During a lecture given in the Polish Embassy in Washington, the head of the National Bank of Poland (NBP), Professor Marek Belka, said that the reason why Poland is not in a rush to adopt the Euro is the fact that there are too many uncertainties within the Eurozone. Professor Belka believes that Poland has to improve its labour market and competitiveness first. He reminded his audience that if Poland were to join the Eurozone, it would be obliged to provide financial help to EU member states that are in trouble economically. He warned the audience that there is a risk that after Poland adopts the Euro, deflation or low inflation would arise as a consequence of the instability of the Eurozone. The NBP head added that there is no certainty that all the financial instruments that have been keeping Poland safe from the crisis would work once the country adopts the Euro. Moreover, Professor Belka believes that before Poland joins the Eurozone, the country has to improve its structural competitiveness. Poland is competitive only due to the fact that costs and wages are low. If Poland entered the ERM2, which lasts for an obligatory two years, before the Euro is adopted, the currency could not fluctuate more than around 15%. This would mean that the costs of the Polish labour market would no longer be viably competitive, as was the case with Slovakia.
Belka highlighted the fact that Poland’s labour market is relatively flexible but the employment rate is much lower than in northern European countries with many Poles working in the grey zone. Professor Belka believes that Poland does not need more flexibility, but better quality flexibility. He reminded the audience that ten years ago the argument against adopting the Euro was that Polish sovereignty would be weakened together with a loss of control of monetary policy. Nowadays, the counter argument is that Euroland is the core of the European Union, where all the important decisions are made. The member states that are not part of that core may be in a restaurant holding a menu but they are not sitting at the table dining with the others. In the meantime, economists have changed their minds. Ten years ago they enthusiastically said that Poland should adopt the Euro as soon as possible, claiming that this would mean better access to capital and an end to the instability of the currency. “However, we have learnt a great thanks to the crisis that took place in 2008,” Professor Belka said, “We have realised that interest rates are too low and could be a threat because they could give rise to a credit bubble and variability in the exchange rate could rescue us in times of crisis.” To conclude, Professor Belka said that when the decision comes it will be a political one but as an economist he would not recommend rushing into adopting the Euro in Poland.