Poland and the Euro

THERE’S MORE LIKE THIS ON OUR NEW SITE – POLANDIAN.COM

While Poland is still dreaming about adoption of the Euro in 2012, eight years after joining the EU, its tiny-weeny, titchy-witchy neighbour to the south, Slovakia, is using the Euro as of Jan 1 2009. The even smaller nations of Slovenia, Cyprus and Malta have also joined in the last year or two.

I confess I’m not an expert in Euro adoption but I do know that Poland already satisfies all of the convergence criteria except for the easiest one of all – the requirement to be within the ERMII mechanism for two years before Euro adoption. As it stands then, the earliest Poland could have the Euro is some time in 2011 (as has been suggested by the Tusk camp) but most likely would be Jan 1st 2012 assuming it joins ERMII on Jan 1st next year. By no means a foregone conclusion.

For Poland of course, meeting all the criteria is just a side-show compared to the political bickering and in-fighting that needs to go on around the subject. The main stumbling block seems to be the fact that the constitution must be changed to allow the Euro to be adopted. To change the constitution needs cooperation between the government and the Kaczynski brothers (definitely PiS but I’m assuming the President can also derail constitutional matters?). What are the chances of that happening – I’d say roughly zero. For example – Ducky Jarosław is determined that there should be a referendum about adopting the Euro. Tusk is equally determined that there is no need for one because Poland has already committed itself to adopt the Euro when it joined the EU. We have presidential elections in 2010 (Hallelujah!) and parliamentary ones in 2011 – how will that change the scenery?

So we have a country that, as far as I can tell is an absolutely ideal candidate for joining the Euro at the earliest opportunity and yet is taking far too long to do so thanks, in the most part, to its leadership sacrificing the countries needs for the sake of their own egoistic bickering! Why do I think Poland is an ideal candidate for the Euro? Primarily because:

  1. From what I can see, Polish citizens are not terribly hung up about keeping the zloty. Perhaps all those years where “hard currency” dollars were far more valuable? Perhaps the fact that the zloty has never really been one of the world’s premier currencies….I don’t know. This contrasts very strongly to the UK where they are incredibly hung up about keeping the pound, even if it does mean you need to buy reinforced trouser pockets to hold the 70 kilos of change you have to carry around!
  2. A large percentage of people already show a preference for foreign currencies, even or especially, for bigger transactions. More than a quarter of all mortgages are not in zloty, for example. Euro adoption would at least remove the confusion about which foreign currency is the best one – Euro, Swiss Franc, Dollar…. This just doesn’t happen in the UK, everything is in GBP.
  3. Many links between Poland and Euro currency nations. Even just the physical proximity of Euro-people is far more keenly felt than on that isolated island of Brits.

Business leaders have welcomed the government’s commitment to bring Poland into the euro zone in 2011. “The adoption of the euro will make life much easier for entrepreneurs, especially those who do business with the euro zone,” said Andrzej Arendarski, head of the Polish Chamber of Commerce (KIG). “They will no longer need to constantly monitor exchange rates and incur costs associated with currency exchange. The risk of losses caused by exchange rate changes will also disappear once the single currency is adopted.”

The Association of Polish Exporters says an early entry to the euro zone would make Polish exports more profitable and competitive. Business Centre Club experts say the benefits of adopting the euro for Poland would include faster economic growth, easier handling of increased tourist traffic and more efficient preparations for the Euro 2012 soccer championships.

According to a survey by the PBS polling company for the Gazeta Wyborcza daily, around 35 percent of respondents support the government’s plan to replace the zloty with the euro in 2011; one in four would prefer Poland to adopt the euro later than 2011; and 31 percent do not want Poland to adopt the single European currency at all. Meanwhile, in a survey by TNS OBOP for the Dziennik daily, 50 percent of people questioned said they would like their country to switch to the euro.

