Barriers to Poland’s Joining the Economic and Monetary Union
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Publication date: 2003-04-25
GNPJE 2003;183(4):81-103
The article attempts to assess the extent to which potential barriers to fulfilment of the Maastricht criteria may pose an obstacle to joining the Economic and Monetary Union (EMU) in 2006. Results of calculations indicate that the threat of failing to meet the inflation criterion due to closing the demand gap or to the Balassa-Samuelson effect is insignificant. On the other hand, a major barrier to fulfilment of the Maastricht criteria is posed by high structural budget deficit. It can be seen from calculations that at present the budget deficit is to only a limited extent the consequence of cyclical factors, and reduction of the public finance disequilibrium will require a substantial tightening of the fiscal policy. Simultaneous joining of the European Union and the ERM2 system in connection with the planned accession to the EMU in 2006 would increase the risk of setting a strong zloty parity in ERM2 and of failing to comply with the exchange rate criterion. A crawling peg regime might effectively counteract the zloty’s appreciation in the period prior to joining the euro zone.
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