles will therefore have to repay twice the value of the loan, while Western banks and financial institutions will profit from it."
He added that Brussels could halt the payout of funds arbitrarily through deploying conditionality rules, thus limiting Poland's sovereignty, and questioned its constitutionality.
"Poland's security cannot depend on foreign decisions," he said.
Warsaw was the biggest beneficiary of SAFE, but the nationalist opposition party Law and Justice labelled it a German plot to meddle in Polish affairs that would saddle the country with debt and limit its flexibility regarding arms purchases.
Tusk's government 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.
"The President has lost the chance to act like a patriot. Shame!," Tusk wrote on X, adding that the government would present its response at an extraordinary council of ministers on Friday morning.
Nawrocki and Central Bank Governor Adam Glapinski have proposed an alternative that would involve using unrealised profits from the increasing value of the National Bank of Poland's gold reserves to finance military spending.
In his address, Nawrocki called on the government to cooperate on the alternative, national proposal.
However, Glapinski says the government has expressed "zero interest" in the proposal. The bill proposed by Nawrocki is unlikely to be approved by parliament, where Tusk's coalition has a majority.
The government has previously said it is preparing a "plan B" that would still allow Poland to access SAFE funds, without giving further details.
($1 = 0.8687 euros)
(Reporting by Alan Charlish and Karol Badohal; Editing by Bill Berkrot)
