5/28/2008

Poland optimistic on meeting euro inflation criteria in 2009 UPDATE

WARSAW (Thomson Financial) - Poland is increasingly optimistic it will meet inflation criteria for joining the euro in time to decide whether to opt in to the ERM-2 currency grid in 2009, its finance minister said on Monday.

Minister Jacek Rostowski has declined to rule out joining the pre-euro currency mechanism next year, saying that the country will need to be sure of meeting the criteria on price stability after a jump in recent months.

'I am more and more optimistic that we will meet the inflation criteria next year,' he told a business roundtable meeting organised by The Economist.

'We want to join ERM-2 when the economy will be extremely well-prepared to join the euro.'

Poland agreed to adopt the euro when it joined the European Union in 2004 and has free rein on when it enters ERM-2. It has to spend two years in the currency grid before applying to join the euro zone itself.

The current government, elected late last year, has stopped short of giving a timetable for adopting the single currency, saying only that it will focus on meeting the economic fitness tests required by the Maastricht treaty.

But analysts say that the centre-right cabinet may prove shy of applying to join ERM-2 soon due to the prospect of a general election in 2011 that would come just as its stay in the mechanism was reaching the two-year threshold.

The country of 38 million now fulfils criteria on debt and the budget deficit, and Central Bank Chief Economist Zbigniew Hockuba told Thomson Financial News last week it may well meet the conditions on inflation next year.

'I think that in the second half of this year inflation will start to fall and within a year or two we will meet the criterion, also in terms of sustainability of inflation,' he said.

Maastricht stipulates that applicants for the euro must have inflation which is no higher than 1.5 percentage points above the average of the three EU members with the lowest inflation rates.

With inflation rising steadily over the last year, to 4.1 percent in April, economists say price growth in Poland now hovers on the verge of meeting the criteria but that the relationship should worsen in the next few months.
Source:Piotr Skolimowski, Paweł Sobaczak
forbes.com



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