Prospects of euro entry distant as ever
As a remedy, Soros suggested the country should join the reworked Exchange Rate Mechanism (also known as ERM 2), a sort of antechamber to the common currency, as soon as possible.
ERM 2 requires that the exchange rates of its member currencies deviate by no more than 15 percent from a set level against the euro. The limit on fluctuations must be observed for at least two years before a given currency can join the 12-nation euro zone. But, last month, Pedro Solbes, the then EU commissioner for monetary policy, suggested that "some of the countries (joining the Union) might be required to remain in the system for longer than the statutory period of two years." This would seem to be another stark warning to this country's euro-enthusiasts after another Commission official's remarks earlier in the year that the brackets within which currencies will be allowed to fluctuate could be reduced to as little as 2.5 percent in the case of "some of the larger, and less fiscally disciplined, potential candidates" to the euro zone.
Given that Soros was "the man who broke the Bank of England" after forcing the pound out of the previous version of ERM back in 1992, his advice might seem somewhat bizarre, and, indeed, his remarks do touch on an extremely controversial matter.
Whereas Brussels seems to prefer caution, putting the earliest date for euro entry beyond 2010, many of the most respected figures on the domestic scene have been vocal in their support for a speedy entry.
Leszek Balcerowicz, the president of the Polish Central Bank (NBP), says the outlook for the benefits of euro entry "is extremely positive, even better than it seemed just recently." He cites a study by the International Monetary Fund (IMF) suggesting that joining the common currency could add some 15-30 percent to the volume of trade with the countries inside the euro zone. The elimination of an exchange rate risk and lower interest rates would also prove beneficial to the economy. The combined effect, the IMF report says, could be GDP growth that is 20-25 percent higher over ten years.
On the other hand, Susan Schadler, IMF Deputy Director for Europe, cautions that, without appropriate preparation, the entry could prove to have "disastrous consequences." Balcerowicz argues that compliance with the so-called Maastricht criteria, which place restrictions on the size of public-sector deficit, debt and inflation, would be beneficial to the economy, irrespective of euro entry. This would enforce fiscal discipline on spendthrift politicians, he says. Indeed, earlier this year, the government 'committed itself' to reining in deficits following accession. But the question is why it wasn't done earlier. After so many promises, this 'commitment' from the outgoing cabinet sounds rather hollow as well.
ERM 2 requires that the exchange rates of its member currencies deviate by no more than 15 percent from a set level against the euro. The limit on fluctuations must be observed for at least two years before a given currency can join the 12-nation euro zone. But, last month, Pedro Solbes, the then EU commissioner for monetary policy, suggested that "some of the countries (joining the Union) might be required to remain in the system for longer than the statutory period of two years." This would seem to be another stark warning to this country's euro-enthusiasts after another Commission official's remarks earlier in the year that the brackets within which currencies will be allowed to fluctuate could be reduced to as little as 2.5 percent in the case of "some of the larger, and less fiscally disciplined, potential candidates" to the euro zone.
Given that Soros was "the man who broke the Bank of England" after forcing the pound out of the previous version of ERM back in 1992, his advice might seem somewhat bizarre, and, indeed, his remarks do touch on an extremely controversial matter.
Whereas Brussels seems to prefer caution, putting the earliest date for euro entry beyond 2010, many of the most respected figures on the domestic scene have been vocal in their support for a speedy entry.
Leszek Balcerowicz, the president of the Polish Central Bank (NBP), says the outlook for the benefits of euro entry "is extremely positive, even better than it seemed just recently." He cites a study by the International Monetary Fund (IMF) suggesting that joining the common currency could add some 15-30 percent to the volume of trade with the countries inside the euro zone. The elimination of an exchange rate risk and lower interest rates would also prove beneficial to the economy. The combined effect, the IMF report says, could be GDP growth that is 20-25 percent higher over ten years.
On the other hand, Susan Schadler, IMF Deputy Director for Europe, cautions that, without appropriate preparation, the entry could prove to have "disastrous consequences." Balcerowicz argues that compliance with the so-called Maastricht criteria, which place restrictions on the size of public-sector deficit, debt and inflation, would be beneficial to the economy, irrespective of euro entry. This would enforce fiscal discipline on spendthrift politicians, he says. Indeed, earlier this year, the government 'committed itself' to reining in deficits following accession. But the question is why it wasn't done earlier. After so many promises, this 'commitment' from the outgoing cabinet sounds rather hollow as well.
