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Poland may push back euro rollout to 2012


BRUSSELS, Sept 15 (Reuters) - The Polish government could step back from the ambitious 2011 target for adopting the euro that it set just last week and actually begin using the currency only in 2012, a senior government source said. Polish Prime Minister Donald Tusk surprised investors and financial markets on Sept. 10 by setting the target date at 2011, much earlier than most economists had predicted. The Polish central bank described the target as very ambitious, adding that the government had not consulted it on the date, and some European Union diplomats privately said the deadline was tight almost to the point of being unachievable.

The source, who is closely involved in decision-making, said Poland could now reinterpret the 2011 target as the date it secures a final EU decision to join the zone rather than having euro banknotes and coins actually in circulation. "One can say that a country joins the euro zone when a final decision on that is taken, when nothing can stop the euro. We can say Slovakia is already in the euro zone," the source told Reuters, asking not to be named. Financial markets had interpreted the Polish target as meaning it would put the euro into circulation in 2011.

EU finance ministers gave their final approval for Slovakia's bid to join the euro zone in July and set the irrevocable exchange rate between the crown and the euro. Euros will appear in circulation in Slovakia on Jan. 1, 2009. The source likened this to Poland seeking the EU's final go-ahead for the euro in mid-2011 and putting the euro into circulation on Jan. 1, 2012. A country about to start using euros normally has dual pricing in shops, but euros are accepted as a means of payment only informally and the country can still have different interest rates from those set by the European Central Bank.

In Slovakia's case, citizens and companies must still change currency for dealings abroad -- a business-stifling obstacle the euro was designed to eliminate.

ERM 2 - By June 2009

Under the alternative scenario, the source said Poland would in practice still have to join the ERM-2, a currency stability test before entering the euro, by June 2009 at the latest. A euro candidate must stay for two years in ERM-2, where its currency trades within a narrow band around a central parity rate. Poland would thus complete its two-year period in ERM-2 by June, 2011. The source said this would allow the European Commission to publish its recommendation on Poland's fitness to join the euro in around May 2011.

Although the Commission need not complete such a review until after the two-year qualifying period, it agreed to let Slovenia adopt the euro in May 2006, although the country was set to finish its two years in ERM-2 only in June of that year. EU leaders could give their political approval for Poland's euro entry at their summit in June 2011 and the July meeting of EU finance ministers would take a final, formal decision on the issue, the Polish source said. The option of putting euros into circulation during 2011 was still possible, the official said. There is no law stipulating that a country must join the euro zone on the first day of the year, though that has been the case until now.


Tusk is widely seen as a pinhead and this episode will not enhance his rep. Not consulting your central bank on a money reform is about as stupid as it gets.

The advantage of 1st January as a changeover date is of course that you have a number of holidays in a row with low money velocity.



--- Quote ---Tusk is widely seen as a pinhead and this episode will not enhance his rep. Not consulting your central bank on a money reform is about as stupid as it gets.
--- End quote ---

Next he will announce a trip to the moon.  :o


Poland needs to alter its constitution to enter the euro zone and the change should come before the country joins the ERM-2 exchange rate mechanism, central bank governor Slawomir Skrzypek said on Wednesday. His remarks are likely to irk Prime Minister Donald Tusk's centre-right government, which is expected to take Poland into the ERM-2 antechamber in early 2009 to meet its target of getting Poland ready by 2011 for final euro zone entry.

"I wouldn't like to speak for all (members of the central bank's Monetary Policy Council) but I think nobody who knows our constitution doubts such a change is necessary," Skrzypek told a news conference after the MPC kept interest rates on hold. "Before entering the ERM-2 mechanism... the task of changing the constitution should be clearly resolved and finalised," said Skrzypek, appointed by the country's last conservative administration who were sceptical on early euro adoption.

The constitution says the central bank alone conducts monetary policy and the issue of coins and notes in Poland -- tasks for which the European Central Bank is responsible in countries in the euro zone.  The government will need the support of at least some members of the main conservative, eurosceptic opposition Law and Justice party (PiS) to change Poland's constitution. PiS has said it is opposed to hurrying in to the euro.

Commenting on Tusk's euro decision, Skrzypek said on Wednesday: "The declaration... may potentially change our way of looking at future inflation trends and also the future path of interest rates." In its Wednesday statement on rates, the MPC said bringing inflation down in the medium term may require further monetary tightening, though it also expressed concern about slowing economic growth. Inflation stood at 4.8 percent in August, well above the central bank's 2.5 percent target.


My personal opinion: Poland euro adoption for 2012 is still very aggressive.



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