Poland committed to joining the euro as part of its EU accession, but progress has stalled over the last decade. Ahead of the country’s next parliamentary election on 15 October, Agnieszka Smoleńska and Paweł Tokarski argue it is time to reopen the issue of Poland’s membership of the Eurozone.
Poland’s complex relationship with the EU has featured more prominently in the campaign leading up to this year’s election than it has in previous elections. In the shadow of the war in Ukraine, politicians across the political spectrum are mobilising around issues related to the rule of law, migration policy and Poland’s frozen recovery fund disbursements.
However, one critical dimension of Poland’s EU integration is largely absent from the national debate: the country’s future in the Eurozone. This is a critical mistake. Sketching a path for joining the common currency could – and in our view should – be an anchor around which to organise the process of Poland’s institutional rebuilding. Such a programme could also prove convincing for undecided voters, whose views will determine the outcome of the election.
Poland and the euro
Poland pledged during its EU accession to adopt the euro, but it postponed practical progress for many years following the Eurozone crisis. Up until 2015, successive governments in Warsaw pursued a policy of keeping one foot in EMU’s door. Poland advocated for inclusive Eurozone reform so as not to find itself altogether on the periphery and it also continued the relevant preparatory analytical work.
This changed in 2015, when the incoming Law and Justice government outright rejected the idea of joining the Eurozone. Adopting the common currency would have entailed greater oversight of Warsaw’s fiscal policy and banking sector, contradicting the gradual takeover of the state’s economic institutions that Law and Justice have targeted. Today, politicians on the right present maintaining Poland’s own currency as a sovereigntist issue, even as the country’s inflation rate ranks among the EU’s highest.
But the economic and security situation and ongoing Eurozone reforms have changed the stakes when it comes to adopting the euro. The process for preparing for the adoption of the common currency offers an opportunity to anchor the reshaping of Poland’s economic model, strengthen institutions and reaffirm the country’s commitment to EU integration.
The case for joining the euro
Institutional and corporate governance aspects are now well established as an element of the “new” Eurozone accession procedure, as Croatia and Bulgaria’s experiences show. In the Polish case, a path to euro integration would need to involve not only depoliticisation of the judicial system but also a stronger fiscal governance framework, especially concerning transparency and the legislative process, as well as the reigning in of populist financial policies. Despite the handover of monetary policy to the ECB, the process of joining the Eurozone would also provide an opportunity to enhance the reputation of the National Bank of Poland, which would coordinate the process.
Joining the Eurozone could also facilitate Poland’s transformation towards climate neutrality. So far, well-known obstacles such as high coal dependency and incumbent interests have stifled the articulation of a clear transition pathway in Poland. But structural factors, such as an underdeveloped capital and financial market, as well as high interest rates are not helping. Working towards the adoption of the common currency would not only help alleviate these issues and some of the uncertainty of the transition but would put the country in a position to better shape the EU’s sustainable finance regulatory trend with a view to promoting a just transition.
Finally, outlining a clear path for Eurozone accession would reaffirm Warsaw’s proactive European stance. In matters of EU economic integration, voices from Poland are largely absent – and where they exist, they carry little weight. The ongoing debate on fiscal rule reforms is one example. Meanwhile, shortcomings in the rule of law are effectively pushing Poland away from enhanced economic governance processes. Eurozone integration could help reverse this trend and mitigate the long-term risk of a “Polexit”.
The 2023 election
In October, the future of the Polish economic and institutional model is at stake. There is a danger the outcome of the election could alienate Poland from the core of the EU, furthering its descent into economic nationalism, deepening the country’s rule of law crisis and undermining its transition to sustainability.
So far, most opposition parties have avoided the issue of joining the euro. However, if the liberal opposition wins, it will have to confront the question of institutional rebuilding. Setting out a clear path for euro adoption would be one way to do this, especially in the financial and economic governance sphere.
The notion that joining the euro might serve as a tool for institutional renewal would have been unthinkable only a few years ago. It is testament to the EMU’s transformation over the last decade that such arguments are now possible. And while these arguments are particularly relevant for Poland ahead of the 2023 election, they also have relevance for the other non-Eurozone members of the EU, as well as for future member states.