The Importance of Risk Factors Related to Polands Joining the ERM2 and the Euro Zone

Two issues related to Poland's entry into ERM2 are analyzed in the first pat of the article: 1) the factors behind zloty moderation after Poland joined the EU, and 2) how the Central Bank of Poland should conduct its monetary policy to stabilize the zloty within the ERM2 band. In the second part the main risks related to Poland's entry into euro zone are analyzed. The main risk is seen in the potentially procyclical influence of ECB monetary policy on Polish economy. A question is posed how to secure the high rate of productivity growth which would shield Poland's economy against the risk of loosing competitive edge and entering a period of protracted slow growth. Poland, thanks to the process of real convergence, enjoys a relatively high rate of productivity increase. It is necessary, however, to implement structural reforms in order to secure productivity growth in longer perspective. The final part of the article emphasizes that the main sources of Finnish and Swedish economic successes were the structural reforms. A proposal to establish Fiscal Policy Council in Poland concludes the article.