1. V4+ and the Eurozone Accession - Poland Maciej Grabowski Undersecretary of State 12 Świętokrzyska St. 00-916 Warsaw tel.: +48 22 694 58 87 fax :+48 22 694 58 86 www.mf.gov.pl

2. 12 Świętokrzyska St. 00-916 Warsaw tel.: +48 22 694 58 87 fax :+48 22 694 58 86 www.mf.gov.pl Euro as a strategic objective The introduction of the euro constitutes Poland's strategic objective. Due to the significant uncertainty about the time horizon of meeting the requirements for the safe euro adoption, the government is not specifying a target date. The government's positive stand on the benefits of adopting the common currency remains unchanged. Government regards the continuation of preparations for the introduction of the euro as beneficial for Poland.

3. 12 Świętokrzyska St. 00-916 Warsaw tel.: +48 22 694 58 87 fax :+48 22 694 58 86 www.mf.gov.pl Pillars of integration strategy The strategy for the integration of Poland with the euro area consists of four pillars: 1.Targeting sustainable fulfilment of the convergence criteria, with particular focus on fiscal discipline. 2.Strengthening the potential of the Polish economy. 3.Early completion and subsequent updating of the National Euro Changeover Plan. 4.Stabilisation of the situation in the euro area, especially its institutional strengthening. Source: Convergence Programme. Update 2013 Currently each pillar constitutes a challenge

4. 12 Świętokrzyska St. 00-916 Warsaw tel.: +48 22 694 58 87 fax :+48 22 694 58 86 www.mf.gov.pl Challenge of meeting the convergence criteria 1.Moving target: –reference values of price stability and – especially – interest rate criterion highly volatile, mostly due to changes in the reference group –interpretation of criteria repeatedly changed in subsequent Convergence Reports 2.Exchange rate volatility constraints in ERM II not fitted for country as big as Poland 3.Legal criterion requirements - compatibility of national legislation with the Treaties (the Constitution amendment required); no public referendum legally required Fulfillment of criteria much more challenging after the crisis

5. 12 Świętokrzyska St. 00-916 Warsaw tel.: +48 22 694 58 87 fax :+48 22 694 58 86 www.mf.gov.pl Fulfillment of convergence criteria (Nov 2013) PL meets 2 nominal convergence criteria: –price stability –long-term interest rate PL does not participate in ERM II EDP – deficit correction till 2014 Composition of reference group: Latvia, Sweden, Ireland Convergence criteria need to be met in sustainable manner

6. 12 Świętokrzyska St. 00-916 Warsaw tel.: +48 22 694 58 87 fax :+48 22 694 58 86 www.mf.gov.pl Challenge of improving real convergence 1.Substantial divergences within the EA as an important drawback leading to the current crisis 2.Need for effective alternative adjustment mechanisms after euro adoption in the lack of monetary and exchange rate policy at the country level –Sufficient labour and product market flexibility Nominal convergence necessary but not sufficient

7. 12 Świętokrzyska St. 00-916 Warsaw tel.: +48 22 694 58 87 fax :+48 22 694 58 86 www.mf.gov.pl Monitoring real convergence of PL with EA correlation of business cycles PL vs. EA – increase of convergence (upward trend observed continuously since Q2 2006) deepening differences between the structures of the GDP and investments in PL and EA (recent years, mainly due to economic crisis) PL CZ HU SK DE FR IT Correlation of business cycles (GDP) Structural similarity to the euro area – Krugman Index Although business cycles converge, structural differences persist

8. 12 Świętokrzyska St. 00-916 Warsaw tel.: +48 22 694 58 87 fax :+48 22 694 58 86 www.mf.gov.pl Challenge of changeover 1.Poland as the biggest „new” EU member state cannot simply follow changeover strategies of previous entrants –Estimated need for euro coins over 10 times higher than in SK, which implies serious logistical challenges –Need for Constitutional amendments 2.Regaining public support for monetary integration with EA –Lower public support for euro adoption - visible effect of the crisis –Rise of uncertainty as a consequence of the EA crisis, especially regarding to the balance of costs & benefits of the euro adoption Practical preparations are continued, despite the lack of target date

