Debate on introducing the euro in Poland will not be fairThe debate on introducing the euro in Poland will not be fair. The arguments against the common currency are crushing

In the double issue of the ARCANA bimonthly (175-176), economist Professor Kazimierz Dadak in his text ‘The euro as a tool of domination’ lists eight fundamental arguments against the introduction of this currency in Poland. Supporters of the abolition of the zloty in the Polish mainstream do not refer to such arguments at all, satisfying themselves with mantras and promises, spreading an idyllic vision similar to those in the pictures of socialist propaganda. Meanwhile, the facts that discourage the currency are strong.

1. Failure to meet the requirements of an Optimal Monetary Area. The introduction of a common currency, according to Robert Mundell (1932-2021), should take place in an area that meets certain criteria - such as labour mobility or price and wage flexibility. Dadak, meanwhile, states that:

‘The euro was introduced despite the fact that the eurozone does not constitute an optimal currency area (OOW). Only certain areas of it, the so-called “core”, i.e. Germany, Austria, France, Belgium, the Netherlands and Luxembourg meet this criterion.

2. The lack of real solidarity in the Eurozone exacerbates crises instead of tackling them. The author recalls the economic crisis of 2008 and concludes that:

‘in the face of severe economic challenges (negative demand shocks), it may be ineffective to combat them with monetary policy (interest rate cuts) and therefore the course of the crisis will be very severe. As a result, for members of the monetary union who are not part of the OOW, in the long run the costs of this endeavour may seriously outweigh the benefits.

3. Lack of a mechanism to absorb economic shocks and, more broadly, less flexibility in the system.

In the absence of a mechanism to absorb negative shocks in the form of a fall in the exchange rate, the economy is able to regain competitiveness through deflation, i.e. a fall in prices and wages. This is a very painful and inefficient form of adjustment process to the new situation.

4. An increase in the cost of borrowing.

Dadak is recalling the mechanism in Greece when

the risk of a possible devaluation of the restored drachma emerged. Hence, interest rates on bonds issued by the governments of weaker eurozone members rose severely and the main benefit of participation in the monetary union (low cost of borrowing) vanished like a soap bubble.

5. A slowdown in economic growth. The professor presents data showing that over the period 1999-2019 (up to the pandemic),

as a whole, as well as in both sub-periods, GDP per capita growth in the euro area was slower than that of the European Union as a whole (27 countries).”

6. Inequalities in economic development. Citing data on the development of countries within the euro area, Dadak points out:

‘ On the whole, instead of a process of convergence, we are observing further stratification in the Eurozone.

The less developed countries, especially Greece and Italy, have significantly worsened their relative position in relation to the strongest ones.

7. The loss of competitiveness for the economically weaker eurozone countries is also evident in the specific data cited in the article. The author states:

‘As a result of the low degree of competitiveness in foreign markets, the foreign trade deficits recorded by Spain and Portugal have increased severely as a result of the adoption of the common currency, while the surpluses shown by Italy have fallen to zero.

8. External control and loss of sovereignty.

The Greek government has become subject to direct control by Brussels. Similar rigours, albeit on a smaller scale, were imposed on other members of the Eurozone that experienced a severe crisis after 2008.

The argument in favour of independence is often made by the opponents of the introduction of a foreign currency, so it had to be made here too, but - interestingly - it need not be prioritised. The disadvantages of adopting the euro are so numerous that an honest public debate would easily deal with this damaging idea. It is clear, however, that an honest debate will not take place - hence the upcoming battle to defend the Polish zloty will demand a special effort to be made on our part.