This morning Polish deputy Finance Minister Kotecki in an interview on Polish radio said that Poland should not join the ERM2 at the present time due to the high uncertainty in global markets. Until now the government has been quite adamant in saying that Poland would join the ERM2 in June this year. Kotecki's comments could be viewed as the first indication that the Polish government is softening its stance on swift ERM2 entry (and euro adoption).
We have long been critical of the Polish government's outspoken ambition to join the ERM2 already this year due to the fact that we don't think the Polish government has the support from the ECB and the European Commission to fulfill such ambition. Therefore, Kotecki's comments could simply be viewed as a more realistic assessment of the European realities and as such we do not think that it changes the (realistic) outlook for when Poland will join ERM2.
Even if some in the market might view this as negative for the zloty as it could indicate a postponement of ERM2 entry (and later euro adoption), we think that it is positive that the Polish government now recognises that uncertainty is very high in the global financial markets and that the ECB and the European Commission would prefer to postpone Polish ERM2 for the time being.
Furthermore, we do not think that this changes the Polish government ambition to join the euro and we think that both Finance Minister Rostowski and Prime Minister Tusk still remain strongly committed to Polish euro adoption - even if it might be less swift than the Polish government has tried to communicate until now.
Concluding, in general today's comments from Kotecki are welcome as they should be viewed as a realistic assessment of the outlook for Polish ERM2 entry. As such the comments might contribute to reducing volatility in the zloty and in the Polish markets in general.
