Polish Currency Takes a Blow

The Polish are worried, and it hasn’t to do with the disappointment that was the UK.

In the last few months, a large number of Poles who had come to the UK to find fortune have returned home as the economic crisis deepened.

But the reason for this week’s concern is that the currency of Poland, the zloty, plunged after the central bank there raised concern over joining the Eurozone.  Poland has been part of the EU for some years but was only due to join the European Single Currency – the Euro – in 2012.  But now they are nearly due to start ERM-II – the two year process which tests the stability of a currency before joining the eurozone – and the central bank is finding it hard to support the move.  The zloty has therefore taken a hit, while having already fallen 14 per cent against the euro in 2009 alone.

Other fears that are affecting the polish currency are centred over whether the country can finance the current account deficit amidst strict lending habits.  The fact that Poland is export dependent only serves as icing on the cake.  Only earlier this week, Japan – the world’s second largest economy and also heavily dependent on export – announced the contraction in their economy, to the lowest level since the 1974 oil crisis.

There is a continuing trend of market pressure when central banks falter and hesitate over major decisions.  Fair enough, Poland must be feeling the pressure – perhaps unforeseen too, is the fact that the time in which they are due to enter the eurozone, the global economy will still be dealing with this prolongued recession.  In recent years, Poland has been the strongest of the post-Soviet Union countries, and trade between them and the UK has been strong.

Are they wise to wait before joining the EU family in all aspects?

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