Poland and Further Enlargement of the Euro Zone: Chance for Poland, Chance for Germany

Alexander Wochnik

Alexander Wochnik holds a PhD in Politics and International Relations from Aston University, UK. His research focuses on German foreign policy, Polish foreign policy, and Polish-German relations. He was a Harry & Helen Gray/AICGS Reconciliation Fellow in the summer of 2012; a Japanese Society for the Promotion of Sciences (JSPS) Postdoctoral Researcher at Hitotsubashi University in Tokyo in 2014; a Research Fellow at Manchester University, UK (2013-14); and in 2016 a DAAD/AICGS research fellow assessing German multilateralism through security relationships: German-U.S. Cooperation in Afghanistan. Alexander has published in the international peer-reviewed journals Geoforum, German Politics, West European Politics, and East European Politics and Societies.

He is a 2016-2017 participant in AICGS’ project “A German-American Dialogue of the Next Generation: Global Responsibility, Joint Engagement,” sponsored by the Transatlantik-Programm der Bundesrepublik Deutschland aus Mitteln des European Recovery Program (ERP) des Bundesministeriums für Wirtschaft und Energie (BMWi).

Amid the euro crisis it seems elusive to think about further enlargement of the euro zone. After all, the political elites, the media, and the common European people are busy debating whether the euro will even survive. The legitimate questions being asked are whether it’s fair to help states to stay in if, in the short term, it means the transfer of billions of euros to aid the peripheries’ dead economies and further guarantees of unimaginable proportions to appease the financial markets; and if, in the long run, the stabilization of the euro zone means further integration and more hollowing out of the nation state? While some euro zone insiders might wonder why they joined the single currency in the first place, it may also lead those on the outside to be relieved that they have not. In that kind of climate why would any member state voluntarily want to “join this mess”? The Treaty on European Union requires all EU member states (unless a member state has secured a permanent derogation as is the case with Denmark and the UK) to join the Economic and Monetary Union (EMU), but not in a specific time frame. Therefore, member states can theoretically defer the entry into ERM III indefinitely. Sweden has set a precedence case for this. I argue that Poland’s early and full commitment to the euro would not only benefit its interests but also give Germany more options in setting the pace for Europe.

Poland is a new member state (NMS) that joined the EU in May 2004 without an opt-out pertaining the euro question. At the beginning of the millennium, the Democratic Left Alliance (SLD) government forged an ambitious plan to adopt the euro by 2007, but by mid 2003 the plan had failed. The more Eurosceptic Law and Justice  (PiS) government under the leadership of the Kaczyński twins sought to delay the adoption of the common currency for as long as possible. A week before their electoral defeat in the 2007 parliamentary elections, Finance Minister Zyta Gilowska announced that Poland would be ready to talk about joining the ERM II mechanism in 2009, with the intention to join in 2012. In 2008, Polish Prime Minister Donald Tusk’s first Civic Platform government published a roadmap on fulfilling the nominal convergence criteria by 2011, with the euro replacing the zloty in 2012[1]. The banking, sovereign debt, and euro crises obliterated these plans.

Since then, the Tusk government has sent mixed messages. Foreign Minister Radosław Sikorski remarked in an interview in December 2011 that Poland could join by 2016 if “the euro zone is reformed by then and if joining is beneficial to us”.[2] In January 2012 Finance Minister Jacek Rostowski corrected Martin Schulz, the President of the European Parliament, who said that Poland would join EMU in 2015. Rostowski clarified that “we do not intend to join in 2015, but want to fulfill the fiscal requirements.” He added that is was difficult to predict whether Poland will have fulfilled all the necessary requirements, and that it is “likely, but it is not our goal. Whether we will fulfill the exchange rate criteria? That is unlikely since we do not assume that we will have joined ERM II.”[3] In July 2012, Jacek Dominik, Government Plenipotentiary for the Euro Adoption in Poland, when asked what happened to the National Plan to Introduce the Euro prepared by the Finance Ministry, he replied that “given the scale of changes in the euro zone it has been purposefully considered to hold the work on the document.”[4] However, on his visit to Canada in May 2012, Prime Minister Donald Tusk stated that Poland is ready to join the euro: “On that question nothing has changed. The only thing that has changed is the euro zone’s reputation which has decisively worsened over the last years”. He added that the European Union must continue political as well as economic integration, of which one element should certainly be a common currency, but that “it has only sense when common rules exist and when all euro zone member states observe these rules.”5]

This sounds like a “wait and see” attitude of postponing the decision of membership until after the crisis has been solved, as well as keeping the possibility to defer the euro adoption indefinitely. This diminishes Poland’s chances of achieving important strategic objectives in the EU by forgoing an alliance with Germany. I will elaborate on this point further below. The Polish government is well aware that the euro adoption entails the strategic goal of preventing political marginalization by joining the euro-insiders that can influence policies. Radek Sikorski said in July 2012 that “Poland’s place lies within the decision-making core.”[6] How much it means for Poland to become a policymaker (or pacesetter) rather than a silent taker can be derived from Sikorski’s Berlin speech during Poland’s EU Presidency in November 2011: “it’s not enough to say that countries may participate once they join the euro zone. Instead of organizing separate Euro summits or exclusive meetings of finance ministers we can continue the practice from other EU fora where all may attend, but only members vote.”[7] That is also the reason why Poland joined the Euro Plus Pact and initiated the Sixpack meant to reform the Stability and Growth Pact.

