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THE SARMATIAN REVIEW Vol. XXIX, No. 3 September 2009 Polish Everydayness A street scene in Kraków in June 2009. Photo by Sarmatian Review staff. September 2009 SARMATIAN REVIEW 1491 Poland and the Euro Poland a 10 billion euro credit line, described as a currency swap agreement, to prevent further Leo V. Ryan, C.S.V. depreciation of the zloty. By December 2008 the zloty seemed to have stabilized.[4] and Richard J. Hunter, Jr. Witold Orlowski observed that one of the main drivers of Poland’s successful transition has been its n November 2008 the Tusk government announced continued ability to attract foreign direct investment, Ia plan to adopt the euro by 2012, although the prime based on the interplay of four solid fundamentals: high minister stated that, should adverse circumstances arise, labor productivity, moderate labor costs, safety of the plan was open to “discussion” and possible delay. investments, and good location.[5] According to a This decision was somewhat controversial since it not report issued by the World Bank, Poland exhibits a only required an amendment to Poland’s Constitution “robust financial system, a relatively sound banking but also the unusual cooperation of Poland’s two major system, and an overall external debt which is relatively political parties—now bitter rivals on the Polish moderate compared to more vulnerable countries.”[6] political landscape—and perhaps even a national Joining the Eurozone would strengthen Poland’s referendum. Despite an overwhelmingly positive international position. consensus about Poland’s European Union membership today, fundamental policy differences exist between THE EURO DEBATE: ECONOMIC AND MONETARY PROS AND two major parties, PiS and PO, and they were reflected CONS the parliamentary elections in 2005 and 2007. A variety of opinions have surfaced on the question Poland’s Constitution[1]—Article 227 in whether Poland’s economy is actually prepared for particular[2]—provides that the National Bank of adoption of the euro. Professor Janusz Bilski of the Poland shall have the “exclusive right to issue money” University of Lodz has summarized some of the main and to “implement monetary policy.” At present, arguments against the adoption of the euro. These Poland is an “honorary” member of the European include: System of Central Banks. As a result, Poland remains a worldwide financial crisis and a free to set its own monetary policy. However, as a • recession will stop economic growth condition of entering the EU, Poland committed itself for the next two to three years, to satisfying a set of fiscal and microeconomic criteria ushering in a period of “soft economic (the Maastricht Criteria) set by the European Central nationalism” at the expense of Bank. These included: “mechanisms and regulations of monetary unions” maintaining an inflation rate of no more than • it is unrealistic to impose severe 2.3 percent • restrictions on the Polish economy maintaining a budget deficit at or below 3 • amid the crisis. The next two- percent of GDP to-three-year period (2009-2011) may maintaining the level of Polish government • be the “worst possible timing for debt at no more than 60 percent of GDP the euro adoption since the moment of creating the euro zone.” Only a In addition, Poland is required to join the exchange monetary policy run by Polish national rate mechanism called ERM II[3] for at least two years authorities can effectively protect before formal adoption of the euro, during which time Poland’s poor and its pensioners fluctuation in the value of the zloty to the euro may against economic recession in an not exceed 5 percent. environment in which the unemployment rate could once ARGUMENTS ON EURO PARTICIPATION dramatically rise In 2009 critical economic factors impacted Poland’s the decision of “fast euro adoption” decision to fully implement its commitment and adopt • will add an external burden on the euro. In 2008, several weeks after President economic policy “exactly at a Kaczynski agreed in principle that Poland would join time when it should be as flexible as the Eurozone by 2012, the European Central Bank came possible” to an agreement with Poland. The ECB would give 1492 SARMATIAN REVIEW September 2009 • the adoption of the European Central (PiS) believe that it will. It thus appears that an Bank’s interest rate may hurt the important interim step will be Poland’s joining the Polish economy. In contrast to an ERM-2, during which it must stabilize the zloty-to- emerging trend, “the government’s euro exchange rate and create suitable adjustment aim seems to be to keep fiscal mechanisms. Rzeczpospolita reports that in preparation policy tight so that the central bank can for this event, “narrowed margins for currency rate cut interest rates”[7] volatility are likely to lay new ground for Polish • restrictions adopted by many countries economy functioning, and it should be carefully against worker migration and the monitored how the market reacts to asymmetric shocks provision of services by Poles may as well as what are the cost of their absorption.”