Polish Failure to Join Euro Cost Nation Years, Kwasniewski Says

By James M. Gomez and Agnes Lovasz

Nov. 3 (Bloomberg) -- Poland’s president at the time of the country’s 2004 accession to the European Union says failure to adopt the euro has cost the EU’s largest eastern member years in its efforts to catch up with the west.

“I criticize our previous government because, frankly speaking, we lost a bit of time,” said Aleksander Kwasniewski, president between 1995 and 2005, in an interview in London at a European Bank for Reconstruction and Development conference.

The criticism is directed at former Prime Minister Jaroslaw Kaczynski, who governed from 2006 until 2007, and highlights the deep political differences that divide the nation over euro adoption. Kaczynski’s twin brother, Lech, has been president since 2005 and hasn’t shied from voicing opposition to Prime Minister Donald Tusk’s preference for a quick currency switch.

“If Kaczynski had been more engaged with the euro question and our entry into the euro zone, this road would be shorter,” Kwasniewski said. “Politically speaking, sooner is better than later.”

The country’s prospects of joining the single currency bloc any time soon have been derailed as the credit crisis depleted public finances, forcing Tusk’s government to abandon its 2012 goal without setting a new target.

The European Commission expects Poland’s general government deficit to widen to 6.6 percent of gross domestic product this year and to as much as 7.3 percent of GDP in 2010. The government expects to post a budget deficit of 6.3 percent of GDP this year, more than double the EU’s 3 percent threshold.

Budget Deficit

Poland won’t be ready to swap the zloty for the common currency until at least 2014, Kwasniewski said.

That may not be a bad thing as countries joining the euro risk losing the competitive advantage of a weaker currency, EBRD chief economist Erik Berglof said yesterday at the London conference. Economies that delayed adoption “like the Czech Republic, have fared better. Setting dates is the wrong thing.”

The only eastern countries to have adopted the euro are Slovenia, a former Yugoslav republic, and Slovakia, once part of federal Czechoslovakia. Both have fared worse during the recession than the Czech and Polish economies.

Polish central bank policy maker Dariusz Filar said on Sept. 8 that 2013 is “optimistic” while 2014 is a more realistic date for the currency switch. Nomura International Plc said on Oct. 29 Poland can peg the zloty to the euro as part of the exchange rate mechanism in 2010 and adopt the euro in 2014.

Poland has had to abandon its euro target even after navigating the global crisis as the only EU member to avoid a recession, shielded from a decline in global trade by its large domestic market shielded. Polish exports make up about a third of GDP, compared with about four fifths in the Czech Republic.

Center River

Poland holds local elections at the end of the year, presidential elections next year and parliamentary elections in 2011 and the political will to cut spending may falter, Kwasniewski said. Tusk and Lech Kaczynski will oppose each other in the presidential contest.

“The political price exists,” Kwasniewski said. “How high it is, we don’t know. The timing is complicated. If you ask me if the problems are solved and we are on the other bank of the river, I say that is not true. We are in the center of the crisis and its problems.”

To contact the reporters on this story: James M. Gomez in Prague at jagomez@bloombergt.netAgnes Lovasz in London at alovasz@bloomberg.net