Not in the zone

The chief of the Polish delegation to the International Monetary Fund (IMF), Susan Schadler, said that Poland needs to cut its budget deficit below the planned zł.30 billion in order to meet the euro-adoption criteria in three to four years.

According to the IMF, Poland's planned budget deficit will be above five percent of GDP over the next few years, which is above the three-percent ceiling.

Schadler expressed doubts that the current government could meet the euro-adoption criteria. "It would be hard to see how the required deficit consolidation could take place without a decrease in social spending," she said. Poland was also advised against any tax cuts and tax incentives as the estimates of the 2006 budget were made on the basis of existing tax levels. 

The IMF underlined that the economic environment is favorable. However, the markets are watching the government's actions closely "for signs of decisive policies to address fiscal and structural weaknesses." Schadler says that the main structural changes should address the slow judicial system, reduce barriers to starting up businesses and reduce the amount of state-owned enterprises. (Reuters)