The Shining Star of Europe?

Fareed Zakaria points us to what may be the shinning star of Europe:

[P]erhaps the biggest reason for poverty-stricken nations like Egypt to pay close attention to Poland is that it is a very rare breed in today’s world, especially in Europe. Poland has a strong economy – the sixth biggest in the European Union now and the only European Union country to avoid a recession altogether. None of its banks needed to be rescued. Its economy grew 4% last year, and is on track to grow 3% in 2012. Why, you’ll ask. How did it survive the turmoil in the Euro Zone? One answer is that it has strong domestic demand and has been pouring money into infrastructure projects. But the real – and fortuitous – reason is that Poland has yet to be allowed in to the Euro Zone – it continues to use zlotys instead of the euro. So unlike Greece or Italy, it was able to devalue its currency to stay competitive.

I know that last part will leave some of my hard money readers in angst, so think of it this way. Poland has been able to stabilize domestic demand by adjusting its monetary policy accordingly. The Eurozone periphery has not been able to do this and paid dearly as seen below:

Now Poland has done other things right as noted by Zakaria, but what this contrast highlights is that the Eurozone crisis is as much a monetary crisis as anything else. Yes, there are deeper structural problems with the Eurozone, but if Eurozone officials want to address these deeper problems they need to first address the immediate monetary problems behind the crisis. Maybe the shining star of Europe will help them appreciate the monetary nature of the crisis.

This post originally appeared at Macro and Other Market Musings and is posted with permission.

6 Responses to "The Shining Star of Europe?"

  1. rodeneugen   January 26, 2012 at 1:14 pm

    Very right!!! Poland, but also some other East European countries (except of Hungary) should increase their investments and not to cut it, as some of them are forced to do. Most of them have relatively low public dept, (mostly bellow 50% of the GNP, except of Hungary), on the other hand, in spite of being part of the European Union, their population lives in shamefully low standard of living and have a big deficit in infrastructure. All the money saved in the European banks, by not been wasted in the government bonds of the troubled economies of the P.I.I.G.S. countries, should be channeled into Poland, Romania, Bulgaria, Czech Republic, Slovakia etc. Compared to any other alternatives, it will definitely bring the highest yield on investments, and be the least risky investments. The time came to explain to these self imposed ”Gods” sorry “Bankers”, that if any entity, be it private or public has liabilities of higher value than its assets, giving them loans is a very risky business. This I call fundamentals.

  2. JCM   January 27, 2012 at 6:53 am

    without the extra money(subsidies) from bruxelles ,the export of unemployment to the eurozone and the money import from the working polish people in the eurozone to poland out of the eurozone,poland would also be an economic disaster.

    by the way a lot of polish people are suffering,because the have mortgages in swiss francs.

    no there are no economic miracles in europe and also poland isn't one.

    • rodeneugen   January 27, 2012 at 3:15 pm

      Sorry, you mixed up Poland with Hungary about the Swiss Francs and as to the polish emigrants, every economist will tell you, depleting the work force is a negative thing to the economy. Subsidies, hmmmm, you are right, but what about the EU subsidies to agriculture?

  3. JCM   January 28, 2012 at 2:42 am

    in this article you'll see,that these mortgages are used in all of eastern europe and are a big problem for their citizens.

    depleting workforce is may be negative for the economy,but exporting unemployment (costs)and importing the benefits of payments by the other eurozone members is a plus.

    don't believe any hype and also not poland's

  4. rodeneugen   January 28, 2012 at 6:19 am

    Dear JCM, probably you don't realize that Poland just 22 years ago was released from the grasp of the Communistic system, with devastated economy and per capita income of about 100 US$ per month, not to mention being totally striped of of any personal assets or valuables. Today the per capita income is above 1500 US$, and they enjoy ownership of some assets, of course mostly mortgaged. In this process of economic and wealth growth Polish people had to pay very high personal price, that may seem to you, who probably lived whole his life in a western welfare country unacceptable. But then, in Poland or other East European countries people still have the feeling, that they are heading towards better future and it is worth to go thru this hardship, while the people in the West lost faith in the future long time ago.

    • JCM   January 28, 2012 at 7:50 am

      dear sir, ofcourse we all know the long way poland has made and also
      everybody with a little brains understands , that on this moment poland is cannibilizing the social security systems of other eurocountrys,probably doesn't sound political correct enough for you,but it's the truth.

      poland is misusing the eurozone and only wants the benefits and not the costs.
      they are exporting cheap labour,unemployment cost and importing this money and devaluating their currency instead of joining the euro.
      it's not a win/win at all.
      innovation is never heard of in poland as in all the other eastern europe countrys, all totally dependant on europe and that trick is over for now and ever, probably.