9. 12 Świętokrzyska St. 00-916 Warsaw tel.: +48 22 694 58 87 fax :+48 22 694 58 86 www.mf.gov.pl Polish euro changeover preparations October 2008: Roadmap for Euro Adoption in Poland - specification of the necessary steps for euro changeover January 2009: Appointment of the Government Plenipotentiary for Euro Adoption in Poland March-November 2009: establishment of Plenipotentiary’s Bureau and organisational structure for euro adoption preparations October 2010: Strategic Guidelines for National Euro Changeover Plan approved by Council of Ministers November 2011 National Euro Changeover Plan (update currently in progress) – schedule of preparations conditional on €-day 2011-2012: Twinning Programme with SK, AT, NL – gathering experiences on practical aspects of euro adoption 2013: debate initiated by high level officials (President, Minister of Finance) Despite of the crisis practical preparations are being continued

10. 12 Świętokrzyska St. 00-916 Warsaw tel.: +48 22 694 58 87 fax :+48 22 694 58 86 www.mf.gov.pl 10 Organizational structure for euro adoption in Poland Chaired by the Government Plenipotentiary for Euro Adoption in Poland [Deputy Minister of Finance] –Supported by his Bureau Co-chaired by NBP’s Board Plenipotentiary for Euro Adoption [Member of the Management Board of the NBP] About 30 institutions (public administration & private sector) more than 150 people involved…  National Committee & Coordinating Council  8 Working Committees: Macroeconomics, Legal adaptation, public administration, financial sector, non- financial enterprises, communication strategy, consumer protection, cash changeover.  2 Task Groups: adaptation of IT systems in public administration, financial stability Progress due to common effort of public and private institutions

11. 12 Świętokrzyska St. 00-916 Warsaw tel.: +48 22 694 58 87 fax :+48 22 694 58 86 www.mf.gov.pl Challenge of improving euro area stability Effective action required both at euro area and national level 1.Crisis in the euro area as a result of accumulating imbalances in particular member states – it is not the common currency to be blamed for crisis events 2.Several challenges to be addressed at both national and EA level –Effective imbalances prevention and correction mechanism –Structural reforms at the national level in both current and future euro area economies –Effective crisis management framework

12. 12 Świętokrzyska St. 00-916 Warsaw tel.: +48 22 694 58 87 fax :+48 22 694 58 86 www.mf.gov.pl Institutional EA reforms as a response to the origins of the crises 1.Macroeconomic imbalances: –Insufficient reforms –No imbalances correction mechanism 2.Fiscal imbalances: –Lack of sufficient fiscal consolidation measures –Imbalances correction mechanism not effective –Insufficient enforcement 3.Institutional framework of the euro area: –Cross-country economic policy coordination not effective –Lack of crisis management scheme –No lender of last resort 4.Lack of genuine monetary union mechanisms Macroeconomic imbalance procedure 6-pack 2-pack TSCG (Fiscal compact) Enhanced coordination ESM Banking union Fiscal union Enforcement of implemented reforms of utmost importance

13. 12 Świętokrzyska St. 00-916 Warsaw tel.: +48 22 694 58 87 fax :+48 22 694 58 86 www.mf.gov.pl Conclusions 1.Adoption of the euro does not automatically imply benefits –Sustainable nominal and real convergence –Effective alternative shock absorbing mechanisms (flexible labour and product markets) 2.Long term balance of costs and benefits from euro adoption highly conditional on far-reaching and effective reforms in euro area 3.Euro adoption strategy shall be tailored to the needs of particular country None size fits all

14. 12 Świętokrzyska St. 00-916 Warsaw tel.: +48 22 694 58 87 fax :+48 22 694 58 86 www.mf.gov.pl Thank you for your attention www.euro.mf.gov.pl

15. 12 Świętokrzyska St. 00-916 Warsaw tel.: +48 22 694 58 87 fax :+48 22 694 58 86 www.mf.gov.pl Source: Eurobarometr, 2013 Support for euro adoption in NMS Information campaign needed to boost infsufficient public support

16. 12 Świętokrzyska St. 00-916 Warsaw tel.: +48 22 694 58 87 fax :+48 22 694 58 86 www.mf.gov.pl 16 Organizational structure for euro adoption in Poland