Anyway. Whether Poles want it or not, whether it would be good for Poland or not, we seem to be stuck with watching the usual Punch & Judy show rather than doing something that might actually be a good thing for the country and its citizens. In the meantime you can look forward to using those nice Slovakian Euros  for your (more expensive) skiing holidays on the other side of the Tatras and just dream about those even better looking John Paul II, Polish Euro coins!

slovak-euro

polen_2004_pattern_euro_coins

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27 thoughts on “Poland and the Euro

  1. guest says:

    Read this Scatts,

    It is in german, but you can translate it in google

    h ttp://diepresse.com/home/wirtschaft/eastconomist/441148/index.do?_vl_backlink=/home/wirtschaft/eastconomist/index.do

    It is about Polands economy the euro and Slovakia.

  2. guest says:

    Here is the google translation…

    The dangers of the common currency

    01.01.2009 | 18:30 | MATTHIAS AUER (The press)

    Many new euro states lost momentum. In Poland, could it be otherwise. Experts attest to the government a good chance, notwithstanding relatively out of the crisis to come.

    Vienna. Since the first of January, Slovakia is a member of the euro zone. A big advantage, as it seems. Especially in the recent turbulence in many Eastern European currencies came under pressure. Great is the lure for many new EU member countries to adopt the euro as a seemingly safe haven in uncertain times packages. Hungary, Poland or the Czech Republic have been waiting some time before the gates of the monetary union.

    But history teaches us that with the introduction of the euro also risks to the economy of a country are linked. For example in Portugal, Spain or Greece: they all have in the course of the euro introduction of a so-called “boom-bust cycle” experienced. Interest and inflation declined in anticipation of the “hard euro” rapidly. Instead of five percent interest loans suddenly there was almost nothing, the credit boom was inevitable. It also boosts consumption, public investment and not least the increase of wages to. The result: the medium term, lost the states of competitiveness, their economic performance declined.

    “Poland is different”

    A study by the University of California at Berkeley and the WU Vienna, the question whether Poland, one of the next Euro candidates in danger victim of a boom-bust cycle to be. Because especially in eastern Europe is the volume of credit in recent years has grown rapidly. “Poland is different, however,” says co-Barry Eichengreen the outcome of the study. Since 2003, the volume of credit in any other Eastern European EU member country so slow considerably as in Poland. Were there in countries such as Hungary or Romania for up to 60 percent more loans a year, remained the boom in Poland.

    Sufficient room for a strong credit growth would be available to a shock believe the authors do not. Indeed, some companies were cheap loans in past years to have. To an overheating of the economy, it is still not yet come: The wages presented for example in the previous year – an Eastern European country moderate – ten percent. Private only could a further rate cut increased access to credit.

    “Island of stability”

    With the onset of financial crisis, the situation has also changed for Poland, says Catherine Steiner co-Europe Institute of the WU Vienna to “press”. “On the interbank market is a lack of confidence. This leads to a forced restraint on lending by banks. “Even the euro planned for 2012 introduction of the credit crunch could only be countered if the risk of the loans work again.

    They celebrated Poland’s Prime Minister Donald Tusk recently his country as “island of stability” in the hurly-burly of the financial crisis. He expects 2009 with a GDP growth of 4.8 percent.

    Not to be wrong, ultimately, a relatively high savings rate and a moderate external debt as on the credit side of the country as one of the most restrictive bank regulations Eastern Europe. Have mainly foreign investors in the past always on the cautious lending complains, so this could be the trump card now for the 38-million-inhabitant country. State rescue packages Polish banks have so far not needed.

    Experts attest to the government a good chance, notwithstanding relatively out of the crisis to come – regardless of whether Poland from 2012 to the euro will be charged or not. In 2007 the country attracted 15 billion euros in foreign investment, even for the previous year, an amount expected double-digit billions. And the European Union also contributes its part to preserve the myth of the “island of stability” in. With nearly 70 billion euros by 2013 flow more funds from the EU structural funds towards Poland than in any other new EU member country.

  3. Aidan says:

    I am not so sure that proximity to the European mainland has anything to do with Euro adoption. After all Ireland joined it from the start and Malta and Cyprus are not joined to the mainland either. The British attitude has far more to with the idea that the UK is a sovereign, powerful country. Ireland was quite willing to join with other European countries in the new currency because the country has no illusions about its marginality so there was little to lose.

