Poland shouldn’t hurry to adopt the euro until the European Union adjusts its political institutions and economy to support a stable common currency, central bank Governor Marek Belka said.
“The European Monetary Union is an ambitious but unfinished project,” Belka said yesterday in a lecture in the city of Krakow, the newspaper Dziennik Gazeta Prawna’s Forsal.pl website reported. “Political ambition wasn’t matched by the capacity and willingness to adjust economic institutions to fit,” which is the issue “that puts the euro’s future in doubt, and for us poses an enormous dilemma about what to do.”
Poland last year dropped its plan to enter the euro area in 2012 after budget revenue slumped due to the global economic slowdown. The country’s general government deficit soared to 7.2 percent of gross domestic product in 2009, more than double the European Union limit. The government forecasts a deficit of 7.9 percent this year and plans to trim the shortfall to less than 3 percent by 2013.
Belka said that while he favors Poland’s adoption of the euro, under current conditions the issue of the entry date is “hypothetical.”
The 27-nation bloc lacks a common budget or centralized fiscal policy, Belka said, according to Forsal.pl. “As a surrogate we have the Maastricht Treaty, which is a gentleman’s agreement, only it turned out there weren’t enough gentlemen,” he said.
The government approved a plan in October to ready the country’s laws, banking system and administration to adopt the euro as soon as it meets economic and political requirements. On Nov. 29, Finance Minister Jacek Rostowski said Poland has a “long road ahead” before it adopts the euro, especially because the country will need to meet eligibility requirements for the single currency on a “deep, sustained” basis.
Poland, which joined the EU in 2004, must adopt the euro as part of its accession agreement.
“Paradoxically, while the euro acted as a protective umbrella before the financial crisis, it also sheltered the euro area from making necessary economic adjustments,” Belka said in Krakow.