17 Jan European Café: The Euro Dilemma: Success in the Baltics, Concerns in the V4 (event summary)
The Centre for Euro-Atlantic Integration and Democracy (CEID) organized a European Café event on the 15th of December. The title of the discussion was “The Euro Dilemma: Success in the Baltics, Concerns in the V4” with the participation of Mr István Újhelyi, Member of the European Parliament, Group of the Progressive Alliance of Socialist and Democrats, Mr. Aldis Austers, Senior Researcher at the Latvian Institute of International Affairs, former Brussels Coordinator of Latvia’s EU Accession negotiations and Mr. Marcin Zaborowski, Senior Associate of the Visegrad Insight.
The aim of this discussion was to at analyze the potential benefits and risks of adopting the euro, especially in the light of the European Commission’s latest “unrefusable offer” to hesitant non-eurozone countries. However, V4 countries experience varying degrees of popular support for the euro. While Hungary has over 50 percent support for the common currency, it remains surprisingly unpopular in both the Czech Republic and in Poland among citizens and the political elite. Our high-level speakers examined the experiences of the Baltic countries and explored the political and economic pros and cons of eurozone accession in Poland and Hungary.
One question immediately raised, was the likelihood of Poland and Hungary adopting the euro in the next 5 years and why there is a greater chance for Hungary joining rather than Poland. Mr. Zaborowski began by breaking down both the technical and political obstacles preventing Poland from adopting the euro. One critical component is the Polish Constitution, which enshrines the Polish Zloty as the national currency and a 2/3 majority would be needed to change it. He also argued that Poland remaining outside the eurozone helped the country weather the 2008-2009 financial crisis because it had the necessary flexibility and devalued its currency by 30 percent. Furthermore, the majority of Poles have no desire to adopt the euro and pushing this would gain little political traction. One the other hand, Mr. Újhelyi argued that Hungary is in a different position with a large portion of the population supporting the adoption of the euro, however, there remains little debate on the topic as ruling Fidesz party hasn’t showed an interest in pushing this agenda.
Mr. Austers elaborated on the many benefits Latvia and other Baltic States enjoyed following their eurozone accession, even though public opinion was either undecided or against adopting the euro. However, the Latvian government successfully ran a campaign depicting the many benefits of joining the eurozone including closer trade ties with its Baltic neighbors and increased competitiveness.
This response prompted the moderator Ms. Inotai to ask about how V4 trade and competition would be affected by joining the eurozone and would these countries experience the same benefits as the Baltic States. Mr. Zaborowski argued that Poland already is a sustainable, competitive economy without the euro and attracts international investors especially from the US due to its favorable exchange rate and low labor costs, making it unviable for Poland to accept the euro on purely economic reasons. Mr. Újhelyi argued that the V4 and Baltic are in different situations but for other reasons than Mr. Zaborowski. The future of Hungarian economic development lies in the West with Austria and Germany or in the East with Romania and Ukraine. He argued that trade between Hungary and other V4 Counties isn’t a key element in the economy. In his eyes, the idea of the V4 as an economic entity is false and in reality it is simply a political tool.
One reoccurring question during the discussion was which direction would countries such as Hungary and Poland choose: creating closer ties with the EU through the eurozone or remaining on the periphery as a non-Euro member. Mr. Újhelyi and Mr. Zaborowski both made convincing but different arguments for their respective countries’ futures, with Hungary taking a more pro-euro approach and Poland staying outside the Eurozone. Both agreed that Poland’s new Prime Minister, Mateusz Morawiecki, will not change Poland’s stance on the issue of the euro and he will rather continue Beata Szydło’s policies.
Furthermore, on the topic of the future of Europe our panelists reacted to questions from the audience regarding the improbability of Emmanuel Macron’s ambitious plans for the eurozone and the need for Chancellor Merkel to provide a counterweight to these ideas and ensure the reforms are realistic. All panelists agreed the next year will be crucial for the eurozone and will also show Poland and Hungary’s plans for the future – either engage with the EU core or remain on the periphery.
