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Poland's Central Bank Head: 'Euro Crisis Will Continue for a Long Time to Come'

The euro crisis, says Polish central bank head Marek Belka, isn't going to disappear soon. But in a conversation with SPIEGEL, he talks about why Warsaw still wants to join the common currency union, the success of Poland's economy and the reason Eastern Europeans haven't protested against austerity measures.

SPIEGEL: President Belka, on Thursday morning the leaders of the euro zone agreed on a debt haircut for Greece and expanded the bailout fund for the euro. Will the Poles now try to join the common currency?

Belka: The Brussels decision shows that everyone who expected the demise of the euro was wrong. The European leaders clearly affirmed that the euro zone would continue to exist. Now the decisions have to be put into practice. All the problems will not disappear at once, and we could still see turbulence over the debt securities of other countries. But the prospects for Poland joining the euro are certainly much clearer now, although we don't want to specify an accession date right away.

SPIEGEL: After the summit, is the euro zone still as attractive to Poland as it was before?

Belka: We can't say yet that the euro countries have put the crisis behind them, and I believe that it will continue for a long time to come. But there is now an outline for a new architecture to coordinate economic policy, and that's a very good thing. The euro zone is heading for an increasingly closer political union, without which the euro can't be saved. One day Poland will join a new and different euro zone, which will have more of the characteristics of a federation than it does today. We have to be strong and healthy to avoid losing our economic sovereignty, which is now happening to a few countries that have problems.

SPIEGEL: Countries like Greece and Italy have to put up with more careful monitoring of their budgets by Brussels. How do you intend to explain to the Poles, who are becoming more and more skeptical about the euro, that introducing the currency is still worthwhile?

Belka: It's still too early to try to explain this to the Poles. We are being bombarded from all sides with bad news about the euro. Of course, this isn't exactly encouraging. But once the euro zone has recovered, the Poles will realize that it's bad to be left out in the cold. It means additional costs and risks for the Polish economy, because it has to offset exchange-rate fluctuations. The Poles basically know that they belong in the euro zone. Not even true skeptics really want to see the euro crash. We have an interest in the euro surviving and being strong. Anything else would mean that the idea of the European Union would fall apart, and that would be disastrous for Poland.

SPIEGEL: Hasn't Europe lost credibility during the crisis? After all, it came about because members of the euro zone failed to comply with their own fiscal criteria.

Belka: Right now there are in fact many reasons to resist joining the euro. But if the euro zone manages to get its house back in order and jointly vouch for the currency, it will convince the Poles. Thursday's decision shows the entire world that Europeans are willing to defend their currency.

SPIEGEL: The European Central Bank bought up government bonds of insolvent countries. Many saw this as a lapse -- as the end of the ECB, and possibly the start of a great inflation.

Belka: Nevertheless, the purchases were correct. It was an absolutely exceptional situation, and the ECB acted within narrow confines. You can't say the ECB simply switched on the money-printing machines. It also helped the countries that needed help. Of course, some economists felt a taboo had been breached. But many taboos were overcome. Only weeks ago, a debt haircut for Greece was taboo, as was the private sector's participation in the bailout. Some see government assistance for banks after the Lehman Brothers bankruptcy as a serious intervention in the markets, but without it we would have experienced a meltdown in the banking sector. I know Germans have a conservative relationship with monetary stability. But this type of crisis requires a lot of pragmatism.

SPIEGEL: Is it conceivable that the EU will cut back on other spending in the future because of the unimaginably expensive bailout funds? Spending such as subsidies and structural assistance, which has also helped Poland in recent years?

Belka: We're worried about that, of course. It would be a violation of the accession agreements. The deal, at the time, was this: We adjust our markets, and you help us in the process. If this were no longer the case, it would be a breach of promise.

SPIEGEL: Until now the European Union consisted of the old, rich members in the west and the new, poor ones in the east. Is the EU now disintegrating into a northern part, which has its finances under control, and a south with a lax approach to debt?

Belka: Actually, we should be pleased that we are finally on the right side. Nevertheless, this sort of a division would not be a good thing. The countries in the south must overcome their crisis. Poland, too, was once heavily in debt. Our economy is booming today. Why shouldn't the Greeks or the Portuguese achieve the same thing?

SPIEGEL: Did Chancellor Angela Merkel and French President Nicolas Sarkozy wait too long to agree on the euro rescue?

Belka: We have recently experienced dramatic changes occurring at a very high pace. The markets act online, and politics will always lag behind a little, especially when -- as in the euro zone -- it's a matter of 17 governments having to agree. I know better than to criticize the political leaders for their management of the crisis, and in the wake of the Brussels decision, I also have no reason to do so.

SPIEGEL: The phrase "Polish economy" once stood for inefficiency. How did Poland manage to be the only EU country to keep on growing its economy during the financial crisis?

Belka: We did a few things right. Our economic policy was cautious. We took integration into the EU very seriously. Many of our rules are more modern than the rules in Germany or France. We have had a debt limit enshrined in our constitution since 1997. We have low taxes and competitive labor costs. The Poles complain a lot, but we are basically optimists. Optimists spend money, while pessimists do not. The Germans believe that after the Hartz (welfare) reforms, they now have a flexible labor market. But ours is even more liberal. We have avoided financial turbulence. And there was no credit bubble.

SPIEGEL: Does Poland have a better handle on its banks than the rest of Europe?

Belka: As a country that still suffers from the consequences of the command economy, we are late bloomers when it comes to the banking sector. Paradoxically, this saved us in the crisis. Besides, our banking regulators have been counteracting insolvency since 2006.

SPIEGEL: The governments of many of your neighboring counties -- Estonia, Lithuania, Latvia, the Czech Republic and Slovakia, have launched painful austerity programs. But there were hardly any demonstrations, in contrast to Spain and Greece, for example. Why are the people in Eastern Europe so much more patient?

Belka: Because the people here still aren't used to prosperity. Let me give you an example from my days at the International Monetary Fund. It was at a time when the Latvians had to implement a drastic austerity program, which caused consumer spending to drop by 25 percent in a year. I asked a Latvia negotiator how his country expected to survive this dramatic crisis. He said: What crisis? We had a crisis when the Soviets were sending us to Siberia. Here in Eastern Europe, many still remember why they were once poor, and they're not afraid of reasonable reforms that are painful in the short term.

Interview conducted by Jan Puhl

Translated from the German by Christopher Sultan

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From DER SPIEGEL

About Marek Belka
  • AP
    Marek Belka, 59, has been president of the National Bank of Poland since 2010. He served briefly as Polish prime minister in 2004-2005, and from 2008 to 2010 he directed the IMF's European Department. He's served as a consultant to the World Bank since 1996 and he holds a PhD in economics.

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