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Poland to pick ERM-2 strategy in Jan-ruling party

Thu, Dec 18 2008, 13:52 GMT
http://www.afxnews.com

WARSAW, Dec 18 (Reuters) - Poland's government will decide in January on its strategy for joining the pre-euro ERM-2 currency grid in the face of constitutional and political obstacles to the plan, a ruling party leader said on Thursday.

Prime Minister Donald Tusk's centre-right government wants to swap zlotys for euros in 2012, but has so far failed to persuade the eurosceptical main opposition party to support the necessary constitutional amendment. Tusk lacks sufficient votes in parliament to amend the constitution without their support.

"When it comes to ERM-2, the prime minister gave two scenarios. One is with the constitutional change and the other is ERM-2 without the constitutional change," Zbigniew Chlebowski, parliamentary chief of Tusk's Civic Platform party, was quoted as saying by news agency PAP.

"The decision on which scenario will be chosen has not been made yet. It will for sure be made in January, after the next meeting with party leaders on the euro issue. This is the will of the prime minister."

Poland's constitution says the National Bank of Poland has the sole right to issue money and conduct monetary policy. Once in the euro area, these tasks would be the responsibility of the European Central Bank.

The ruling party, the Civic Platform, its junior partner the Peasants' Party and the leftist opposition are in favour of the euro but the conservative Law and Justice has said it wants a referendum on the government's plan.

Analysts and even some members of the government have said it would be dangerous to take the zloty into ERM-2 -- where it would move in a designated range against the euro -- without the constitutional changes in place because it could encourage speculators and increase currency volatility.

Critics also note the increased volatility on emerging markets caused by the current global economic downturn as investors turn away from riskier assets.

(Writing by Karolina Slowikowska; editing by Patrick Graham) Keywords: POLAND EURO/

(karolina.slowikowska@thomsonreuters.com; Reuters Messaging: karolina.slowikowska.reuters.com@reuters.net; tel. + 48 22 653 97 25)

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