“Money is the worst currency that ever grew among mankind. This sacks cities, this drives men from their homes, this teaches and corrupts the worthiest minds to turn base deeds.” So thought Sophocles and this is as good a thought as any with which to begin the new year, especially if you are in Lithuania which entered its own brave new Euro world on 1st January. Lithuania thus became the nineteenth member of the Euro zone and the third of the Baltic States to join, following Latvia a year ago and Estonia on 2011.
But, of course, we are not in Lithuania but along the coast in Poland where, accession treaty obligations notwithstanding, a different view prevails. According to the Polish finance minister Mateusz Szczurek, speaking on the radio last week, Poland is still not ready to join the Euro. In his view while the Euro is undoubtedly good news for the economy of Lithuania, it would not necessarily be so for Poland.
For Sczcurek, it wass obvious that the advantages and costs of introducing the Euro in Lithuania, whose former currency the Litas had been pegged to the Euro since June 2004, are completely different than for “such a diverse country as Poland which has a larger internal market.” The logic of that statement is not entirely clear especially in the case of Poland whose economy, particularly in the case of manufacturing, is increasingly tied to that of Germany of whose supply chain it forms an important part.
Needless to say the finance minister said that the ministry is continuing with its plan to adopt the Euro, and that “the discussion on joining the euro in Poland should continue”. This is becoming a rather long discussion about which I wrote here nearly two years ago – tempus fugit (please see The Colour of Money) – and there can be only one conclusion treaty wise unless, of course, Poland can spin out the discussion long enough until the Euro collapses. Szczurek said that the government did not wish to pretend that there was not a challenge to be faced “but the conditions, which have been laid out by the prime minister and which we have now been talking about for a long time, such as stability in the Euro zone and ongoing talks on Poland’s eventual entry, must be met before we can give any date for euro adoption”. Which is similar to his predecessor’s remark that Poland wishes to join the Euro but “not this one”, another example of Polish exceptionalism.
Be that as it may, Poland continues to enjoy the benefits of a floating currency and ended the year down against most currencies including the Euro and US dollar. Szczurek said that he was he was not bothered by a EUR/PLN rate of 4.30 which he attributed to weakening economies of Poland’s trading partners. In any case, in his view, a weakening currency not only helps exporters but can lead to domestic production replacing imports. Overall, the finance minister predicts for 2015 lower unemployment, higher wages and GDP growth of above three percent which “is still almost the highest in Europe.”
Let’s hope that Szczurek is correct and Poland’s economy prospers in 2015 because without a strong economy everything else becomes more difficult. And in this regard there are, as ever, a number of clouds on the horizon: high levels of indebtedness in the West, the unknown effects of continually falling oil prices and, not least among them, the unpredictability of events in Russia. Let’s also hope, therefore, that the winds of change of brother Putin (who might enjoy Sophocles) don’t upset the economic apple cart the way they have hitherto upset the apple farmers.