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Poland could adopt euro in 2012

Some news.

Poland could adopt euro in 2012

WARSAW, Jan 23 (Reuters) - Ratings agency Fitch said on Wednesday its central scenario showed Poland adopting the euro in 2012 but it did not rule out a delay of a year or two.

It also said it welcomed the new government's plans to lower public debt and boost privatisation revenues, although it added the 2009 budget would serve as the test for the cabinet's determination to introduce reforms.

"Euro adoption in 2012 is likely. This is our central scenario. It could be delayed by a year or two," Fitch Ratings analyst David Heslam told Reuters in a telephone interview.

The centre-right government of Prime Minister Donald Tusk, which won a parliamentary election last October, is more euro friendly than the previous conservative administration but it has stayed away from setting a path towards the euro zone.
It has only said that switching zlotys to euros was unlikely before the end of the government's term in the autumn of 2011.

Heslam also reiterated Fitch could raise Poland's ratings within the next three years. In November, Heslam told Reuters that the agency could consider upgrading Poland's outlook in 2008.
"We hear some good things about bringing the debt down, focusing on privatisation and cutting public spending."

"We will know the government's determination when it works on its 2009 budget throughout this year. The government is obviously more business friendly. It's less hostile to euro adoption," Heslam said.
Heslam also said the Polish economy would slow down this year but its expected moderate weakening could be welcomed because it could help curb inflationary pressures.


Re: Poland could adopt euro in 2012

EU: Polish drive towards euro zone slows down

Poland's accelerating inflation, escalating wage demands and fragile
political environment are making the centre-right government of Prime
Minister Donald Tusk reluctant to push energetically for euro
The victory of Tusk's Civic Platform (PO) in October parliamentary
election has fuelled expectations that Poland's drive towards the
euro zone, stalled under the previous conservative administration,
would resume in earnest.
Such hopes have been dashed by senior officials, including Finance
Minister Jacek Rostowski, who say Poland wants to swap zlotys for
euros as soon as possible but not before the current parliament's
term ends in 2011.
Rostowski, a liberal economist who in the past had urged immediate
euro zone entry, has flatly refused to justify the contradiction
inherent in the government's stance.
Analysts say, however, that the government has good reasons for
caution amid the uncertain world economic outlook and imbalances
which have shown up in the Polish economy.
"From the point of view of meeting (euro) criteria, the opportunity
is lost," said Witold Orlowski, a respected senior economist and
former presidential adviser.
"Poland should have made an effort 2 years ago, now it will be
difficult to keep inflation at a satisfactory level and the budget
also will come under strain," he said.
Polish inflation rose to 4 percent in December from 1.4 a year ago
and is expected to rise further on the back of strong wage growth and
tight labour markets in the European Union's largest ex-communist
And the budget deficit may be hard to contain when growth slows from
the 6 percent-plus level in 2007.
Infrastructure spending which Poland needs to make in the next few
years as it prepares to host the 2012 European soccer championship is
also going to put strain on the state coffers.
As if the economic challenges were not enough, the government has
little scope to head them off with any radical reform of the
overspending public sector, because they would most likely be vetoed
by President Lech Kaczynski.
The government lacks a three-fifths majority in parliament to reject
the presidential veto.
Kaczynski and his twin brother Jaroslaw, ex-prime minister and head
of opposition Law and Justice party, have made clear they oppose
quick euro entry and are engaged in a war of attrition with the
government on all fronts.
Lech Kaczynski is likely to face Tusk in the 2010 presidential
election, a rematch of their 2005 duel, and analysts say Tusk is
reluctant to engage in any major reforms that could weaken his hand.
Opinion polls show he stands a good chance of defeating Kaczynski,
whose popularity has plunged, and his victory would give the Civic
Platform a much better chance of pushing reforms through in the next
"There is little room for radical reforms at the moment, I think what
we can expect from the government is what you could call drift in the
right direction," a senior Civic Platform insider told Reuters. This
means the government will not rush to peg the zloty currency inside
the ERM-2 fluctuating band, an ante-chamber to euro entry, until it
is sure economic fundamentals and political room to manoeuvre are
sufficient to guarantee euro entry.
Countries need to keep their currencies stable within ERM for two
years to qualify.
The delay to ERM-2 entry may come at a cost, however. Analysts say
pegging the zloty now, when it is trading at around 3.60 to the euro,
would be favourable to exporters, while a delay means the currency is
set to continue to appreciate.
Government insiders say Poland would like the EU to accept a level
close to 3.50.
Others argue, however, that allowing the zloty to rise further will
help contain inflationary pressures by keeping a lid on prices of
imported goods, while making Polish wages more comparable to Western