|Will Donald Tusk and Bronisław Komorowski take Poland into the euro zone|
Courtesy of KPRM
Poland will try to fulfill the criteria to join the euro zone “as soon as possible” but the final decision whether to access or not would have to be “100 percent safe for our country,” said Prime Minister Donald Tusk while speaking on the issue in parliament last week.
The government has begun a push towards bringing the country closer to joining the single currency union, starting with a comprehensive public debate, as it looks to make Poland a core EU member that can participate in the bloc’s key fiscal decisions.
During the speech, the prime minister also said the choice of joining the euro zone would need a “widespread” support amongst MPs, referring to the fact that a two-thirds (or “constitutional”) majority will be needed in parliament to change Poland’s official currency from the złoty to the euro.
“There will not be a constitutional majority for joining the euro zone unless there is widespread and complete conviction that it is safe for Poland,” said Mr Tusk.
However, in order to get a constitutional majority on board, the government would need the support of the largest opposition party, Law and Justice (PiS). But the eurosceptic PiS has said it wants a referendum on the issue.
Euro enthusiasts would be hard-pressed to win such a referendum. A December Ipsos Observer survey showed 56 percent of Poles were against Poland adopting the euro.
President in favor
This week, the prime minister and his government are scheduled to meet with President Bronisław Komorowski in a special Cabinet Council meeting organized to discuss Poland’s path to the the euro zone. The president fully supports Poland adopting the European common currency.
In an interview for television channel TVP1 last month, Mr Komorowski said that Poland should be able to fulfill the euro zone’s convergence criteria by 2015.
“Today instead of considering theoretical matters, such as taking decisions about Poland’s membership in the euro zone, we should concentrate on the first phase: fulfilling the requirements to join the euro zone ... because they are good for Poland,” the president said.
Nevertheless, Mr Komorowski has given no indication that he intends to hurry the prime minister and his government on the issue, at least for now.
Conditions to meet
In 2008, Prime Minister Tusk said that Poland would adopt the euro by 2011 – that was just days before the collapse of Lehman Brothers, and the ensuing global economic crisis meant all those plans went out the window. Since then, the Polish government has maintained that it is committed to joining the euro zone while refusing to set a concrete date for eventual membership. However, government officials say that Poland will have fulfilled all the criteria needed to join the currency zone by 2015.
To be able to adopt the euro, Poland must meet the conditions laid out in the EU’s Maastricht Treaty, such as bringing its budget deficit to within 3 percent of GDP, public debt below 60 percent of GDP and the inflation rate to within 1.5 percentage points of the average of the three EU states with the slowest price growth. It must also meet certain interest-rate convergence criteria and spend two years in the European Exchange Rate Mechanism (ERM II).
However, as of January 2013, the only of these criteria Poland had met were those regarding public debt and interest rates. But the government made significant progress when it comes to bringing the overall budget deficit closer to the Maastricht Treaty targets.
Among its reforms, Mr Tusk’s government can count raising the retirement age and curbing early retirement pensions for uniformed services. It managed to reduce the budget deficit to 3.4 percent of GDP last year from 7.9 percent in 2010. Meanwhile, Poland’s public debt was under 53 percent of GDP in 2012, according to finance ministry estimates, well under the permitted maximum 60 percent. And that compares with an average of 92.9 percent in the euro area.
Experts weigh in
“Poland will need about four years to join the euro zone. At the moment, we don’t meet the criteria, especially the fiscal ones. But we hope to fulfill them by 2014,” said Stanisław Gomułka, chief economist at the Business Centre Club and a former deputy finance minister in Mr Tusk’s government.
“The economic slowdown will make it easier to fulfill the interest rate and inflation criteria. The euro zone itself is coming back to health thanks to its reforms and so it would now be safe to join,” he added.
And so BCC, one of the largest and most influential employers’ associations in the country, thinks Poland should join the ERM2 at the beginning of 2014 to enable it to formally join the currency union at the beginning of 2017.
But Mr Gomułka said there is a risk the process could still be a drawn out affair due to Poland “not reducing the budget deficit fast enough and not changing the constitution on time.”
Meanwhile, Zenon Marciniak, an economics professor at the Warsaw School of Economics, said the National Bank of Poland has conducted “two complex surveys, both of which revealed that joining the euro zone would bring tangible benefits for Poland. And so delay means delaying those benefits.”
Marek Belka, a former prime minister and current head of the NBP, spoke out on the matter recently. In an interview with the Wall Street Journal last week, he said he supports joining the euro zone but is “less enthusiastic about a very quick euro adoption.”
Recent changes in the rules governing the euro zone have strengthened the common currency, Mr Belka said. But he also said that Poles need to keep in mind that the goal is not just “to join the euro, but also to stay there as a country of the core and not of the periphery.”
“We’re still a catching-up economy, an emerging economy, with all its weaknesses and strengths,” Mr Belka said, adding that Polish policy makers should compare the country with “the Spain of some years ago.”
“We know what happened there, but we hope to avoid the mistakes of Spain,” he added.
Looking at macroeconomic data and economic forecasts, it would seem that the BCC’s proposal for Poland to join the euro zone in 2017 is not an unrealistic one. If there continues to be strong political will in Poland to join the currency union and if the Polish economy does not take any unexpected hits in the coming years, then it is likely that Poland will join the euro zone before the second decade of the 21st century runs out.
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