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The Warsaw Voice » Business » November 5, 2008
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Gov't Approves 'Road Map' to Euro-zone
November 5, 2008 By A.R.    
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The Polish government has approved a detailed schedule for adopting the single European currency on Jan. 1, 2012. "We have decided to stick to the ambitious schedule for preparing Poland for euro-zone entry by the end of 2011," said Prime Minister Donald Tusk after a government meeting Oct. 28.

The government's goal is for Poland to meet the nominal convergence criteria in 2011. This would enable the country to adopt the single European currency on Jan. 1, 2012, following approval from the European Commission and the Economic and Financial Affairs Council (Ecofin). Adopting the euro will boost the inflow of foreign direct investment to Poland and will make it easier for Polish businesses to operate on EU capital markets, the government says.

Before replacing the local currency with the euro, each applicant country has to meet a set of convergence criteria, also known as the Maastricht criteria. The country's inflation rate must be no higher than 1.5 percentage points above the average for the three EU member states with the lowest inflation. Its long-term interest rates must be no more than 2 percentage points higher than the average for the three member states with the lowest inflation. The government debt-to-GDP ratio must not exceed 60 percent, and the government deficit must be no higher than 3 percent of GDP. Before euro-zone entry, the applicant country has to join the European Exchange Rate Mechanism (ERM II). Two years before adopting the euro, the country's currency is already pegged to the euro and the exchange rate is allowed to deviate by no more than 15 percent from the assigned value.

According to Katarzyna Zajdel-Kurowska, the deputy finance minister, Poland will join the ERM II in the spring of 2009.

The business community in Poland has welcomed the target date for adopting the euro and the plan to integrate the country with the euro zone. The Confederation of Polish Employers says the removal of foreign exchange risk and reduced business expenditures thanks to eliminating currency exchange operations will be the main benefits of Poland's adoption of the euro. As a result, the Polish economy will become more competitive, they say.

Experts with the Lewiatan Polish Confederation of Private Employers list another significant factor. If Poland adopts the euro, they say, it will no longer be vulnerable to a currency crisis. This factor seems especially important in the context of the latest financial crisis, Lewiatan says, because the weakening of the zloty and its volatility have heightened the risk involved in business operations.

The only problem is that the euro road map may have to require Poland to amend its constitution, Lewiatan says. And this means that all political parties will have to approve the plan to enter the euro zone in line with the schedule proposed by the government. "If there is no political will to bring Poland into the euro zone this will be synonymous with intentionally exposing the Polish economy to a very high risk," Lewiatan said in a statement.
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