  4. Jacek Wesołowski says:

    There are three reasons for which local politicians from different parties may consider coming together and doing something for the good of the country:
    1. A 30-metres-wide stain the shape of St. Mary The Christ’s Mom shows up overnight on the Palace of Culture and Science in Warsaw, along with a subtitle saying “just do it already!”
    2. Russians invade one of Poland’s neighbours.
    3. Someone reads too much Douglas Adams and succeeds in building a working Infinite Improbability Drive.

    Other than that, we’ll have to wait until the election. I predict the slogan “it’s either Kaczynski or euro” may actually help one candidate or another.

  5. Ania says:

    I’d keep the Zloty, if anybody asks me. The reason is simple: my family company exports things from Poland, and not just to the euro zone. Depending on the rates, I can work with the price of goods or the price of currencies and this means more money for me – and more risk as well.

    I also remember the price increases in Germany when they joined the euro and am now observing the wages struggle in Spain. All in all it is not such a good business… there is no need for changing stuff, unless the reason is change for the sake of change. Plus, the dollar, euro and pound are now crisis currencies, so joining those groups would mean taking some of the burden on ourselves, which is just plain stupid.

    What we would loose is the ability of running a fiscal policy cut for our needs, and we are not quite as tiny as Slovakia.

    Anyway, there being a different currency in Poland is not an obstacle for trading for any person able to use a calculator – all you do is convert.

  6. […] discusses Poland's difficulties in fulfilling requirements to adopt the Euro as currency by 2012, while […]

  7. […] discusses Poland's difficulties in fulfilling requirements to adopt the Euro as currency by 2012, while […]

  8. Jubal says:

    Ania, are you really thinking, that zloty is not a crisis currency right now? Or that it won’t be in a very short time?

    FWIW, I moved to the Euro zone and am quite content right now – at least the exchange rate of CHF does not bother me that much as it would if I would still be paid in zlotys.

  9. Jubal says:

    Oh, and by the way, don’t spread the myths. Examples of two in your commentary:

    – ‘we would lose the ability to run an independent fiscal policy’,
    – ‘being a different currency in Poland is not an obstacle for trading’; yeah right, maybe if you’re not doing any planning for a time periods longer than four weeks,
    – in some part also the price increases in Germany are more or less a myth, look at the inflation rates.

    [And again, If you really think that just the use of zloty makes Poland insulated from the global crisis, you’re very, very wrong.]

  10. Ania says:

    actually, there is more Jubal – the banking policy which was mentioned before. I’m sure you’d like to copy it from the UK? there are new charities in the UK asking for money for the people who have just lost their homes.
    The crisis is going to last like the 1920’s one and there is no reason to make it worse by paying the debts of the Americans.

    what I have written are not ‘myths’, because they come from my trading experience. If you are buying cheap electronics from the USA, you have to convert currency as well, and it does NOT bother anyone. Nor is anyone making them joing the euro. oh, yes, I know – they’re big. So what. not only big countries can have their currency. oh, sorry: only the ‘modern and fashionable’ can have their currency.

    anyway, if you think that the euro will insulate Poland from the crisis, you are even more wrong (but I think you don’t really want it)… to explain: in the euro zone, for the statistical purposes, the unit used by experts is not euro, because there is effectively no common currency. it is a theoretical unit, different for each of the countries.

    the biggest mistake that you are making is here: ‘at least the exchange rate of CHF does not bother me that much as it would if I would still be paid in zlotys.’ if you were paid in zlotys, you would spend in zlotys: now you get euros or pounds and spend euros or pounds. and you still can bank in foreign currencies in those countries, if you enquire – only they don’t do that much, because they are still sending cheques by post. Barclays and HSBC offer currency accounts.

  11. Jacek Wesołowski says:

    Talking about zloty and the crisis… I was planning on going to annual conference devoted to the industry I work in. It’s a one-of-a-kind event , and you can learn a lot there, not to mention meet interesting people or find a job. It would be an expensive trip, so I had been saving for it for some time.

    But the conference is held in San Francisco. And dollar jumped up from 2.40 to 3.00 in two months, thank you very much. That’s basically a 20% crisis tax. I can’t pay that much. I don’t mind being poor and unable to travel across nine time zones on a whim, but I do mind not being able to make reliable plans because of the exchange rate dancing like a drunken monkey.

  12. w says:

    “there are new charities in the UK asking for money for the people who have just lost their homes.”

