President and PM are Poles apart

By bne IntelliNews February 19, 2009

Jan Cienski in Warsaw -

There is little love lost between Poland's president and the prime minister, who fight over everything from foreign policy to who gets to fly on the government plane. But this antipathy is further destabilising the country during the current economic crisis, because Donald Tusk, Poland's prime minister, and Lech Kaczynski, the president, are now at loggerheads over whether Poland should adopt the euro by 2012, as the government wants.

At the end of last summer, just as the tremors of the global economic crisis were beginning to undermine the value of the Polish zloty, Tusk sprang a surprise proposal for Poland to join the euro within four years. For the prime minister, joining the euro as fast as possible would remove Poland economically from Central Europe, arguably the hardest hit region in the world by the crisis, and give it a stable currency instead of the roller-coaster zloty.

But Kaczynski has remained strongly opposed, fearing that joining the common currency would mean higher prices for the mostly poor and rural voters who form the bulk of the supporters of the opposition Law and Justice party headed by his twin brother Jaroslaw. He is also worried that joining the euro would deprive Poland of the ability to devalue its currency, keeping its exports uncompetitive, and consign Poland to membership in a group of countries with slow rates of growth. When talking about the euro, Lech Kaczynski has said: "Will it happen in 2015 or 2018? Only God alone knows."

The government is sticking with its plan, although Tusk has begun to acknowledge that the target date may slip slightly because of the economic turmoil buffeting the world. There is particular concern about the idea of joining the Exchange Rate Mechanism, in which the value of a currency is not supposed to vary by more than 15% over two years before joining the euro. In order to make the 2012 date, Poland would have to join ERM II in the first half of the year. "If it turns out that joining ERM II carries risks for the Polish currency and the financial system, the date can be shifted," Tusk said in a recent television interview.

In addition to complications caused by the crisis - which has seen the value of the zloty fall by 30% against the euro since last summer - the European Central Bank (ECB) is also likely to look askance at the political fight over the euro, worrying that the lack of a national consensus could create problems

The government cannot join the euro without some level of support from Law and Justice, the largest opposition party. Poland's constitution has to be amended to allow the euro to replace the zloty and the ECB to take over some of the functions of Poland's central bank, but that cannot be done without votes from Law and Justice. "When I talked to the leaders of the European Central Bank, I found out that in their view a political and social consensus is one of the key conditions in every country which aspires to the euro," Tusk said in a recent interview.


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President and PM are Poles apart

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