Poland and the Eurozone: to join, or not to join?

On Wednesday, 3 July, the European Parliament gave Latvia the go ahead to become the Eurozone 18th member on 1 January, 2014.

This move is a clear reward to Latvia, who emerged from the sharpest of economic recessions among EU members in 2009, to become one of the EU’s fastest growing economies.

 After Estonia, Latvia is the second Baltic and former soviet country to join the single currency area. Just like Poland, Latvia is one of the eight countries obliged under the European Treaties to join the Euro. While Lithuania is preparing for adopting the Euro in 2015, the question is whether Poland might be next?

Poland is an economic success story. Called by the OECD “the best growth performer within the OECD through the global economic crisis”, Poland maintained a positive growth rate, while many other EU countries struggled with recession. This was due to the strength of the banking sector and the monetary and fiscal policies applied.

Being one of the most pro-European countries, adopting the single currency seemed a natural step for Poland. Eurozone membership would have guaranteed our economic and political security and given us a seat next to strategic partners, such as Germany, at the decision making table.

Then again, with the deepening of the Eurozone crisis, the enthusiasm of Polish citizens to join the Euro started to cool off with nearly half of the population opposing the move.

A recent opinion poll conducted by the Polish research institute CBOS in February this year showed that 64% of Poles oppose adopting the Euro. Only 29% of those surveyed were in favour, and 7% remained undecided.

The debate on Euro membership has taken another twist after Polish Prime Minister Donald Tusk announced earlier this year that his government will hold a referendum before deciding whether to adopt the Euro.

Eurozone membership has been one of Mr Tusk’s central goals since he came to power in 2007. However article 227 of the Polish constitution makes the central bank responsible for monetary policy, while establishing the zloty as the legal tender. This article must be amended before Poland can officially adopt the Euro, but Mr Tusk is lacks the 2/3 majority of votes in the lower house required for constitutional change.

As a matter of fact Poland already held a referendum in 2003 before ratifying the Treaty of Accession and joining the EU. 
77.6% of the voters voted in favour to adopting the Treaty of Accession, which included an article requiring Poland to join the single currency (article 4). Since the Polish people have already expressed their opinion on the matter, I do not see the necessity of holding another referendum on this issue.

Nevertheless, even before a referendum can take place, Poland will have to go beyond the basic economic requirements in order to avoid the same fate of Greece, Cyprus, Spain and Italy.

For example, we need to cut the public debt to about 40% of annual economic output. We also need to improve our market competiveness by, for instance, easing regulation of the labour market and reducing the unemployment rate, currently just above 10%.

Realistically, Poland might be able to meet the Maastricht Criteria for launching the Eurozone procedures in 2019. However, as long as the Polish citizens are opposed to the common currency, the decision on this matter will be based on political, rather than economic considerations.

Poland will have to adopt the Euro eventually. The big question now remains when…

Greetings from the European Parliament,

Lidia Geringer de Oedenberg

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