The European Commission believes that Poland does not meet the conditions for adopting the euro, in the light of the compliance assessment of legal regulations and the fulfillment of the convergence criteria, as well as taking into account additional important factors, the Commission announced. Poland fulfills only the criterion of public finances.
“In the light of the compliance assessment of legal provisions and the fulfillment of the convergence criteria, as well as taking into account additional important factors, the Commission is of the opinion that Poland does not meet the conditions for adopting the euro,” according to the report “Convergence Report 2022”.
Especially:
* Polish legislation is not fully compliant with the requirement set out in Art. 131 TFEU.
* Poland does not meet the price stability criterion.
* Poland meets the public finance criterion.
* Poland does not meet the exchange rate criterion.
* Poland does not fulfill the criterion on the convergence of long-term interest rates, the Commission said.
As for the legislation in Poland – in particular the Act on the National Bank of Poland (NBP) and the Polish Constitution – it does not fully comply with the obligation to comply with the provisions of Art. 131 TFEU. The discrepancies concern the independence of the central bank, the prohibition of central bank financing and the integration of the central bank with the European System of Central Banks (ESCB) on the adoption of the euro. In addition, the Act on the NBP also contains some imperfections regarding the independence of the central bank and the integration of NBP with the ESCB at the time of euro adoption, the Commission said in the report.
Poland does not meet the price stability criterion. The average inflation rate in Poland in the 12-month period to April 2022 was 7%, well above the reference value of 4.9%. It is expected to remain well above the reference value in the coming months, according to the report.
Poland meets the public finance criterion. Poland is not covered by the Council’s decision on the existence of an excessive deficit. The general government deficit increased sharply to 6.9% of GDP in 2020 and fell to 1.9% in 2021. In the forecast Commission economic spring of 2022, the deficit-to-GDP ratio is projected to deteriorate to 4% in 2022, reflecting measures taken by the government to contain the economic and social impact of rising energy prices and the cost of assistance to refugees from Ukraine. it is assumed that in 2023 it will reach the level of 4.4% assuming ‘no change in policy’, according to the report.
Poland does not fulfill the exchange rate criterion. The Polish zloty does not participate in ERM II, it was also indicated.
Poland does not fulfill the criterion on the convergence of long-term interest rates. The average long-term interest rate in the year to April 2022 was 3%, above the reference value of 2.6%.
The Commission also examined additional factors, including balance of payments developments and market integration.
Poland’s balance of payments (combined current and capital account) remained in surplus in 2020 and 2021, but weakened in late 2021 and early 2022 due to rising prices of imported goods. The Polish economy is well integrated with the euro area thanks to trade and investment links Selected indicators on the business environment show that Poland performs worse than many euro area Member States, in particular with regard to the rule of law and government performance indicators. It is largely dominated by banks that are well integrated into the financial system of the euro area. Market financing is less developed, which is reflected in very small equity and private debt markets, , according to the report.
The European Commission said that Croatia is ready to adopt the euro on January 1, 2023. This will increase the number of euro area Member States to twenty.
Source: European Commission and ISBnews
