Poland may enter ERM2 at turn of '09/10-c.bank head

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By Katarzyna Pieniadz

WARSAW, Feb 28 (Reuters) -
Poland may enter into the ERM-2 exchange rate mechanism at the turn of 2009 and 2010, when inflation will be lowered to 2.5 percent in a sustainable way, central bank governor Slawomir Skrzypek said on Thursday.

"I can uphold what was said earlier. Inflation will return to the target in a sustainable way at the turn of 2009 and 2010. It may be the time when we will be entering the ERM-2," Skrzypek told reporters.

The governor and the bank's Monetary Policy Council met the Finance Minister Jacek Rostowski earlier in February to discuss Poland's path to the single currency zone.

"Entering the ERM-2 mechanism at the turn of 2009 and 2010 means Poland could join the single currency zone in 2012 or 2013," said Rafal Benecki, economist at ING Bank Slaski in Warsaw.

Changing the zloty's free float exchange rate to the ERM-2 mechanism for at least two years is one of the prerequisites for adopting the euro.

To date, Poland's biggest problem has been keeping its public deficit under the European Union's ceiling of 3 percent of GDP, but a recent drop in the budget deficit and a jump in inflation has raised questions about the CPI entry criterion.

Inflation in Poland jumped to 4.3 percent in January, and EuroStat's 12 month HICP average approached close to the required level of 1.5 percentage points above average of three countries with lowest inflation in the European Union.

Poland's public deficit last year is estimated at 2.5 percent of GDP and is expected to remain under 3 percent this year.
Source: By Patryk Wasilewski, Jon Boyle, guardian.co.uk