Euro in Poland… what, where and why

Poland’s way to the Euro looks like a snail race on a formula one circuit or a highway through hell. Still we are trying to enter the Eurozone... Still our car is out of gas...

A European dream

A common currency was a big dream of many people around Europe. The civil and economic development of western Europe after World War II, the strategic German-French partnership, the cooperation between the Benelux countries, the new Italian government, the Marshal Plan, all helped establish a European community. But building a common market was obstructed. The different currencies in the member states were among the most important obstacles. And so, thanks to Robert Mundell, Pierre Werner, Jacques Delors and others, after the 1st of January 2002, citizens of twelve European countries could say bye-bye to their national currencies, starting to use the Euro for shopping or entertainment. But what does it look like in Poland? When can we expect to pay with Euros in Warsaw, Gdansk, Krakow or Wroclaw? What do Poles think about the European currency?

A Polish dream

Richard Mbewe believes Poland should enter the Euro community as soon as possible, not later then in 2009. Why? In Mbewe’s opinion, we have to use the current good economic situation. Poland is developing rapidly, the economic rates are positive and the Euro might even accelerate this economic growth. After 2010, the Polish economy may slow down. The government and politicians would then be afraid of the social consequences of introducing the Euro, which might adversely affect their results in the parliamentary elections of 2009. Unfortunately, the idea of joining the Eurozone is not even mentioned in the 2007-2013 National Development Plan. If Poland does not join the Eurozone, we can only expect foreign investment to find better business conditions in Lithuania or Slovenia. Then it will be too late…

A Polish nightmare

What do the Poles think about the Euro? In general, we do know that the Euro exists. It looks better in bigger cities, but still it is not enough. Euro-awareness is apparent among entrepreneurs, people with higher education, students and people who travel a lot. Most of the Poles do not know in which countries the Euro is valid. Unfortunately, there is no ‘Euro education’ or governmental campaign to show, as simply as possible, the advantages and disadvantages of entering the Eurozone. A simple Pole does not want to switch Zlotys for Euros. Why? It is our Polish tradition that we do not like what we do not know. We are opportunists. And of course we should not forget about populist politicians, very popular in Poland, who are openly arguing against the Euro, ipso facto creating people’s views on the subject. It is a great pity that such dilettantes, without basic economic knowledge, are building public opinion on such an important issue.

Arguments against

What type of arguments are used against the Euro? Generally, people believe that the prices will rise rapidly after the acceptance of the Euro and that everything will become expensive, just as expensive (in ratio with the prices in Poland) as in Germany or France. This is a repetition of the situation before Poland’s accession to the European Union. I remember people saying that the goods in the shops would grow expensive and that nobody would be able to afford them anymore. Nothing of the sort happened. Some goods became even cheaper. I can only predict that this scenario will be repeated. A second argument is of the patriotic kind. Why do we have to change the Polish Zloty into the Euro? Our banknotes look better and are more interesting. And those Euro notes… who designed them?

Arguments for

What would be the benefits of changing into the Euro? It would reduce currency risks for importers and exporters. It would help to cut costs of risk protection and make trade profits more predictable. Predictable profit stimulates investment. About two years ago there was a rule, saying that export is profitable when the Euro costs 4.10 Zloty. Now the Euro costs about 3.80 Zloty and the exporters are counting their losses. With the Euro, international trade would become easier, in the European Union for sure! But the most interesting aspect of the Euro is the way to get the right to join it – the convergence criteria.

Convergence criteria

For the twelve countries of the Eurozone, it was more or less easy to meet the convergence criteria. For Poland it is a very ambitious aim. It seems to be easier for the Polish national football team to win the world championships in 2006 than for the government to cope with the convergence criteria. In the first place, we have to decrease the financial deficit. It may not exceed 3% of the Gross Domestic Product (GDP). This is the largest problem for the Polish economy. Nowadays, it seems to be impossible. Before you know it, the parliament will have given five million Euros for a church… In the second place, the ratio of the gross government debt may not exceed 60% of the GDP. And the Polish government is not even able to count it properly… No comments… Thirdly, ournominal long-term interest rate may not exceed with more than 2 percentage points that of the three best-performing member states. Done… Fourthly, we must participate in the exchange-rate mechanism of theEuropean monetary system without any break during two years. In addition to this, we may not devalue the Zloty on our own initiative during the same period of two years. We will wait and see... Lastly, ourinflation rate may not exceed with more than 1.5 percentage points that of the three best-performing member states. Thank God we did that!

Future

So when can we, Poles, expect to exchange our currency? A difficult question. There is still a long way to go, through political distaste and economic problems. But we should do it as soon as possible. It will be easier for Poland and it will be easier for the rest of the European Union when we too have the Euro. We are a part of the European Union and we have to cooperate with our partners for a better future, for common European welfare.

Stefan Wyszyński, Movement for Supporting Initiatives towards International Education, Wrocław