Warsaw, 21st February 2019
The Union of Entrepreneurs and Employers on the eurozone – there is no need to hurry
The Union of Entrepreneurs and Employers has published a report on Poland’s entry into the Euro zone – it analysed probable profits and losses related to the possibility of Poland joining the Monetary Union and replacing the zloty with the euro. As a result of this analysis, scepticism is recommended as to the plans for the rapid introduction of the single market currency.
The study reminds the reader of the motives behind the creation of the euro. “From the very beginning, the euro was a political project, not an economic one. The fall of communism resulted in a political vacuum. Living in the shadow of the Soviet-American conflict, Western Europe faced several dilemmas, including the issue of solving the problem of a divided German state. Other European powers, primarily France, concluded that the consent to Germany’s re-unification was conditioned by their adoption of the single European currency. They feared the strength of the German mark,” remembers professor Robert Gwiazdowski, author of the report.
Due to the fact that non-economic factors were behind the introduction of the euro, many economists believed that this experiment could not succeed. “Nobel Prize winner Milton Friedman predicted that the currency would last for about 10 years. In fact, he was not mistaken, as it was after a decade when the eurozone suffered from a big crisis, which would end with the collapse of the project, had it not been for the European Union’s leading states, obviously motivated by political factors,” adds Robert Gwiazdowski.
The public opinion is convinced that Poland has committed to become a member of the euro area. Although this is seemingly true, it is worth recalling that no date has ever been set. Moreover, the accession to the eurozone was to be based on the criteria agreed to in Maastricht, which are no longer valid today. The report proves, therefore, that there is no legal possibility of pressuring Poland in the context of joining the Monetary Union.
In Poland, the discussion with regard to joining the eurozone resembles the one in Western Europe when the concept of the new currency were merely created. “The voices calling every now and then for the euro to be introduced as soon as possible are only political actions, without any justification. The wealth of nations is not the result of the colour of the paper one uses in a store to pay,” said Cezary Kaźmierczak, president of the Union of Entrepreneurs and Employers.
The report names a number of risk that could impact the Polish economy in the case of an ill-considered introduction of the euro. Interest rates set by the European Central Bank may turn out too low for Poland, which is a country with low GDP and a relatively low level of prices, which in turn may result in macroeconomic imbalances, including a real estate bubble. Furthermore, the Polish economy would be deprived of today’s trump card on the European market, namely low labour costs. Poland is not ready yet to compete with Western countries in other fields, e.g. with the degree of innovativeness.
The report also point to considerable differences betwen the Polish economy and the economies of euro area members, e.g. greater flexibility of the labour market or low development of the rental market. The common monetary policy may not be adapted to the cyclical situation in our country. When functioning within the Monetary Union, it is also more difficult to react effectively to the crises encountered.
“In a world of diversified economies, a common currency will either have an inflated value for some or an underrated for others. Strong countries will therefore become stronger, whereas weaker ones will become even weaker. Therefore, we have to first become a strong economy, and only then can we think about adopting a common currency,” says Tomasz Wróblewski, president of WEI.