Editor's Note: This installment is the second of a three-part series that delves into the issues facing the eurozone and the European Union. This segment discusses the positions of Poland, the Czech Republic, Latvia and Lithuania. Click here to read part 1 or part 3.
Poland
Relations with Europe
Given Poland's strategic but vulnerable geographic position, Warsaw's main fear is getting wedged between two strong blocs: a bloc dominated by Germany and France to the west and a Russia-led bloc to the east. By promoting the integration of Central European countries into the European Union, Warsaw hopes to contain rising German and French influence while weakening Russia's presence in the region.
Eurozone Accession and View of Integration
Poland joined the European Union in 2004 and planned to join the eurozone in 2012. However, after the global financial downturn and the onset of the European crisis, Warsaw pushed its joining date back to 2016. Poland still does not meet many of the accession criteria and would have to be part of the European Exchange Rate Mechanism for two years before it could join the eurozone.
Domestic Political Situation
Poland's opposition Law and Justice party is less enthusiastic about European integration than the ruling Civic Platform party. The Law and Justice party is willing to support deeper military and economic integration with the rest of the bloc but remains skeptical about political integration and the federalization of Europe. Poland also has euroskeptic parties such as Real Politics Union and The Congress of the New Right, but they are small and failed to obtain parliamentary seats during the 2011 elections.
The Czech Republic
Relations with Europe
Like many other Central European countries, the Czech Republic fears the loss of economic independence associated with joining the eurozone. The security concerns regarding Russia that plague Poland and the Baltic states are somewhat muted in the Czech Republic and it is open to associating with Moscow. While Prague considers itself truly European and is conscious of its political and economic dependence on the European Union, its willingness to work with Russia gives it enough leeway to weigh the benefits and detriments of a complete assimilation into Brussels' orbit.
Eurozone Accession and View of Integration
The Czech Republic has never had a hard deadline for joining the eurozone and has pushed back the date for talks on accession since 2007. Czech National Bank head Miroslav Singer said he could not see the Czech Republic entering the eurozone during his term, which ends in mid-2016. Additionally, Czech Prime Minister Petr Necas has said he will not bring the issue of eurozone accession to parliament during his current term, which expires in 2014. The Czech Republic was also the only country to join the United Kingdom in openly opposing the EU-wide fiscal compact in 2011.
Discussions about the creation of a banking union have received an overwhelmingly negative response from the country's people and leadership. Even the generally pro-European Necas said his government is very circumspect on the issue and considers the Czech banking sector's independence essential. The banking union presents a problem to the Czech Republic because more than 90 percent of Czech banks are held by foreign institutions — primarily banks in the eurozone that would be subject to the rules and oversight of the eurozone banking union. Some economists argue that the Czech banks will, by proxy, be under Brussels' control, and if Prague refuses to agree to the banking union, it could lose its ability to represent the interests of its banks. However, this argument does not thus far appear to have persuaded the top echelons of the Czech government (where mistrust of Brussels prevails) to back the proposed banking union.
Domestic Political Situation
A major contributing factor to Prague's lack of commitment to the European Union and eurozone projects is the governing coalition's continued weakness. The center-right coalition has a one-vote majority in Parliament and holds periodic talks on the division between its constituent members. While the coalition members generally agree on domestic economic issues, the two largest parties have divergent ideas regarding Prague's relationship with Brussels.
Necas, who typically supports cultivating the country's relationship with the European Union, is counterbalanced in the coalition leadership by the staunchly euroskeptic President Vaclav Klaus. Euroskepticism is relatively widespread throughout the Czech population and the government is still divided on the benefits of EU membership and a common currency.
Latvia
Relations with Europe
Latvia, a relatively new member of the European Union, has a favorable view of the West and of the eurozone in particular. It is also in a better financial position than many other countries in Central and Eastern Europe, including Hungary, Romania and Bulgaria. The main source of friction between Latvia and the West is Riga's quest to obtain a commitment from the European Union and NATO to protect Latvia from Russian advances. However, Riga is more cooperative with Moscow than the other Baltic states are, so securing this commitment is less critical for Latvia than it is for some of its neighbors.
Eurozone Accession and View of Integration
Latvia, along with Denmark and Lithuania, is part of the European Exchange Rate Mechanism (a requirement for eurozone membership) and is scheduled to adopt the euro on Jan. 1, 2014. Latvian Prime Minister Valdis Dombrovskis has said that his country will decide whether to join the eurozone after the European Union's Convergence Report is released at the beginning of 2013.
Opinions on European integration are mixed in Latvia. The country's central bank head, Ilmars Rimsevics, has said that Riga is willing to contribute to future bailouts for eurozone countries, but other officials like Ventspils Mayor Aivars Lembergs have equated such a move to "boarding a sinking ship." Still, among the country's leadership the overall view of joining the eurozone is favorable.
Domestic Political Situation
While the Latvian government is fairly stable and unified on the eurozone issue, popular support for eurozone membership is relatively low. An August survey by Latvijas Fakti showed that only 35 percent of people polled supported the adoption of the euro, while 59 percent were opposed and 6 percent were undecided. Dombrovskis has emphasized the importance of communicating with the public on the benefits of Latvia's move toward the eurozone and plans for an information campaign are in place. The campaign will aim to explain the economic advantages of adopting the euro and the influence this change would have on people's everyday lives.
Lithuania
Relations with Europe
Lithuania — along with Poland — is probably the nation that is most concerned by Russia's resurgence. Vilnius sees the European Union and its institutions as guarantors of Lithuanian national interests and thus cannot afford to be isolated. Lithuania was the first country to take Gazprom to court and use the European Union's third energy package to obtain lower natural gas prices and supply chain unbundling. Though the results have so far been limited, Vilnius has not caved under Moscow's pressure and has continued its energy diversification efforts with financial support from the European Union.
Eurozone Accession and View of Integration
Lithuania, like Latvia, has been set to join the eurozone in 2014. But in early 2012, Lithuanian President Dalia Grybauskaite said Lithuania likely would not be able to keep that timeframe, citing problems with the deficit and inflation targets that the European Union set for accession. Lithuania is, however, already part of the European Exchange Rate Mechanism. Vilnius is preparing for its upcoming elections in October, and the head of the party currently leading in the polls has already announced his plans to delay the country's adoption of the euro by at least two years.
The Lithuanian central bank's reaction to the proposed banking union has been positive for the most part; however, the bank has said that a centralized supervisory body is necessary and has criticized the lack of clarity in the current proposal's technical details. Within the government, the banking union has not been a contentious issue; officials have assumed a wait-and-see attitude as details of the proposal continue to emerge. Further integration with EU institutions is generally seen as beneficial for the country unless such integration threatens national sovereignty or carries a high economic risk, a view that explains the country's support for the banking union but not for the adoption of the euro.
Domestic Political Situation
The economic aspect of joining the eurozone continues to worry Lithuania's people and government. Fifty-one percent of Lithuanian citizens said they would be opposed to joining the eurozone. Algirdas Butkevicius, the front-runner in the next election, has said that joining the eurozone would put Lithuania at risk of becoming the next Greece or Portugal and dismissed the potential for any financial benefits of adopting the euro. However, Lithuania continues to lean heavily on EU institutions to counterbalance Russian influence and will generally prove accommodating and supportive of further integration efforts.
