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Business

Euro convergence programme presented today

08.02.2010 09:31

The Finance and Economy Ministries have jointly drawn up the final version of the convergence programme, paving the way for Poland to eventually adopt the euro.

 

The revised programme forsees public financial deficit to fall from seven percent of the GDP to below three percent in 2012. This is to be made possible with the rapid economic growth. Decreasing the budget deficit to three percent is feasible, says Adam Ambrozik, from the Confederation of Polish Employers.

 

"2010 is the first year of recovering from the crisis. If nothing bad happens, then we will have no problems in attaining this goal,” says Ambrozik.

 

The plan is to be submitted to other ministries today. (ab)

• Jasiek 08.02.2010 10:48 Congratulations. Mr Pawlak is a sage man.
  
  Now the focus should be on, as well as how to proceed with the programme, what rate of the Zloty is to be targeted to the Euro upon entering into the ERM2. The exchange rates are always “sticky” either upwards or downwards, as the exchange rate adjustment mechanism of the current account does not really work linear to the actual exchange rates in the market due to speculative trade, and the PLN/EUR is in fact being appreciated a bit too high these days considering how Poland’s current account is now.
  
  Greece, Portugal, Spain, Italy, Ireland and Estonia have fallen into the pit of exactly the same fault when they entered the ERM or ERM2 programme respectively, and that’s why they are now in big trouble. On the contrary, the Deutschemark was rather cheap when they introduced the ECU, which has driven the export industry of Germany towards the other Euro zone countries. This is where a misinterpretation lingers; a lot of people still believe that the Deutschemark had already expensive upon introducing the Euro.
  
  I think the Zloty should be cheaper by at least 20% than now (I mean, the Euro should be close to 5 Zlotych), or the Polish economy, especially the export industry, would surely suffer years later. Poland has such little equity that its industries should get as much foreign currency as possible, or for the Polish economy to grow they will have to heavily rely on the debt capital supplied by foreign capitals, which is the most risky trail that all the abovementioned failed economies are proceeding through. Rather than following those failed countries, Poland should follow the People’s Republic of China, which has been accumulating its foreign currency reserves by its massive exports thanks to its currency – the Renminbi – having long been arbitrarily fixed at very low rates.
  
  My conclusion - Poland should choose to be a mini-China, and as the proverb “long term gain for short term pain” always works it will see a bright future. Jasiek
• Jasiek 08.02.2010 10:52 P.S. the Zloty may fall as much - apparently dangerous but actually favourable in the long run. See what is happening in the financial world now. There may be the second wave, bigger than the previous one, of the Financial Crisis in a few months. Jasiek
• Pioro 08.02.2010 21:03 Jasiek I don't remember where I heard it (maybe TVN CNBC) but the fixed rate for ECM2 is targeted for 3.6zl/1eur. Did you hear anything about that? I fully agree with your comments though. Pioro

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