No euro for Poland before 2010

The government's euro-convergence plan says Poland's general government deficit will fall to 3.7 percent of GDP in 2008 from 4.7 percent of GDP in 2005, when calculated according to Eurostat's ESA-95 standard. This exceeds the three-percent limit set for eurozone eligibility by the EU's Stability and Growth Pact.

According to  the Finance Ministry, one of the factors that would prevent Poland from meeting the fiscal target is the high cost of pension reforms. This is mainly due to a reclassification of pension transfers, which previously weren't included in the budget deficit. Starting in 2007 the reclassification will add about two percentage points to Poland's budget deficit.

"In subsequent years, consolidation of public finances will be continued, which should allow the structural deficit to be reduced to the medium-term target after 2010," a Ministry statement said.

Last year, EU Ministers decided Poland must include transfers to privately managed funds in its budget deficit, which it didn't do following the reform in the pension system. The Ministers overruled Polish arguments that the payments were a contribution to savings and were crucial to reinforce the long-term stability of public finances. The Finance Ministry claims that without counting these transfers, Poland would have met the eurozone fiscal standard in 2005 with a general government deficit of 2.9 percent of GDP, which would fall to 1.9 percent in 2008. (Reuters)