4 June 2014, 19:00

Monetary disaster delayed: Poland postpones Euro adoption

Monetary disaster delayed: Poland postpones Euro adoption

Poland is the latest victim of "Euro mania" that gripped the continent. Despite numerous proofs that Euro adoption is more often than not a recipe for disaster, a number of Polish politicians are pushing for a speedy adoption of the common currency. However, cooler heads have prevailed so far.

The main problem with the Eurozone is that it tries to service two very different types of economies. On the one hand it must service export-orientated economies like Germany, Netherlands and Finland but it also must service very weak economies of the European periphery like Greece and Portugal. Politicians on the periphery of the Eurozone loved the Euro because the adoption of the common currency produced a boost in purchasing power of ordinary people and it also lowered the interest rates, creating a credit-induced boom in retail consumer-orientated sectors. However, the Euro also destroyed any remnants of competitive advantages that the industries of those weak countries had with their own currencies. Basically, their own exports became too expensive and their own producers lost their competitive edge even in their own home markets. All in all, Euro acts as a monetary equivalent of heroin: it gives a temporary high but with disastrous consequences. Weak economies that adopted the Euro quickly became mere consumer appendages of the German exporting machine. Sadly, for some of the Eastern European politicians, adopting the Euro is not an economic but a political decision.

One of the weirdest reactions to the crisis in Ukraine was that the governor of Polish Central Bank, Marek Belka said on March 7th that Poland must adopt the Euro quickly because it will give Poland more influence in Europe and make Poland a part of the “core group” of the EU in the context of geopolitical crisis. “There’s more influence” inside the Euro area on issues ranging from defense to energy policies, Belka told reporters. “Even if the economic benefits today look modest, we need to make the political calculation as well.” When the Central Bank governor starts using political arguments for guiding his monetary policy, something is obviously wrong. Even his political rationale is not valid, because the power within the EU depends on the size of the national economy and not on the currency it uses.

Reuters reports that the patriarch of Polish politics Lech Walensa joined the fight for speedy Euro adoption. In an interview for Gazeta Wyborcza he said that:"(Entering the Eurozone) is the final thing that concerns me. This is not a full freedom. I will do everything, regardless of the personal costs, to help us to get to the Eurozone. And only then will Poland be safe and progressing. And I will be serene.”

How can destroying what is left of the Polish industry help Poland advance towards a safer and more prosperous future is hard to understand, but again Walensa seems to be concerned only about the political effect of the Euro adoption.

Despite tremendous pressure, the president of the country is not rushing the issue, most likely because he will be held responsible by the public for the resulting fallout. It will be hard to explain to jobless Poles that their jobs were sacrificed on the altar of geopolitical expediency. According to a Reuters report, President Komarowski believes that Euro adoption must by discussed after the next elections that will be held in 2015. By that time it is unlikely that the popular opinion on Euro will change and one can only hope that Warsaw will not ignore the will of the electorate.

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