[9] distort the effect of any adjustment The decision to adopt the euro has been made. mechanisms adopted by the EU Questions remain as to how and when Poland should take this dramatic step. Prime Minister Tusk summed On the positive side, Professor Bilski noted some it up: “The main obstacle to the carrying out of the potential positive benefits from the adoption of the euro. plan [to adopt the euro by 2012] . may be the lack of These include: political consensus rather than the condition of Poland’s • adoption of the euro may provide an economy, which is fairly stable.”[10] impetus to Poland’s attempt to reform This article is based on a paper delivered at the 67th Annual Meeting its public finance system and in its of the Polish Institute of Arts and Sciences of America, June 2009. efforts to tame or control inflation NOTES the decision to adopt the euro “may • 1. <www.sejm.gov.pl/prawo/konst/polski/10.htm>. be [one] of the country’s most vital 2. “Centralnym bankiem paƒstwa jest Narodowy Bank decisions in the next decade as it is Polski. Przysługuje mu wyłàczne prawo emisji pieniàdza likely to ensure good conditions for oraz ustalania i realizowania polityki pieni∏Ïnej. Narodowy stronger economic growth” Bank Polski odpowiada za wartoÊç polskiego pieniàdza.” • for the Polish economy—which 3. Thompson Financial News reported that “Poland must Professor Bilski terms as a “peripheral enter the pre-euro exchange rate mechanism ERM-2 at latest economy”—the adoption of the euro in the second quarter of 2009 to be ready in 2011 to adopt will be beneficial if it is a part of a the common currency.” Dagmar Leszkowicz, “Update 1- plan to ensure “better Poland c.banker sees ERM-2 at latest in Q2 2009,” at www.forbes.com, 25 September 2008. implementation of [Poland’s] strategic 4. Stefan Wagstyl, “Lending fears may freeze the system,” economic goals” Financial Times (Poland), 9 December 2008, 6. 5. Witold Orlowski, “Better placed than neighbors,” ibid. According to Thomas Laurson, country manager at the 6. World Bank, EU10 Regular Economic Report, reported World Bank for Poland and the Baltic States, “Poland in Anna Olejarczyk, “Fundamentally sound,” Warsaw is really the only country now in the region that has a Business Journal, 3–9 November 2008, 3. firm and, at least as far as possible, a credible plan for 7. Economist, “The tough go politicking,” 6 December 2008, 68. adopting the euro.”[8] 8. Anna Olejarczyk, “Fundamentally Sound,” Warsaw Business Journal, 3–9 November 2008, 3. 9. Polish News Bulletin, “Has Poland Chosen Worst Timing CONCLUSIONS Even for Euro Adoption?” 12 December 2008, citing Both proponents and opponents of euro adoption agree Rzeczpospolita, 11 December 2008, B12. that the decision to join the Eurozone will have a 10. Polish News Bulletin, “PM and Finance Minister on profound impact on the Polish economy and society. Euro,” 10 December 2008, citing Gazeta Wyborcza, 9 The economy, while generally robust and growing, December 2008. albeit at reduced growth rates, is still not fully mature. In sum, the arguments boil down to a fundamental disagreement on whether the adoption of the euro will BOOKS amount to a “risky economic experiment” that will lead Harsh Vineyard: A History of Catholic Life in the Poland into a prolonged recession in which the Russian Far East, by Miroslava Igorevna Efimova. European Central Bank’s interest rates could hurt the Translated by Geraldine H. Kelley. Victoria, BC: Polish economy. President Kaczyƒski and his party Trafford Publishing (www.trafford.com), 2008. xvii + September 2009 SARMATIAN REVIEW 1493 280 pages. Maps, tables of Catholic parishes in the contemporary issues such as the proposed World War Russian Far East. ISBN 978-1-4251-6803-2. Paper. II Museum that is to be placed in one of the EU cities. history of Catholic churches, missions, and The editorial board includes distinguished Polish Acommunities east of the Lena River, from the historians and social scientists. The articles are written eighteenth century to the present time. Most of these by highly competent and sometimes distinguished were founded by Poles from Poland, Lithuania, and scholars. However, competence is not enough to make Belarus, and were meant to serve Polish political a journal first-rate—see the last paragraph of this prisoners and exiles sent to eastern Siberia by the review. Russian government as punishment for attempts to The present issue is dedicated to the Polish Right regain Polish independence. The first Catholics in the between the two world wars, with some attention paid Far East were members of the Bar Confederacy whose to the other rightist movements in Europe.
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