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Baltic trio embrace euro but other nations hesitate
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After Latvia, Lithuania is aiming to join the eurozone in 2015, completing a Baltic embrace of Europe’s troubled single currency, but other nations in the region are in no rush to adopt it.
Concerns over the influence of Soviet-era master Russia and their small size prompted the Baltic trio to relish eurozone entry, but larger economies like Poland and the Czech Republic, less worried by Moscow, are more circumspect.
“Other countries are more relaxed about joining, they’re looking more at the costs and benefits, rather than the Baltic attitude of joining the eurozone at any price,” Witold Orlowski, a Warsaw-based PricewaterhouseCoopers analyst and former advisor to the Polish president, said.
In a bid to boost stability, Baltic states including Estonia, which adopted the euro in 2011, pegged their currencies to it in 2004.
Only Bulgaria has made this move among other eurozone candidates, all of which agreed to join in their European Union entry deals.
They include regional heavyweight Poland and the Czech Republic, which experts believe could meet eurozone entry targets on deficits and inflation within three to four years.
Warsaw insists it will be euro-ready by 2015, but has been coy about pegging a target entry date.
Others like Bulgaria, Hungary, Romania or Croatia have a longer road of reform ahead.
“There’s no pressure” to join the eurozone in Poland and the Czech Republic, where inflation and interest rates are “pretty low”, Orlowski observed.
“Both countries are quite happy with a flexible exchange rate,” he noted, adding that the eurozone’s debt woes had also prompted a “wait and see” approach.
Poland was the only EU member to avoid recession in recent years thanks largely to that flexibility, which boosted exports as its currency, the zloty, weakened against the euro during both the world financial and eurozone crises.
Poland’s new Finance Minister Mateusz Szczurek has put it more bluntly.
“The alleged benefits of the euro area — better positioning of the economy on access to capital and its affordability, stability of foreign funding — have proved to be a fiction,” he insisted.
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