Bloomberg News

Poland Needs ‘Chutzpah’ to Demand Euro Without ERM, Belka Says

April 04, 2013

Poland should have “chutzpah” to demand that European Union authorities allow it to adopt the euro without requiring it to peg the zloty to the euro for years, central bank Governor Marek Belka said.

The requirement to join the pre-euro exchange rate mechanism, which allows a candidate nation’s currency to rise and fall 15 percent from a central parity rate “is an obstacle to euro adoption,” because it would invite “speculation,” Belka said today in Warsaw at a debate on euro-entry terms.

The debate on when and how the EU’s largest eastern economy should adopt the euro was revived this year amid a lull in the currency region’s debt crisis. The 17-nation currency group needs to resolve internal problems and Poland must be fully prepared before it scraps the zloty, Prime Minister Donald Tusk said in February.

“I think we should say publicly, that” the ERM “is a very serious barrier that would prevent a country like Poland from joining the euro area,” Belka said. “We have a big currency market and we should just say: ‘We’re not entering ERM2. If you want us in, invite us without that requirement.’ Is that chutzpah? You bet it is.”

The zloty gained 0.3 percent to 4.1834 as of 5:05 p.m. in Warsaw. In the past month, it’s been the fifth-worst performer among more than 20 emerging-market currencies tracked by Bloomberg, weakening 1 percent against the euro. Poland’s 10- year local-currency denominated government bond yield fell seven basis points to 3.78 percent.

Euro Terms

Poland meets euro-adoption terms on public debt, which must be less than 60 percent of gross domestic product. Its debt limits written into the constitution served as model for the EU’s own proposals to tighten budget discipline, Tusk said in February.

The government narrowed the budget gap to 3.5 percent of GDP last year from a record 7.9 percent in 2010, the third- biggest austerity adjustment in the world behind Greece and Portugal, according to data from the IMF examined by Bloomberg Rankings. Last year’s figure compares with an estimated 3.3 percent average in the euro area, according to the European Commission.

Polish legislators last year passed bills to raise the retirement age and curb pensions for uniformed services to lower public debt. The country’s debt totaled 55.5 percent of GDP, compared with the euro region’s 92.9 percent average, the commission said.

‘Most Important’

Fiscal consolidation “was the most important factor behind slowing growth in 2012,” Belka said today. “Nobody stresses this.”

The central bank isn’t considering introducing a lower inflation target, Belka said. The Narodowy Bank Polski’s tolerance range is for the pace of price increases to be between 1.5 percent and 3.5 percent.

There’s no point for Poland to set a deadline for the currency changeover because first it must further revamp the economy, Finance Minister Jacek Rostowski said Feb. 15.

Candidates must meet the conditions laid out in the EU’s Maastricht Treaty, such as bringing budget deficits to within 3 percent of gross domestic product, 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.

To contact the reporters on this story: Agnes Lovasz in London at; Piotr Skolimowski in Warsaw at

To contact the editor responsible for this story: Balazs Penz at

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