Tim Gosling in Prague, Jan Cienski in Warsaw -

Poland will not join the euro anytime soon, Prime Minister Donald Tusk insisted on February 19, who, despite bringing the issue back into the spotlight ahead of the EU budget summit early this month, has battles to fight at home first.

Speaking to parliament's lower house, Tusk said that one of several hurdles to joining the single-currency union is a lack of political support for changing the constitution, which designates the zloty as the country's legal tender, reports Dow Jones.

Apparently shoving the issue back on the back burner where it has sat for the past year or so as the Eurozone crisis has flared back up, the PM castigated both proponents and opponents of swift euro adoption for Poland. "There's no need for any feverish efforts to enter the euro now, instantly," Tusk insisted. "It seems to me that kind of fever is unnecessary and may be damaging to the process of calm, gradual build-up of Poland's potential that will allow us to safely enter the Eurozone."

It was a different story in late January, however, as senior officials lined up to put the issue back on the table, just ahead of a crunch meeting in Brussels over the 2014-2020 budget, at which Poland led a host of mostly CEE states in opposing proposed cuts to development spending. That saw Tusk dust off discussion of the euro as he called for the parliament to start debating the issue on March 1.

Other Civic Platform party heavyweights soon joined the cause. "Already today, when we can talk about the dangers of a collapse of the Eurozone in the past tense, we should start to lay out more or less when and after what preparations we want to adopt the euro," Finance Minister Jacek Rostowski wrote in a blog.

Even Marek Belka, the hawkish governor of the National Bank of Poland, joined the fray, stating: "We are a part of continental Europe and we want to and have to - also for political reasons - be part of the inner core."

The PM is not the only one to change tack since Poland led the cheers on February 8 over a resolution of the Brussels budget bickering, which saw the country's cohesion funding actually raised, to €72bn over the seven years.

In an interview published by The Wall Street Journal the same day that Tusk addressed the parliament, Belka's emphasis changed significantly. The central banker now talks of Poland needing years of structural reform before it can adopt the euro and observe the bloc's strict fiscal and monetary criteria in a lasting way.

Trouble at home

It's not that Tusk and Co have changed their goal of euro entry for Poland, but the government is choosing its battles for the meantime.

Longer term, Tusk is clearly determined to push forward, worried by the prospect of being left aside as the crisis pushes the Eurozone to tighter integration in economic policy and banking regulation.

Further, there is a growing recognition that this will be Poland's last large EU budget handout. After 2020 it looks likely that future budgets will be negotiated within the Eurozone, and the outs will lose. Tusk reiterated on February 19 that while Poland remains outside the single currency it will be on the fringes of the EU.

However, with the budget fight put to bed (assuming the plan is not rejected by MEPs), Civic Platform needs to concentrate on more parochial issues for the time being.

While admitting euro entry will not be immediate, Tusk strongly reiterated that it is Poland's eventual destiny, and he criticized right-wing conservatives for their reluctance to debate the issue. The comment reveals that the PM's next battle is at home, with conservative forces within his own party.

The conservatives within Civic Platform opposed to adopting the euro are the same forces that have been enraged by recent moves by the senior coalition partner over sensitive issues such as legalizing civic partnerships in the fervently Catholic country. Forty six Civic Platform MPs voted against their own party's bill in late January. Leader of the rebels, Justice Minister Jaroslaw Gowin, attacked the bill as unconstitutional, just as Tusk admits euro adoption would be for now.

Media speculation suggests Gowin - who is a rare voice of dissent in the well-oiled Civic Platform machine - could take up to 40 right-wing deputies with him should his fight with the party leadership flare up. With the addition of opposition from conservative junior coalition partner Polish People's Party to many of the government's proposals, antagonizing the right with a push towards the euro now would threaten the government's majority.

At the same time, the liberal-leaning Tusk needs the conservatives in Civic Platform to maintain the inclusive image that the party has successfully promoted to voters over the past two elections.

Waiting for elections

That raises the next key political issue for Civic Platform. Tusk has already gone out once on a limb over the euro, announcing in 2008, just weeks before the start of the global economic crisis, that Poland would be in the common currency by 2012. That date obviously had to be shelved because of the economic storm unleashed by the collapse of Lehman Brothers. The PM also has wider issues to deal with before he sticks his neck out again.

As Belka says, there are economic issues, but they look less challenging. Poland does not meet all the criteria for joining the euro, but it is not far off. Its budget deficit, at about 55% of GDP, is better than the 60% limit under the Maastricht criteria. Other factors like the budget deficit are very close, while inflation and interest rates are falling fast, which could put Poland in a position to join sooner than many expect. "Convergence is back from the dead," notes Peter Attard Montalto of Nomura.

Yet, even economically, Poland is being pulled in two directions over joining the euro. One the one hand, it makes sense to hang on to the zloty for longer, as the currency's weakness in 2009 helped shield Polish exporters, providing a crucial support that kept the economy from falling into a recession that year. However, with three-quarters of Polish exports going to the Eurozone, there are undeniable benefits in removing the threat of currency risk - something that has fuelled foreign investment in neighbouring Slovakia, which joined the euro in 2009.

The wider politics of joining the euro are even trickier. The common currency's travails have withered public support for the project - surveys show that almost 60% of Poles are opposed to joining. However, Tusk has insisted that Poland's 2003 referendum in favour of joining the EU covers later steps like adopting the euro, so that no further public consultation is necessary.

But that still leaves the problem with the constitution, which makes the central bank the only source of monetary policy as well as the emitter of Polish currency. The constitution has to be changed to give that role to the European Central Bank, but doing so requires a two-thirds majority in parliament. Even if he could get his own government on side, Tusk would fail due to the opposition of the right-wing Law and Justice opposition party.

The next parliamentary and presidential elections are scheduled for 2015, an event President Bronislaw Komorowski says will be key to Poland's eventual adoption of the euro. If the results of those elections favour parties that back joining, Poland could then move fairly quickly.

Attard Montalto says it is possible that Poland could be in the European Exchange Rate Mechanism - the two-year period of keeping a fixed rate against the euro before entry - as early as next year if it plans to join the euro in 2016 or 2017. "Overall, we think this theme may well be on the backburner for much of the year, but may accelerate when Poland moves to a more definite timetable," he writes.