Commission Opinion [COM(97) 2002 final - Not published in the Official Journal]
Commission Report [COM(98) 701 final - Not published in the Official Journal]
Commission Report [COM(1999) 509 final - Not published in the Official Journal]
Commission Report [COM(2000) 709 final - Not published in the Official Journal]
Commission Report [COM(2001) 700 final - SEC(2001) 1752 - Not published in the Official Journal]
Commission Report [COM(2002) 700 final - SEC(2002) 1408 - Not published in the Official Journal]
Commission Report [COM(2003) 675 final - SEC(2003) 1207 - Not published in the Official Journal]
Treaty of Accession to the European Union [Official Journal L 236 of 23.09.2003]
In its Opinion of July 1997, the Commission took the view that it was too early to decide on Poland's participation in the euro area immediately upon its accession. If it were to participate in the third stage of economic and monetary union (EMU) while not being a member of the euro area, this should not pose any problem in the medium term, although the Commission felt that the central bank legislation would have to be made fully compatible with Community requirements.
The Report of November 1998 stressed that Poland had made good progress in preparing for economic and monetary union.
By contrast, the Report of October 1999 stated that Poland had made only limited progress in its preparations for participation in EMU.
The Report of November 2000 stated that there had been no legislative developments here in the course of the year but that Poland had already adopted a substantial portion of the EMU acquis.
The Report of November 2001 stated that no progress had been made in the field during the period covered by the report.
In the Report of October 2002 the Commission noted that no progress had been made in transposing the acquis.
In its Report of November 2003, the Commission finds that Poland complies with the commitments and obligations resulting from the accession negotiations but that adjustments are still needed to guarantee the full independence of the National Bank of Poland.
The Treaty of Accession was signed on 16 April 2003 and accession took place on 1 May 2004.
The third stage of EMU began on 1 January 1999. This date will entail far-reaching changes for all Member States, even those not taking part in the euro area from the outset.
In the economic sphere, the keystone is the coordination of national policies (national convergence programmes, general economic guidelines, multilateral surveillance and excessive-deficit procedure). All countries are required to comply with the Stability and Growth Pact, to refrain from direct financing of the government deficit by the central bank, to prohibit privileged access by public authorities to financial institutions and to have liberalised capital movements.
Member States not taking part in the euro area conduct an independent monetary policy and participate in the European System of Central Banks (ESCB) under certain conditions. Central banks must be independent and must have price stability as their primary objective. Lastly, exchange-rate policy is regarded as a matter of common interest by all Member States, who must be in a position to participate in the new exchange-rate mechanism.
Even though accession entails acceptance of the objective of EMU, compliance with the convergence criteria is not a precondition. However, since those criteria are indicative of a macroeconomic policy geared to achieving stability, all Member States must, in due course, comply with them on a permanent basis.
Poland is regarded as a functioning market economy which should be well able to cope with competitive pressure and market forces within the Union in the medium term. Trade integration with the European Union has been reinforced. Poland's macroeconomic stability is well established and the country has weathered the Russian crisis well. However, the 2000 report noted the appearance of a number of economic imbalances. As a result of regular growth, per capita GDP (purchasing power standard) amounted to 39.2% of the EU average in 2000, against less than 34% in 1995; however, the figures concealed significant differences between regions. The private sector accounted for more than 70% of GDP and 72% of employment. The 2002 report noted that unemployment remained the key problem of the transitional period. Unemployment, which stood at 11% in 1997, has increased over the last few years to a high of 18.4% in 2001. The 2003 Report notes that Poland has maintained macroeconomic stability and is experiencing a gradual recovery which is largely driven by external demand. The expansion in the fiscal deficit and in public debt, together with high unemployment (19.9% in 2002), is the main economic challenge facing the Polish authorities.
As regards economic activity, Poland's real GDP increased by 6.9% in 1997. The following year, growth ran at 4.8%. The slowdown since mid-1998 is a direct result of the Russian crisis and other external factors. In 1999 the Polish economy grew at a rate of 4.1%. Growth for 2000 as a whole was approximately 4%. The clear downturn since 2001 interrupts Poland's impressive record of growth from the mid-1990s. Growth in the first quarter of 2002 amounted to barely 0.5%. However, average real GDP growth for the whole of the period under consideration runs at a very healthy 4.2%. The 2003 Report notes that, after a sharp slowdown in 2001, Poland experienced a modest recovery in 2002. Real GDP grew by only 1.4%, against 1% in 2001. Recent developments suggest an upturn in economic activity: real GDP increased by 2.2% in the first quarter on a year-on-year basis and by 3.8% in the second quarter.