    I thought it was mainly because of riddiculous bank loans and not the currency… What were you expecting where you’re paying your credit with another credit, payed with another credit?

    “If you are buying cheap electronics from the USA, you have to convert currency as well, and it does NOT bother anyone”

    well, it bothers me on few levels.
    I am ‘selling’ a specific service though (art) – to many places ariund the worl. I’m doing better since I switched to euro.

  13. Dawid says:

    Greeks had no problems dropping their thousands-year-old drachmae, so I don’t think Poles should be too tense about dropping zloty which dates back “only” to the 15th century. I say, bring it on!!

  14. johnwilpers says:

    Dear “Polandian” author,

    My name is John Wilpers. I am the Global Blog Coordinator for GlobalPost, a new international news organization set to launch on Jan. 12 (see http://www.globalpost.com).

    My job is to build a list of blogs that will appear on GlobalPost where we will have approximately 65 correspondents in some 46 countries. We are looking for enlightening, informative posts from bloggers writing (in English) in those countries.

    I am pleased to extend an invitation to you to have the most recent post of “Polandian” included on the Poland page of GlobalPost.com as part of our “Global Blogs” service.

    After reviewing thousands of blogs worldwide, we have found “Polandian” to be one that is thought provoking and gives readers your unique perspective on what life is really like in Poland.

    The way it would work if you accept our invitation is that we would use your RSS feed to place your most recent post on your personal page on GlobalPost.com. We would point back to your actual blog for comments and for archives, hopefully driving lots of traffic to your site. Each time you write a new post, it would replace the older one so only one post would appear on GlobalPost.com.

    By appearing on Global Post’s exciting new international news website, your words, viewpoints, and pictures would gain worldwide exposure. Your posts would not only appear instantly on globalpost.com but also possibly on the sites of our partners, including the Huffington Post (7.8 million U.S. and 9.7 million global monthly unique visitors) and other news and information websites.

    You don’t need to do anything differently. We do request that you consider pointing back to us from your blog (we will send out logos shortly for your consideration).

    You should know that we have a few guidelines that we observe here at Global Post:

    1) We do not publish racist, sexist, or misogynist comments (unless those comments are the subject of the post).
    2) We do not publish obscene language or photos. While we recognize that obscenity can be difficult to define, we know it when we see it and we will let you know if we think you have crossed our line.
    3) We do not permit plagiarism. Any work taken from another source must be attributed to that source.
    4) We do not publish libelous or slanderous language.
    5) We do not tolerate repeated errors of fact or misrepresentations of facts or quotes.
    6) We do not publish work inciting violence.

    Failure to observe these guidelines would result in the removal of your blog from GlobalPost. We would contact you, of course, to discuss the post in question.

    Because we have a broad multicultural audience holding every conceivable political and religious viewpoint, we want to respect their views while also possibly challenging them. We will host controversial work. We will encourage robust debate of the hottest topics. We will not stifle discussion, only abuse of people, belief systems, and laws.

    We hope these guidelines are acceptable to you.

    I look forward getting your permission to put your RSS feed on our site. Please reply to: jwilpers@globalpost.com. Thank you!

    Sincerely,

    John Wilpers

    PS If you choose to accept our invitation and would like a photo and a short biography to appear on GlobalPost, please send both to me with your confirmation e-mail or at some time shortly thereafter.

    JOHN WILPERS
    Global Blog Coordinator
    The Pilot House
    Lewis Wharf
    Boston, MA 02110
    617-688-0137
    jwilpers@globalpost.com

  15. scatts says:

    Thanks for the interest, John. We’ll get back to you soon.

  16. Elementary says:

    “We would lose the ability to run an independent fiscal policy” is described by Jubal as a myth. It is an overstatement, but not a full-blown myth. Interest rates in the eurozone are determined by the European Central Bank (ECB), not by the individual member countries. How much say will Poland have in the setting of interest rates by the ECB? I don’t know but obviously less than they would have if they set the rates themselves.

    Jubal also doubted the truth of “being a different currency in Poland is not an obstacle for trading” [sic]. In my limited experience Jubal is right. The EU’s much vaunted free flow of capital seems to be something that happens to other people. I spent months – literally months – moving less than 10,000 euros from Britain to Poland and the commissions demanded by the banks (those banks that even understood what I was talking about) were astronomical.

