The Euro, is it a good idea for Poland?

Marek11111Threads: 49 Posts: 1,954 Joined: Aug 6, 09 ♂	Mar 18, 10, 21:13 #31
The euro will go down before Poland will convert to it, when euro will go down it will bring all currencies down in Europe the only one solution is to have your currency backed by gold to prevent collapse

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Edited by: jwojcie Mar 18, 10, 21:14 #32

I think it is idea worth of consideration but not before Euro stabilize and Polish economy will synchronize with Eurozone. So, 5 or 10 years? Definitely not now (on the other hand it would be probably good to enter with cheap currency... but it would demolish western economies ;-) so they don't let us now anyway :-))

convex:

Here's a trick, just peg the currency to the Euro.

Hm... I'm not sure about that, country unilaterally pegged usually don't have access to central bank loans, and is vulnerable to currency attack a'la Soros vs BOE. When country finally violently "unpegs" then all debtors are screwed, that is way Latvia is fighting so much to not "unpeg"...

Anyway, it would be nice to not have to change Zloty to Czech Korona everytime when I go skiing.. Life would be easier with one currency, but both Eurozone and Poland are not ready for that.

PS. comment by Forlana from "The Economist" forum:
"To put in another way, it is often said here in Poland that the Euro is a powerful tool for growth and an excellent shield, but a heavy one. Be sure you can carry it before you take it..."
very accurate allegory in my opinion

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Mar 18, 10, 22:40 #33

jwojcie:

"To put in another way, it is often said here in Poland that the Euro is a powerful tool for growth and an excellent shield, but a heavy one. Be sure you can carry it before you take it..."

Very good indeed.

To be clear, I'm not for Poland taking up the Euro. There are, however, advantages that come with the Euro. For instance, it would make borrowing easier (the ECB has deep, deep pockets.)

convex:

Regarding making imports cheaper, the tiny bit that is lost in currency conversion is a pretty terrible trade off outsourcing your monetary policy.

It's far from a tiny bit. Currency devaluation is one of the keys to China's success (why do you think the US is so angry at them right now?) Cheaper exports, but also expensive imports. It's not "a tiny bit", it's a substantial amount (quite indeed.)
I think the doomsday predictions that costs would spiral out of control are misplaced. Costs would rise, but not astronomically. Be reasonable.

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Mar 19, 10, 09:59 #34

jwojcie:

Hm... I'm not sure about that, country unilaterally pegged usually don't have access to central bank loans, and is vulnerable to currency attack a'la Soros vs BOE. When country finally violently "unpegs" then all debtors are screwed, that is way Latvia is fighting so much to not "unpeg"...

It depends, revaluation can be done in a controlled manner, again, just as Denmark has always done. If you are in control of your money supply, you control the exchange rate.

Latvia is screwed because they're already in ERMII and are stuck.

polishmeknob:

There are, however, advantages that come with the Euro. For instance, it would make borrowing easier (the ECB has deep, deep pockets.)

Borrowing doesn't seem to be a problem at the moment. Just hedge against fluctuation. Most governments did just that with their structural funds.

polishmeknob:

It's far from a tiny bit. Currency devaluation is one of the keys to China's success (why do you think the US is so angry at them right now?) Cheaper exports, but also expensive imports. It's not "a tiny bit", it's a substantial amount (quite indeed.)
I think the doomsday predictions that costs would spiral out of control are misplaced. Costs would rise, but not astronomically. Be reasonable.

I think I managed to mix up conversion with devaluation.

Anyway, you've just made a great argument for not outsourcing monetary policy. The RMB is pegged as well. It's a great policy to protect them from the effects of monetary policy overseas. The Chinese really have it down. They are protected from attacks on their currency, and devaluation of the currencies of their trading partners. Their investments will never suffer too much from currency fluctuations.

The euro is bad for Poland precisely because that isn't possible. The NBP couldn't have devalued PLN over the last 18 months to make Poland attractive to foreign capital. Growth would have been dead in the water.

But hey, I like the ECB myself. They are doing what a central bank should be doing, attempting to control inflation...

king polkagamon	Mar 19, 10, 13:27 #35
I don\'t think euro will work in Poland.

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Mar 24, 10, 13:19 #36

king polkagamon:

I don\'t think euro will work in Poland.

Neither do I, at least not now.

convex:

The euro is bad for Poland precisely because that isn't possible. The NBP couldn't have devalued PLN over the last 18 months to make Poland attractive to foreign capital. Growth would have been dead in the water.

Quite indeed.

Let me restate what I was trying to say: I don't think that the Euro is good for Poland (at least not now), but it's not all bad.
I was making a point about how energy (oil) is more expensive with a weak Zloty, but I forgot to also explain how oil dropped a lot, so it didn't really matter; although, oil is recently on the rise.

Anyway, my extended opinion on it is right here: http://polishmeknob.blogspot.com/2010/03/its-official-buy-zoty.html

przem	Apr 14, 10, 06:10 #37
I oppose the adoption of Euro. Does anyone think Poland would have avoided the recession the way it has, had it not have had its competitive currency? The EU crisis has only begun and the bail out of Greece has proven that the Euro will be further devalued as the remaining PIIGS buckle under pressure. Poland recently told the IMF it doesnt need their credit line - good for them!

z_dariusThreads: 22 Posts: 5,091 Joined: Oct 18, 07 ♂	Apr 14, 10, 06:20 #38
Euro would be Poland's noose.

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Apr 14, 10, 13:53 #39

z_darius:

Euro would be Poland's noose.

It really depends on where you are coming from.

The Zloty fell about 20% because currency dealers can't tell the difference between Poland and Hungary :)
This however was a good thing for Poland, as it made exports cheaper and created more of a demand for internal consumption because imports were more expensive.
BUT such fluctuations are not good for a country at all, the Euro is a stronger steadier currency and it is excepted, and therefore recognised, worldwide.
A friend here imports big machinery from Japan, the Yen went up in value and the Zloty went down, creating an even bigger gap for his business, the contracts are all signed months in advance, he suffered huge losses and it will be a while yet before he will recover.
Bottom line it is very difficult to do business with a country that's currency is unstable.

Also there is a physiological border that needs to be crossed more, from ''Poland and the E.U.'' to ''Poland in the E.U.''

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Apr 14, 10, 14:32 #40

SeanBM:

A friend here imports big machinery from Japan, the Yen went up in value and the Zloty went down, creating an even bigger gap for his business, the contracts are all signed months in advance, he suffered huge losses and it will be a while yet before he will recover.

That's why you hedge on big contracts involving different currencies. Any competent financial adviser with basic risk management skills can put this together.

SeanBMThreads: 41 Posts: 8,727 Joined: Mar 10, 08 ♂	Edited by: SeanBM Apr 14, 10, 14:34 #41
Yeah, but you know yourself, nobody expects the unexpected or the Spanish inquisition ;) I have "lost" money and "made" money as I usually work with a few different currencies and I think I have broken even over the years but to honest it is just a pain in the buttocks. It would make me happy when Poland gets the Euro :) but I won't hold my breath for it.

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