Poland's new govt says euro entry unlikely before 2011, to lower debt levels

WARSAW (Thomson Financial) - Poland's new government said it was unlikely to decide on adoption of the euro before the end of the current parliament in 2011 and would not set a concrete target for when the EU's largest former communist state can join.

Presenting the 2008 budget to parliament yesterday, Finance Minister Jacek Rostowski also said he would aim to lower the ratio of public debt to GDP by 4-7 pct points over the cabinet's four year-term.

Analysts said his comments confirm the cabinet will aim to improve the structure of public spending and lower the budget deficit steadily, but show it is unwilling to encourage speculation that Poland could adopt the euro before 2013.

'Replacing the zloty with the common European currency goes beyond the horizon of one parliamentary term,' Rostowski told the Sejm lower house of parliament.

Before joining the euro, Poland must spend at least two years in the pre-euro currency grid ERM-2, and analysts say in reality it would likely take up to 3 years from the moment of entry to ERM-2.

Rostowski, who has declined to talk to reporters since his nomination, gave no details of how much he would seek to chop off next year's budget deficit, planned at 28.6 bln zlotys by the outgoing conservative administration.

Prime Minister Donald Tusk, however, said his ruling coalition would seek to knock 1-1.5 bln off the headline cap in work in committee - less than previous estimates of a 3-4 bln zloty cut by other party officials.

'The ambitious target for Rostowski will be to lower next year's deficit by 1 or maybe 1.5 bln zlotys,' Tusk, whose pro-business Civic Platform party won elections last month, told a news conference.

In reality, that means the 2008 public sector shortfall will likely rise from this year's, which looks set to come in at least 7 bln lower than the outgoing cabinet's 30 bln target due to an economic boom which has driven revenues higher.

Rostowski signalled next year's budget was unlikely to outperform so spectacularly.

'The strong execution of the budget in 2007 results chiefly from the high pace of economic growth,' the minister said.

'In 2008 the impact of this factor, due to the slowdown in theeconomy, will be weaker. The peak of the economic cycle is now behind us. We are entering a phase of slightly slower growth, although the fall will be a slow one.'

The budget assumes Poland's economic expansion will slow to 5.5 pct next year from 6.5 pct in 2007.

Source:By Paweł Sobczak, forbes.com