  17. Steven Woodruff says:

    I’m just a dumb ass American Carpenter. However I feel everyone is entitled to my opinion. Money is money, I could care less if I get paid in Euros, Dollars or Złoty. Just pay me, and pay me well for my work. I am trying to give a crap and it just isn’t working. I’m willing to bet that most Poles don’t really care either. My friends just want to get paid. And whats the deal with only getting paid once a month here? Man that bites…

  18. Steven Woodruff says:

    I just can’t help myself, I have to ask….. Mr. Wilpers….sir What’s a Global Blog Coordinator ?? How does one attain the proper credentials and aspire to become not just a Blog Coordinator but a GLOBAL Blog Coordinator? Wow…..

  19. Steven Woodruff says:

    Since I build in Poland, does this mean I’m a Global Carpenter.??. I’m really sorry I can’t help myself.. It’s just too temting and I’m so bored.

  20. Steven Woodruff says:

    tempting……….. (Stupid Americans)

  21. scatts says:

    Yes, good question….how does one tempt stupid Americans? ;)

    You, my good sir, have just been appointed as Polandian’s official Global Carpentry Coordinator!

  22. Steven Woodruff says:

    Two more years of school.. and that’s Dr. Steven Woodruff
    Global Carpentry Coordinator

  23. MaterialGirl says:

    Scatts,
    point for you! Are you prophet? ;-)
    You hit the target with 1 of obverse of the coin.

    “Rzeczpospolita” made poll for the polish Euro. Won white eagle ;-).
    2nd place – “Solidarność”.
    3rd place John Paul II

  24. kate theobaldy says:

    @Quote: “We would lose the ability to run an independent fiscal policy” is described by Jubal as a myth. It is an overstatement, but not a full-blown myth. Interest rates in the eurozone are determined by the European Central Bank (ECB), not by the individual member countries. How much say will Poland have in the setting of interest rates by the ECB?

    None at all, just like all the other governments. The whole idea behind the ECB for its decisions to be free from government interference.

    “Jubal also doubted the truth of “being a different currency in Poland is not an obstacle for trading” [sic]. In my limited experience Jubal is right. The EU’s much vaunted free flow of capital seems to be something that happens to other people. I spent months – literally months – moving less than 10,000 euros from Britain to Poland and the commissions demanded by the banks (those banks that even understood what I was talking about) were astronomical.”

    Err, wait a minute. Don’t you think that this has something to do with the two countries having different currencies? By contrast, moving Euros inside the Euro zone is as easy as 1-2-3.

  25. Elementary says:

    “Don’t you think that this has something to do with the two countries having different currencies?”

    Sure it does but the EU (not the eurozone) supposedly guarantees the free flow of capital. The difference in currencies should not be the almost insurmountable obstacle Polish banks make it out to be.

    And of course the ECB is unanswerable to electorates. It’s just that I keep forgetting why this is a good idea.

  26. kate theobaldy says:

    @Elementary: “Sure it does but the EU (not the eurozone) supposedly guarantees the free flow of capital. The difference in currencies should not be the almost insurmountable obstacle Polish banks make it out to be.”

    Absolutely. However, it’s a fact that obstacles (in the form of additional paperwork and fees) to wire transfers between banks in different EU countries didn’t disappear until the respective countries joined the eurozone. So, if anything, the trouble you had moving money from the UK to Poland is actually an argument *for* those countries joining the eurozone, not against it. (That it shouldn’t be a problem even without the euro, is another matter.)

    “And of course the ECB is unanswerable to electorates. It’s just that I keep forgetting why this is a good idea.” Actually, no national bank answers directly to the electorate, but you probably mean governments. The idea is to keep inflation down. If governments had direct control over their central bank’s monetary policies, they would be tempted to do things that would result in increased inflation. It’s kind of hard to tell how this is working in practice at any given moment, of course, but that’s the idea.

  27. Elementary says:

    Who elects the government if not the electorate? The ECB is not unusual in being unaccountable to the citizens of the state(s) whose economy it has such a huge influence on.

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