Poland Waits for the Euro
January 13, 2007
Poland and other new EU members are on their way to the euro zone.
As a part of joining the European Union, all new member states have agreed to the goal of introducing the euro as their own currency.
But in order to enter the euro zone, Poland and the other members must fulfill two general conditions. First, they must meet the requirements of the Maastricht Treaty, and second, they must take part in the European exchange rate mechanism. That means their exchange rates must not fluctuate more than 15 percent against the euro over a period of two years.
So the question is not whether Poland and other new EU members will introduce the currency but when.
Poland and the euro
As it stands now, Malta and Cyprus will join the euro zone next year, with Slovakia following in 2009. But for the other new member states, the timing is still unknown.
Poland has already met three of the four economic conditions for entering the euro zone. Its inflation and interests rates are below the maximum level allowed, and the country's debt does not cross the limit. But the country's budget deficit is still too high for EU standards.
"Poland must follow through on some financial reforms," Marek Zuber, an economy advisor to Prime Minister Jaroslaw Kaczynski, has said. "The most important and highest priority for us is the social welfare contributions, which are too high."
An anti-euro government?
Since joining the European Union in 2004, public and governmental support for the euro has been mixed. Support is high in the cities and lower in the countryside.
"I am skeptical," Kaczynski told a news conference in November. "I think haste in this matter could seriously hurt us."
The Law and Justice Party, led by the prime minister and his twin brother, President Lech Kaczynski, has repeatedly stated its uncertainty about any rush to join the euro zone since taking over the government in 2005.
In November, the Polish government announced plans for a referendum concerning the adoption of the euro, stating the need to educate the public and to allow more time for the Polish economy to develop. The projected date for the referendum is 2010.
"We have to join the euro, but there's no fixed deadline, so we can do it when the levels of economic development in Poland and the euro zone are closer than they are now," Kaczynski said.
No "opting out" of euro
New EU states would be joining 13 counties now using the euro, including Germany, France and the currency's newest member, Slovenia, which officially adopted the currency on Jan. 1.
New member states may not opt out of the euro, as long-time members Britain and Denmark have. Those two countries negotiated for opt-out clauses in the Maastricht Treaty. Denmark rejected joining the euro zone by referendum in 2000.
In announcing a referendum, Poland has cited the example of Sweden, which rejected the adoption of the euro by referendum in 2003 and has since showed no interest in revisiting the issue.
Old versus new Europe
"I think that the old European countries fear the political balance of the European Central Bank will begin to waver with the accession of the new countries," said former Polish Finance Minister Dariusz Rossati, who is now a member of the European Parliament.
Rossati believes fears that more euro zone members will weaken the currency are unfounded.
"On the contrary, these countries can strengthen it (the euro) because the new countries have much less debt than the old," he said.
Discussion over the euro comes at a time when the European currency has been gaining strongly, rising 35 percent against the dollar over the past three years.