Turning to public finances, the 1999 draft budget provided for the State's budget deficit to be reduced from 2.8% of GDP (1998) to 2.15%. The medium-term financial strategy envisaged a balanced budget by 2003. In fact, however, the deficit still amounted to about 3.5% in 1999 because budget policy had been relaxed in response to cyclical and structural factors. The situation worsened further in 2001, with the deficit growing to 3.9% of GDP. The 2002 report notes that Polish efforts to place the budget on a sounder footing have been undermined by the economic slowdown and the authorities' unwillingness to take radical measures on public spending. Nevertheless, there has been a significant reduction in the public debt, which shrank from about 47% of GDP in 1997 to 38.7% at end-2000. The trend was reversed in 2001, with the debt ratio amounting to 39.3% at the end of last year. The 2003 Report notes that Poland's fiscal position deteriorated further last year as a result of the economic slowdown and the relaxation of fiscal policy. The general government deficit increased to 4.1%. This was reflected in a 4.5% increase in the debt-to-GDP ratio.
Inflation fell to 7.3% in 1999, a result which should be seen in the context of the year-on-year average of 11.6% for 1998. It picked up again in 2000, rising to 10.2%. The 2001 report notes an ongoing reduction in inflation, which amounted to 3.5% at end-2001. The 2003 Report notes that inflation continued to decline sharply in 2002, with headline inflation falling to 0.8% year-on-year in December 2002. Inflation has remained very low since the beginning of 2003.
The Polish authorities used to operate a clear exchange rate policy based on a crawling peg. The zloty lost almost 10% of its value in the currency fluctuations induced by the Russian crisis. Poland subsequently switched to a free float, an exchange rate strategy consistent with inflation targeting. The 2002 report notes that the central bank has maintained its policy of combining a floating exchange rate with direct inflation targeting. This combination is regarded as meeting the needs of the Polish economy at this late stage of transition in the run-up to EMU. The 2003 Report notes that the effective depreciation of the zloty observed since mid-2001 has helped to make Polish exports more competitive.
Poland's current account deficit amounted to 3.2% of GDP in 1997, rising to 4.3% in 1998 and 7.5% in 1999. This very substantial increase was the most urgent economic policy problem of the time. In 2000 the deficit shrank to the more comfortable level of 6.3%, and it is estimated at 4% for 2001. Over the whole of the period covered by the reports, there has been an ongoing deficit on current account of at least 4% of GDP, which has been increasingly financed by foreign direct investment (FDI). The 2003 Report notes that the current-account deficit shrank again last year to 3.6% of GDP.
With regard to structural reforms, in July 1998 the Polish Government adopted a privatisation programme scheduled for completion by end-2001. It also mapped out reforms on regional organisation, pensions and the steel industry. Restructuring in the coal and steel industries had major social repercussions, as did farming reforms. Agriculture declined as a proportion of total production from 13% in 1989 to 6% in 1997. Although most prices are no longer set by the authorities, distortion remains on some markets. Reforms have continued in the financial sector, which is attracting increasing interest from foreign investors. The 1999 report noted that substantial progress had been made in privatising the banking industry. The Government also planned a reform of the tax system. The Commission noted in its 2000 report that the country had continued to improve its functioning as an open market economy through prudent macroeconomic policies and implementation of various types of structural reform. Prices have largely been liberalised. Overall, progress was made in 2001 on privatisation and structural reform. The 2002 report indicates that Poland has completed transitional reforms in the areas of trade and price liberalisation, that implementation of the privatisation programme is at an advanced stage and that good progress has been made on structural reforms. Progress has also been made on major reforms concerning pensions (with the introduction of a three-pillar system), healthcare, education and regional organisation. Various privatised sectors have been successfully restructured. However, the programme of reforms has yet to be completed. The 2003 Report indicates that the reform process has made virtually no progress since last year's report. Privatisation has slowed down considerably in the last two years.
A new law on the independence of the central bank (NBP) was passed in August 1997 making price stability the NBP's number one priority. The new law reinforces the bank's independence given that it is no longer required to obtain parliamentary approval for its monetary directives. It has also been prohibited from lending or transferring funds to the authorities since October 1998. The 1999 report notes that Poland adopted the Public Finances Act, which prohibits direct funding of the public sector by the central bank, in November 1998. Technical amendments still have to be made to the National Bank of Poland Act to guarantee that body's institutional and financial independence. The 2000 report calls for the Bank's articles of association to be amended as regards financial management, the independent audit system and participation by a government representative in the meetings of the Monetary Policy Council. Parliament has rejected the draft amendments to the NBP Act, which were designed to bring Polish legislation into line with Community law. The latest report notes that Poland is firmly committed to its declared objective of bringing its legislation fully into line with Community law by end-2000. The 2003 Report notes that the Act is still incompatible with the acquis in respect of a number of points. Among other things, provisions allowing participation by a government representative in Monetary Policy Council meetings should be deleted.
As regards the negotiations, Poland has fully accepted the acquis relating to EMU, as laid down in Title VII of the EC Treaty. Administrative structures have been set up to ensure that Community law is implemented in practice.
Negotiations for this chapter were closed in December 2002. No transitional arrangements have been requested. Generally speaking, Poland has met its commitments in this field.
This summary is for information only and is not designed to interpret or replace the reference document.