Bloomberg News

Polish Euro Peg ‘Not Practical’ Now, President’s Aide Says

November 17, 2011

(Updates with economist comment from fourth paragraph, background from eight.)

Nov. 16 (Bloomberg) -- Poland shouldn’t consider fixing the zloty to the euro in the European Union’s exchange-rate mechanism at a time when the currency bloc is in crisis, said Tomasz Nalecz, an adviser to President Bronislaw Komorowski.

Euro adoption remains an “important strategic goal” for the EU’s biggest eastern member, Nalecz said in a telephone interview today.

“Euro adoption should be presented as a realistic goal and not a vague vision for the future,” Nalecz said. “We don’t think that today, when the euro area is in a financial crisis, it’s possible to raise the practical issue of entering the ERM-2 currency corridor.”

Prime Minister Donald Tusk will propose taking the zloty into the pre-euro exchange-rate mechanism during a Nov. 18 policy speech outlining his government’s priorities for a new four-year term, Gazeta Wyborcza reported today, citing a person close to the premier it didn’t name.

Poland wants to show it’s fully prepared to adopt the euro, unlike Greece, and wants to have more say about what happens in the euro area, the Warsaw-based newspaper cited the person as saying.

Finance Minister Jacek Rostowski believes Poland can meet all requirements for entering the ERM-2 currency corridor next year, including meeting EU budget deficit and debt limits, Gazeta reported, without saying where it got the information.

‘Strange Strategy’

Pushing for the euro peg “seems a strange strategy,” Tim Ash, chief economist for emerging markets at Royal Bank of Scotland in London, said in an e-mailed note. “Why would you want to lock into a sinking ship? The one big plus for Poland, and the zloty post-Lehman has been exchange-rate flexibility.”

While ERM-2 membership may provide “an anchor for greater fiscal reform and structural adjustment,” its force of discipline only works “if you are actually serious” about euro adoption, he said.

Poland, which joined the EU in 2004, must adopt the euro when it meets the conditions. Beside the economic requirements, Poland has yet to adjust its constitution to shift monetary policy supervision to the European Central Bank, which has to be approved by two thirds of the 460-seat parliament. For that, the ruling coalition party would need to win the largest opposition party’s support.

Rostowski, who made his last comments on euro adoption before parliamentary elections Oct. 9, reiterated Poland has a “long road” before it can drop the zloty, while central bank Governor Marek Belka told Der Spiegel on Oct. 31 Poland will “one day enter a new, different euro zone that carries the traits of a federation more than it does today.”

--Editors: Balazs Penz, Andrew Langley

To contact the reporter on this story: Dorota Bartyzel in Warsaw at dbartyzel@bloomberg.net

To contact the editor responsible for this story: Balazs Penz at bpenz@bloomberg.net


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