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14th Aug 2022

Financial crisis builds Polish euro-entry momentum

  • Warsaw - almost two third of Poles are keen on euro entry ahead of a potential referndum (Photo: EUobserver)

The financial crisis is building momentum for Poland to swiftly join the EU's single currency on 1 January 2012, with a positive political climate for the euro also developing in the Nordic states.

"The world crisis has shown that it's safer to be with the strong, among the strong and to have influence on the decisions of the strong," Polish Prime Minister Donald Tusk said on Monday (27 October), adding that his pro-euro policy is "not based on any orthodoxy, any ideology" of deepening EU integration.

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The remarks came after a meeting with the chief of Poland's main opposition party, Law and Justice head Jaroslaw Kaczynski, who opposes an early entry date and wants Poland to hold a referendum on the move.

"I am not excluding that Poland's entry into the euro zone could be played out in a referendum," Mr Tusk said, PAP reports. "The suggestion of a calendar to change the constitution [to allow the currency shift] and then a referendum is worth considering, but it would have to take place fast."

The Polish government is on Tuesday expected to finalise a roadmap for meeting its 2012 target and to present the document to President Lech Kaczynski before launching talks with the European Commission.

The country will aim to join the ERM2 mechanism - which limits the fluctuation of the Polish zloty to within 15 percent of the value of the euro - by June next year.

Polish parliamentary speaker Bronislaw Komorowski on Tuesday said that any euro referendum could only concern when the single currency is to be adopted, not if, since Poland legally obliged itself to join the eurozone in its 2004 EU accession treaty.

The Polish zloty dived by over 10 percent against the EU's single currency in recent days amid fears of a coming recession.

US bank JP Morgan on Monday also warned in a report that the zloty is even more vulnerable than the Hungarian forint due to an imbalance in foreign debt and foreign currency reserves, indicating that Poland may need to borrow €10 billion from the IMF next year.

Economists from other banks, including ING and Societe Generale, told Poland's Rzeczpospolita that the JP Morgan analysis was flawed. But opinion surveys show ordinary Poles have the crisis on their minds, with 70 percent of people saying Poland should join the euro in a GfK Polonia poll.

Nordic rethink

The reaction to the crisis in non-EU country Iceland has been even more extreme, with the Icelandic krona losing over 40 percent of its value and Reykjavik being forced to seek €5 billion in international loans to avoid bankruptcy.

Almost 69 percent of Icelanders want to join the EU and 72.5 percent want to swap the krona for the euro, according to a poll out Monday in the Frettabladid newspaper. Approval for EU entry was at 55 percent before the financial storm hit.

"Icelanders are starting to have doubts about their krona. An increasing number think the only solution is to act with other countries and not in isolation," Iceland's Institute of Economic Studies chief Gunnar Haraldsson told AFP.

Denmark and Sweden, which rejected the euro in recent referendums, have also begun a fresh debate, with the Swedish krona losing 7 percent of its value against the euro.

"I think to some extent, there will be a more friendly euro environment after this sharp decline in the currency. It could be an issue in Sweden's elections in 2010," SEB bank chief economist Haakan Frisen told the French newswire.

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