The euro is already 20 years old and Poland is still outside the zone. Is it right?

On January 1, 2002, a new currency was introduced into circulation in 11 European Union countries – the euro. It was the largest currency exchange operation in history. It was difficult to predict then how this project will develop, but even today – despite the passage of 20 years – supporters and opponents still argue over the sense of the common currency.

The established conversion rates of national currencies were developed by specialists and economists who analyzed the purchasing power of individual countries, the price level, and foreign exchange relations. Intra-EU trade between countries that decided to adopt the euro was taken into account. In line with the Maastricht Treaty, the United Kingdom decided to keep the pound as its currency, and Denmark and Sweden refused to participate in the project, but decided to introduce a fixed exchange rate for their currencies – the Danish krone and the Swedish krona to the euro.

Citizens of other countries, including Poles, who had bank accounts in currencies participating in the euro project, e.g. in German marks, Austrian shillings or French francs, received notifications of automatic conversion, at a fixed exchange rate, to a new currency. For a month, commercial banks, and later branches of the National Bank of Poland, accepted currencies for free exchange.

To illustrate the problems that suddenly appeared all over Europe, it is worth recalling the conversion rates of some currencies to the euro:

The specific situation concerns the two countries of Montenegro and Kosovo that have adopted the euro unilaterally, are not members of the euro area, and are not allowed to mint their own coins. In these cases, the adoption of the euro took place through the back door, as it were, due to the fact that previously the currency of these countries was the German mark. Central banks sent bags of millions of marks to Germany almost every day and exchanged them for the new currency on an ongoing basis.

The situation of countries that are not formally part of the European Union is slightly different, although also interesting, but their symbiosis with this economic organization is natural. We are talking about the Republic of San Marino and the Vatican connected with Italy, and Monaco and Andorra connected with France and Spain. These four countries are entitled to mint their coins according to an annual limit set by the European Central Bank. These coins are of great interest to collectors. For complete information, it is worth saying that despite the passage of time, you can still exchange brands for euros in Germany. Every year, several million marks found in old books, straw mattresses and other unusual places go to the Bundesbank and are exchanged for euros.

A single currency in the time of a pandemic

The arguments for and against the single currency that have been raised over the years are almost the same. “For” is primarily a greater access to capital and lower interest rates supporting development, reduction of debt servicing costs and issuance, a stable exchange rate and savings in economic exchange.

According to many economists, the “against” the adoption of the euro is the maintenance of an independent exchange rate policy, a lower price level, and a reduction in the risk of speculative bubbles, including in housing construction.

The last years and months have successfully verified these theses and set completely new tasks to be solved. Keeping the public finance deficit in check is impossible in the era of a pandemic, printing money, the so-called covid and above-standard behavior of the ECB, but also of the central banks of the Czech Republic, Denmark and Sweden, show that apart from economic theory, there is also practice that verifies these hypothetical assumptions.

The euro has gone through many turbulences in its 20-year life. We are talking, of course, about the crisis and the practical insolvency of Greece, about the building bubble in Spain and Portugal, the deficit above all high in Italy. One currency, with a different standard of living, a different economy, not to mention the mentality of citizens, faced quite a few challenges. However, it lasts and accounts for almost 30 percent. world foreign exchange reserves.

For comparison, in Polish reserves of the National Bank of Poland the euro is 20 percent and the US dollar is about 50 percent.

Poland and the issue of the euro

The issue of the euro in Poland is a topic for a sensational film. According to the current interpretation of constitutionalists, we have a problem. The Poles decided in a referendum related to joining the European Union that we are ultimately committed to adopting the euro. However, the question of when will we adopt this currency is still open. Because at the same time we have a provision in the Constitution saying that the Polish zloty is a legal tender in the territory of the country.

Many years ago, the Ministry of Finance decided that you can also make purchases in euro, as evidenced by large boards in large supermarkets with the current exchange rate of euro to zloty and the information that we spend the rest in the Polish currency. A few years ago, even a government plenipotentiary was appointed to prepare us for the euro adoption operation. It ended with promotional activities and guidelines for keeping the public finance deficit in check.

Recent polls have shown that in Poland the opponents of adopting the euro are starting to dominate. Also government representatives recognized that the Polish currency, apart from the possibility of conducting an independent exchange rate and economic policy, provides us with a sense of security and national pride. A similar argument is presented by the National Bank of Poland and its president, Adam Glapiński. To confirm these theses, in 2020, after the Monetary Policy Council cut the interest rate to 0.1 percent, it seemed that the euro and the Polish zloty were almost identical, strong global currencies. The interest rate on loans was very similar, our economic growth was higher than in other EU countries, and inflation was in check. And suddenly September 2021 came, inflation ceased to be effectively controlled, interest rate hikes increased the costs of servicing loans, public debt, not to mention the weakening of the Polish currency.

There is something to talk about

Regardless of all conditions, a common EU currency is a fact and it is difficult to imagine a return to national currencies. In the coming months, the euro area countries will try to develop new standards for governments after the end of the pandemic period. The question remains, to what extent the extensive system of aid for industry, as well as for small business and affected citizens, will result in an increase in deficits.

At the moment, we are left to start a discussion about which national symbols could be found on the obverse of coins with face values ​​of 1, 2, 5, 10, 20 and 50 euro cents as well as 1 and 2 euro. These preparations for the possible adoption of the euro can be carried out without the necessity to introduce changes to the Constitution and adopting appropriate legislative solutions by the parliament.

Also read: The euro is 20 years old, but some old currencies can still be exchanged


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