Govt. outlines euro adoption plan

7th February 2010

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Prime Minister Donald Tusk on Wednesday provided an update on his government's proposed plan for Poland adopting the euro, but opposition from coalition partner PSL appears to be delaying his submitting it to Brussels for approval.

Tusk's cabinet had been expected to approve a revised convergence plan detailing how soon Poland could move towards entering the eurozone, but a dispute over overhauling the country's expensive pension scheme for farmers appears to be a stumbling block.

The government says that overhauling the KRUS retirement system is necessary if Poland is to reduce its deficit to 3 percent of GDP, which is a requirement for entering the EMR2, an initial stage in the Euro adoption process.

Although there had been talk earlier of reaching this deficit reduction goal as early as next year, the new target is 2012. Tusk warned that if economic growth slowed the date could be pushed back to 2013.

The government recently announced plans cutting spending and speeding up privatization this year, but the proposal still leaves a budget deficit of some PLN 30 bln for 2010.

Tusk tried to downplay the impact of the rift on the retirement issue with PSL. "I don't think there is conflict within the coalition. Our temperaments are complementary and we understand each other very well, even when our views differ," he said during the press conference he held on the convergence plan.

The government's proposal to bring farmers into the national pension system would require them to make bigger monthly contributions. Meanwhile, PSL needs to show its support for its rural electorate, since recent polls show the party is struggling to maintain the 5 percent voter support it needs to enter parliament in the next elections.

Agriculture Minister Marek Sawicki said that another obstacle is PSL's opposition to the government's plans to tax farmers as a way to raise PLN 2.8 bln in additional revenues. "Even if these are the rich farmers who pay, and for Minister Boni every farmer with more than 15 hectares is rich, I know that this group does not have this kind of money," he told TVN24.

In theory, the government is supposed to send the convergence plan to Brussels on Friday, but without PSL's support this deadline will be hard to meet.

The government has set a target date of 2015 for entering the eurozone, but a poll of analysts by Reuters showed that most of those surveyed feel Poland could adopt the Euro as early as 2014.