Euro rules could delay Polish entry

Date: 16/09/04

CHANGES to the rules underpinning the EU's single currency laid out in the Stability and Growth Pact could make it harder for Poland to enter the eurozone, the country's Finance Minister Miroslaw Gronicki has warned.

At last weekend's informal Ecofin meeting in Scheveningen, EU ministers agreed that the pact should be reformed with more emphasis on debt and sustainability as well as an emphasis on "peer pressure" to keep member states in line.

But while this will make life easier for current euro budget battlers, Gronicki said changes could blur the otherwise simple rules for euro entry.

"If it's going to be made more flexible then of course we will have problems achieving the goals," he said. "Whereas if it stays as it is, with the 3% [of gross domestic product] deficit limit, a 60% debt level and other criteria intact, that is something we can use in our convergence plan. But if every year somebody changes the criteria we don't know what the target is."

Gronicki also noted the "possible statistical impact of pension reforms" as a potential cloud over Poland's deficit situation. Confusion over whether mandatory pension reforms should be included in the calculation of a country's deficit could mean a difference of 1.0% and 1.5% to Warsaw's deficit figure, he said.

As a result Poland, with Hungary, Slovakia and Sweden, has demanded that the issue be settled formally at the November finance council.

New member states currently have four criteria to meet in order to adopt the euro, one of which is to keep their budgetary deficit under 3% of GDP. Poland's deficit was 5.7% last year. But Gronicki insisted that the entry criteria would be met by 2007 as planned.

Changes to the rules underpinning the EU's single currency laid out in the Stability and Growth Pact could make it harder for Poland to enter the eurozone, the country's Finance Minister Miroslaw Gronicki has warned.