Euro

Tony Barber

Mikolaj Dowgielewicz is truly a new Pole.  Not yet even 37 years old, he is a minister (for European Union affairs) in Poland’s centre-right government, speaks fluent English and French, was educated partly in the UK, and has spent more of his life in an independent democratic Poland than in a Soviet-controlled communist Poland.  When I was listening to him speak at a think-tank breakfast in Brussels this morning, it struck me with force that he would have been just a small boy when I first visited Warsaw, Krakow and Gdansk in the summer of 1980 and witnessed the emergence of the free trade union Solidarity.

Now, like other new Poles, Dowgielewicz talks breezily about Poland’s growing weight in the EU, which it joined five years ago, and its prospects for adopting the euro as early as 2012.  Poland doesn’t want or need the eurozone’s entry rules to be bent, he says.  “We’re not proposing any amendments to the entry criteria.  Not that we think they make absolute sense, but it’s not feasible.  You’d have to change the EU treaties.  We think the criteria strengthen the eurozone’s credibility.  It will have to be down to the merits of each individual country.” Read more

Tony Barber

There are two schools of thought on whether Latvia should devalue the lat, or fight tooth and nail to keep its currency peg to the euro.  One, espoused by the Latvian government, the International Monetary Fund  and the European Commission, is that devaluation would destabilise the Latvian banking system, wouldn’t really address the long-term challenges facing the Latvian economy, and would risk spreading shock waves beyond Latvia across the Baltic and into other parts of central and eastern Europe.

The other view, espoused by some of the world’s leading economists, such as Paul Krugman and Nouriel Roubini, can be summed up as: “Get Real”.  Without devaluation, the only path that Latvia can go down to extract itself from crisis is massive deflation, through spending cuts and sharp falls in wages that will inflict terrible damage on society and will unnecessarily prolong Latvia’s recession. Read more