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Preparing for Euro Adoption in Poland

Author

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  • Rafal Kierzenkowski

    (OECD)

Abstract

The objective of joining the euro area has become an important priority in the policy agenda of the current government. The paper focuses on the major structural reforms necessary to prepare for euro adoption that should allow a sustainable fulfilment of the Maastricht criteria and maximisation of the ensuing various benefits. These reforms are desirable independent of the effective date of adoption, given the necessity to restore fiscal discipline, maintain price stability and ensure a balanced growth going forward. However, they are even more essential in the run up to euro adoption as the process of real and nominal convergence remains largely incomplete, which requires a substantial strengthening of alternative adjustment mechanisms to domestic interest- and exchange-rate changes. The reforms should aim to create strong institutions to ensure fiscal sustainability and an efficient counter-cyclical rules-based fiscal policy supported by an independent fiscal council; promote flexibility in labour and product markets; and head off the risk of a boom-bust cycle triggered by much lower real interest rates, too rapid credit expansion and overblown perceived permanent income gains. The timing of euro adoption should therefore be determined by the speed of the implementation of reforms; otherwise the outcome of early membership without appropriate preparation may turn out to be difficult and risky. Yet, provided that adequate reforms are implemented, euro adoption should speed up the convergence process. This Working Paper relates to the 2010 OECD Economic Survey of Poland (www.oecd.org/eco/surveys/poland). Préparer l'adoption de l'euro en Pologne L'objectif que constitue l'entrée dans la zone euro est devenu un objectif important du gouvernement actuel. Cet article est consacré aux principales réformes structurelles nécessaires à la préparation de l'adoption de la monnaie unique, qui devraient permettre à la Pologne de satisfaire durablement aux critères de Maastricht et de maximiser les différents avantages qu'elle en retirera. Ces réformes sont souhaitables indépendamment de la date effective d'entrée dans la zone euro, compte tenu de la nécessité de restaurer la discipline budgétaire, de maintenir la stabilité des prix et de garantir une croissance équilibrée dans l'avenir. Néanmoins, elles sont d'autant plus cruciales à l'approche de l'adoption de la monnaie unique que le processus de convergence réelle et nominale reste dans une large mesure inachevé, ce qui exige un renforcement sensible d'autres mécanismes d'ajustement que les taux d'intérêt et le taux de change domestiques. Ces réformes devraient viser à : mettre en place des institutions fortes garantissant la soutenabilité des finances publiques, ainsi qu'une politique budgétaire anticyclique efficace fondée sur des règles et étayée par un conseil indépendant de politique budgétaire ; à promouvoir la flexibilité du marché du travail et des marchés de produits ; et à neutraliser le risque d'un cycle de forte expansion et de récession déclenchée par des taux d'intérêt réels nettement plus bas, une croissance trop rapide du crédit, et l'impression injustifiée de gains de revenu durables. Le moment d'adoption de l'euro devrait donc être déterminé par le rythme de mise en oeuvre des réformes. Faute de quoi, une entrée prématurée dans la zone euro sans préparation adéquate pourrait se révéler difficile et risquée. Néanmoins, si des réformes adaptées sont instituées, l'adoption de la monnaie unique devrait accélérer le processus de convergence. Ce Document de travail se rapporte à l’Étude économique de l’OCDE de la Pologne 2010 (www.oecd.org/eco/etudes/pologne).

Suggested Citation

  • Rafal Kierzenkowski, 2010. "Preparing for Euro Adoption in Poland," OECD Economics Department Working Papers 790, OECD Publishing.
  • Handle: RePEc:oec:ecoaaa:790-en
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    File URL: http://dx.doi.org/10.1787/5kmbm6v89gtk-en
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    References listed on IDEAS

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    Cited by:

    1. Svitlana Maksymenko, 2015. "The Cost of Euro Adoption in Poland," Working Paper 5779, Department of Economics, University of Pittsburgh.
    2. Tronzano, Marco, 2017. "Testing Fiscal Sustainability In The Transition Economies Of Eastern Europe: The Case Of Poland (1999-2015)," Economia Internazionale / International Economics, Camera di Commercio Industria Artigianato Agricoltura di Genova, vol. 70(1), pages 103-132.

    More about this item

    Keywords

    boom-bust cycle; convergence; convergence; critère de Maastricht; cycle d’expansion et de récession; euro area; fiscal rules; flexibilité du marché du travail; labour market flexibility; Maastricht criteria; OCDE; OECD; Poland; Pologne; règles budgétaires; zone Euro;

    JEL classification:

    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
    • P20 - Economic Systems - - Socialist Systems and Transition Economies - - - General

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