Anti-Euro Swing on EU’s Fringe Triggers Backlash From Businesses

Belka said said adopting the single currency would lower corporate financing costs, prod businesses to boost their competitiveness and drive up wages. 

When Poland’s main business lobby hosted a debate on the pros and cons of euro membership last month, former central bank Governor Marek Belka surprised the audience by issuing a ringing endorsement for joining the euro.

For a man who resisted a switch to the single currency during the Greek crisis, his call for deeper integration now – echoed by attending executives – revealed how alarmed eastern Europe’s corporate elite is by the nationalism running through their governments and on the streets.

Eurobarometer, April 2017

It’s the same story in Hungarian business circles and in the Czech Republic, where premier-elect Andrej Babis rose to power by rejecting the French and German drive to make the currency union the engine of the European Union. Businesspeople worry about the economic costs of forgoing a seat at the table.

“We should take our EU membership, and EU affairs in general, very seriously,” Radek Spicar, vice-president of the Confederation of Industry a lobby group representing 11,000 Czech companies, told a business forum in Prague on Nov. 22. “If you’re so vitally dependent on something it’s good to be able to have maximum influence over it.”

Marek Belka

Photographer: Piotr Malecki/Bloomberg

Given how heavily the three countries rely on the EU for exports, foreign investment and subsidies, there’s good reason to be nervous, especially against the backdrop of Brexit. Without the anchor of euro membership, some companies fret that the deepening wedge between their governments and the EU will leave the nations with less clout in making decisions that affect their economies.

This risk is becoming more pronounced as the 19 nations in the bloc prepare to lay the foundations for a more complete financial and economic union, including possibly a euro-zone finance minister, a budget and a monetary fund.

Poland – the EU’s biggest eastern member and largest net recipient of  its subsidies – needs to have a strong voice in Brussels as this unfolds, Belka said on a panel about the future of the euro hosted by business group Lewiatan, which represents 4,100 companies. He said adopting the single currency would lower corporate financing costs, prod businesses to boost their competitiveness and drive up wages. 

“Joining the euro would trigger an innovation drive on a mass scale,” said Belka, a former IMF director who ran the Polish central bank from 2010 to 2016.

Fellow panelist Leszek Skiba, a deputy finance minister, argued Poland is better off waiting until after the euro-area reform to make any decisions – a view common among the region’s populist politicians and their voters.

Like Babis, a Slovak-born billionaire who controls an agriculture and media conglomerate, Hungary’s Viktor Orban and Jaroslaw Kaczynski of Poland oppose yielding any more national sovereignty to the EU. They’ve refused to set target dates for euro adoption, a condition of membership when the countries joined in 2004.

Their hesitation partly stems from the economic crises that drove the euro to its breaking point in the past decade. They don’t want to be liable for bailing out countries like Greece, especially since they’re less indebted than many euro members. Having independent currencies also serves them well during crises because they can weaken them to improve export competitiveness — something Italy and Spain can’t do.

Beyond that, though, is the virulent isolationism and anti-immigrant sentiment that’s swept through parts of the EU’s east. Two out of every 10 Czechs favor joining the euro, while only a third say being an EU member is a “good thing,’’ according to Eurobarometer surveys this year. That’s worse than how Britons feel about the bloc. While the EU itself remains popular in Hungary and Poland, only 43 percent of Poles want to adopt the euro. Almost six out of every 10 Hungarians favor a switch away from the forint.

If Brexit showed business leaders anything, it’s that their interests can quickly be sidelined when emotions run high over issues like migration and, in Poland and Hungary, rule of law. In June, the EU launched legal proceedings against the three states for refusing to accept refugees. Poland’s ruling Law & Justice party is at loggerheads with the EU over its push to bring courts and state media under more direct government control.

“Euro adoption is so demonized right now that it’s hard to expect a move,” said Marcin Czyczerski, the chief financial officer of Poland’s biggest shoemaker, CCC SA, which has a lot of customers in Europe and even pays for rents at home in the single currency.

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