We can’t deny that Polish accession to the Eurozone must involve some costs. Moderate adverse effects, however, are likely to be felt only in preparation for the introduction of the euro and at the very exchange of the Polish currency. Meanwhile, the decision to say “yes” will be made in due course, and by beginning preparations in advance, we can reduce those costs to a minimum. And benefits that can be achieved may reward the necessary sacrifices.
Entry into the eurozone is like entering a motorway – who has a bad car, may end badly, said Marek Belka, in 2010, the president of the Polish National Bank. He added, however, that the very entrance to the eurozone at the right time and in the right circumstances is like changing the ride from a bumpy road to highway driving. There’s no denying that Polish accession to the Eurozone – like joining the European Union in 2004 – must involve some costs – expenditure on adaptation of the Polish banking system to adopt a common currency, or any technical costs and administrative provisions. Moderate adverse effects, however, are likely to be felt only in preparation for the introduction of the euro and at the very exchange of the Polish currency. Meanwhile, the decision to say “yes” will be made in due course, and beginning preparations in advance, we can reduce those costs to minimum.
And benefits that can be achieved may reward the necessary sacrifices.
Let’s talk about benefits
It does not make any sense to ponder over whether Poland should join the euro area, or maybe not. Deciding to join the European Union, Poland has committed itself to adopt the euro. Since 2004 Poland has been a member of the Economic and Monetary Union of the EU under temporary derogation, so we can only answer the question of when Poland should adopt the common currency, but not whether it should be done. Polish media often buzz about the costs that would be suffered in the course of accession and after accession to the eurozone. In my opinion, the long-term benefits offered by the adoption of the common European currency far outweigh the costs, so let’s just try for once to focus on the advantages of the results.
Contrary to appearances, some of the major benefits for Poland are the results arising from the need to meet the convergence criteria. Currently, the public opinion treats the topic very harshly, as a necessary evil, rather than a positive stimulus for our economy. Yet the decline in inflation, interest rates and limited government deficit and public debt in itself are good for long-term economic growth.
And what about the benefits that we will be noticeable? First of all, the introduction of the euro will eliminate the currency risk which will be associated with facilitating the planning and conducting business activity. Currently companies exporting or importing products to and from the eurozone countries must reckon with the fact that depending on whether Polish currency (PLN) has appreciated or depreciated, they will pay or receive respectively higher or lower amount. The situation of a floating exchange rate we have now does not give businesses certainty what the euro at the time when they receive payment for their goods or services will be. An example? Company A manufactures TVs for export to Italy. There’s a depreciation of PLN from PLN 4 to PLN 4.20 per 1 euro, and thus for a batch of TVs sent to Italy with a value of PLN 100,000, the company will receive about PLN 20,000 less. Whereas, company B imports cars from Germany. There’s an appreciation of the Polish currency from PLN 4.20 to PLN 4 per 1 euro, so in this case, for a car worth PLN 100,000 imported from Germany, the company will pay about PLN 20 000 more. With the euro, the risk in commercial transactions in the eurozone countries will disappear completely, which will increase investment and stimulate trade.
The adoption of the common currency will be beneficial also to an average Pole. Traveling, working abroad, studying in another EU Member State? The common currency will help you with that. Travel agencies – especially those with counterparties are billed in euros – will be able to quickly and efficiently calculate the cost of trips abroad, and tourists and visitors will easily plan their holiday expenses. Exchanging money and converting prices will not be needed ever again. And the use of ATMs and credit cards abroad will not lead to high costs of conversion. So the same trips will become for us more attractive and comfortable.
And what about the fear associated with price increases after the adoption of euro? Media threaten that after Polish accession to the eurozone prices will dramatically increase. However, examples of countries that have already undergone this process show that the increase for inflation was only 0.3 percentage points. The price increase for entry into the euro area has often been caused by speculative activities made by retailers and manufacturers who used the situation of the changeover to raise prices of their products. Therefore, public institutions and consumer organizations play an important role – the better the informing campaign about the consequences of the introduction of a new currency, and control and monitoring of price fluctuations during the transitional period are, the faster and easier we’ll get rid of the side effects.
EUR or PLN?
For some, replacing Polish currency with the euro poses a threat to the Polish national identity and a loss of sovereignty. Indeed, the accession to the eurozone is associated with a voluntary abandonment of self-application of the country’s economic policy, especially monetary policy and exchange rate policy. However, being a member of the eurozone has the right to decide about the shape of the monetary policy of the European Central Bank, and – as we know – the euro, unlike gold, is one of the most stable and the world’s strongest currencies. Let’s consider, whether the transfer of some competencies from the state to the EU level, in exchange for the delivery of measurable benefits to the Polish economy, will not put us in the most convenient situation.
Opinions about Poland entering the eurozone are divided, and we definitely should take a look at both standpoints. But we should not forget that a few years ago, we had similar concerns about joining the European Union itself. Now we can clearly see that it was a very good decision – we gained a lot: we are one of the biggest beneficiaries of the EU budget, we can freely travel and work in other European states. I am convinced that similar situation will take place after the adoption of the single currency – but only then will we take notice of the benefits.