It’s doing fine without it, thanks.
The eurozone has, one way or another, operated fairly well as a device to mask the effects of the debt load being piled up by some of its members. But, one way or another, that debt will eventually lead to a crunch, perhaps triggered by the weakening economic and financial condition of Germany, the country that effectively underwrites the EU’s vampire currency. When the reckoning will occur is anyone’s guess, but to quote Stein’s law, “If something cannot go on forever, it will stop.”
Under such circumstances, it was good to see Poland’s finance minister, Andrzej Domański, tell the Financial Times that his country has no plans to sign up for the euro just now. It’s doing fine without it, thanks.
Domański explained that two years ago, he had been “a bit worried that Poland could be left behind in a two-tier EU and outside the Eurozone, but today Poland is clearly in the top economic tier, and I see no strong reason to abandon our own currency.” Poland’s economy is doing “clearly better” than those of most of the countries that have the euro.
Domański is correct, and he’s also correct that Poland’s retention of the zloty played an important part in keeping the country out of recession during the global financial crisis and, although he might be too tactful to say it, the eurozone crisis too. An independent, free-floating currency helped Poland avoid the toxic imbalances that had built up in the eurozone and also offered it much more flexibility in weathering the economic storm that accompanied both crises.
Donald Tusk, Poland’s current and former prime minister, is a stalwart of the country’s Brussels bloc (so much so that he spent much of the interval of his two premierships as president of the EU’s European Council) — and, as is related in the Financial Times, had been an advocate of Poland joining the single currency by 2012. This ludicrous (my adjective, not the FT’s) proposition was overwhelmed by both economic (the twin crises) and political (fierce opposition from the conservative Law and Justice (PiS) party) realities.
Such was the fanaticism of its Europhiles that the question of whether Poland should sign up for the single currency was, despite the euro’s woes, still the subject of lively debate in 2013. Tusk framed the issue as “whether to be a part of this heart of Europe . . . or . . . a marginal state [with] its own currency.” He fretted that Poland would miss “the train.” This possibility did not worry Leszek Balcerowicz, the father of Poland’s impressive economic transformation, who argued that joining the euro would only work for Poland when it could “compete with” other EU countries, something he thought might take a while.
My own view (just say nie) was, and is, that Balcerowicz’s rejection of the single currency did not go far enough. Even if the eurozone’s wider dysfunction were put right, the implications for Poland’s democracy of replacing the zloty with the euro would still be disastrous.
That wider dysfunction has, of course, yet to be resolved, and the fundamental democratic objections to a shared currency remain. Moreover, nothing has altered the inconvenient truth that, as I noted in 2013, “separate currencies . . . are an excellent market mechanism for adjusting for the differences between economies, a market mechanism that European Monetary Union has suppressed — with predictably disastrous consequences.”
Poland did not jump on the train. In many respects, it overtook it. According to the IMF, its economy has crossed the $1 trillion threshold, making it the world’s 20th largest. Furthermore, while it is worth keeping a wary eye on Poland’s budget deficit, the OECD is forecasting that its GDP will grow over 3 percent this year, compared with just 1.2 percent for the eurozone.
Domański’s rejection of eurozone membership — a stance in line with that of most Poles — is the position he has taken for some time now and is notable not only because he is the finance minister, but also because he is part of the pro-Brussels wing of the Polish political divide. He would, as the FT reports, rather Poland join the G20, the grouping of the world’s largest economies (Poland will be attending this year’s G20 summit as an observer), another measure of Warsaw’s growing assertiveness.
As Keynes may or may not have once said, “When the facts change, I change my mind. What do you do, sir?”