The argument that being a euro-outsider leads to a loss of influence due to both the reduced possibilities to participate in the policymaking process and that an outsider is not an attractive coalition partner for other insider member states dates back to the late 1990s.[8] Academics then examined these assumptions and found that countries that secured opt-outs do still retain influence in the Council. This is done by either compensating for the nominal loss of influence by “playing the good pupil” and adhering to EU rules better than many member states without these opt-outs (Denmark and the UK), by engaging in missionary strategies trying “to teach Europe a lesson” through specific examples and threats (UK),[9] or simply by being well connected in the negotiation network (UK, Denmark ,and Sweden).[10] However, the findings do not take into account what goes on at the highest level between the leaders of government. Since these findings were published, the euro crisis has hit Europe and has made it clear that the euro zone needs to further integrate itself − a path that it is currently trying to take. An example of this is Volker Kauder, chairman of the CDU/CSU parliamentary group in the German Bundestag, who suggested a separate parliament for the euro zone members.[11] Moreover, Poland is a mid-size country that could not really show much muscle power in the EU. With its most important geostrategic goal of bringing Ukraine closer to the Europe Union, Poland has shown a limited ability to do so.[12] Even though Poland has “learned the Brussels game” since 2004 and the tough rhetoric of “Nice or death”[13] has been replaced by more diplomatic tactics (a decent but not amazing presidency of the European Union in the second half of 2011),[14] its choice of partners in compensating the mid-size status and increasing influential capabilities are not adequate to achieve her goals. Teaming up with Sweden to initiate the Eastern Partnership (EaP) has been successful, but the EaP is not a strong enough instrument in pulling in Ukraine. The regional Visegrád group framework, while perhaps helpful in the upcoming negotiations for the 2014-2020 EU budget, is again not suitable for Poland to “sit in the EU decision core.” Too distinct are the four states’ ways of handling European affairs. The Slovaks rushed into the euro, while the Czechs do not want to have anything to do with it. Furthermore, Hungary’s government has been annoying the EU leadership with a number of issues over the last few years.

To improve Poland’s standing in the EU, I argue that Poland should seek Germany’s partnership on a permanent basis. This should be done by Poland sending a clear message and committing to the euro without hesitations. The idea of a strong Polish-German partnership is not new in and of itself, and it was put on the table in the early 1990s by calling for a “community of interests” (Interessengemeinschaft)[15] between the two states. In Germany, it was argued that Poland could become “our France in the East.”[16] Never have chances been better for Poland to achieve this position. Since Poland’s EU accession GDP has regularly grown over 4 percent, and in 2006 and 2007 GDP grew by more than 6 percent. Even during the economic crisis in 2009, Poland was the only EU member state with a moderate growth of 1.6 percent. Polish exports to Germany represent over 26 percent of her total. From Germany also stem the most imports to Poland, over 22 percent in total. Poland also imports from Germany the most, over 22 percent of its total.[17] The balance sheet favors Germany, of course. Poland has also been engaged in a number of out-of-area missions, thus proving her willingness for military cooperation with other partners.

On the societal level, things have gone well. In a representative poll in June 2011, Germany came in third (behind Slovakia and the Czechs) with 57 percent regarding Polish-German relations as friendly[18] – an improvement of 7 percent since 2005 despite the omnipresent “Merkozy” tandem in the news. The Germans have started to note their neighbor as well. The country, once “full of car thieves and post-communist drabness” is now increasingly portrayed as a “Central European powerhouse.”[19] It is unlikely that Poland can simply replace France as Germany’s most important partner in the EU. The relationship has too deep of roots and the Franco-German tandem has shaped Europe ever since the integration project was launched in the 1950s. Notwithstanding, the Franco-German axis is not set in stone, and it certainly does not mean that a third partner should not join in. The terms of the euro creation at the beginning of the 1990s left a bitter aftertaste in France,[20] and it is a myth that the Franco-German tandem easily drafts joint proposals for the rest of Europe. These proposals are always the result of long discussion and negotiations reaching difficult compromises. Moreover, while François Hollande took back Sarkozy’s retirement reform and lowered the retirement age back to 60 years of age – a move that strains the euro zone − Poland lifted the retirement age to 67 for both genders. A Poland inside the euro zone would also make it one of the few countries with gross government debt well under 60 percent, thus falling within the original Maastricht criteria. This would lend the euro zone more credibility and give Germany another ally in stabilizing the euro. Of course, participating in the ESM/EFSF would be costly for Poland. However, if winning Germany for her cause would be the result, the money would be well invested.

The road to euro adoption is not an easy one. In a July 2012 representative poll, 68 percent of the Polish population reject the idea of the euro. In January 2002, 64 percent liked the idea. The percentage of the population that favors integration has reached a low with 77 percent (the lowest since September 2005) – still high, but down from the high of 89 percent in July 2007. [21] For the euro to be introduced in Poland, the Constitution would need an amendment which requires a two-thirds majority of parliament. This necessitates the cooperation of the opposition. The politics in Poland, however, is characterized by confrontation rather than consensus, as is the case in Germany. The current oppositional PiS made it clear that it would only vote in case of a referendum. The turnout of the referendum must, however, exceed 50 percent to be valid. Given that in the last parliamentary elections in 2011 a mere 49 percent was reached, things are looking dire on that front. That is why the current government should put efforts into a euro campaign on time. The longer the Poles wait, the more difficult it will later become to convince the electorate. Rising GDP might be an effective argument that prosperity can also be achieved without the euro. The opposition should also grasp what is best for the country in the long run: being at the heart of Europe can only be achieved by positioning Poland as a European pacesetter which, in turn, can only be done inside the euro zone. The times for a Polish-German tandem are favorable. As Sikorski stated in his Berlin speech “I will probably be the first Polish foreign minister in history to say so, but here it is: I fear German power less than I am beginning to fear German inactivity.” Poland should help Germany to become active and remain active in the EU.