High Growth Contrasts With Eurozone Stagnation as Poland Draws a Line on Euro Adoption

Poland Opts to Preserve Monetary Sovereignty
Eroding Confidence in the Euro Amid Weakness in Core Economies
Downside Risks to Europe’s Economy Intensify as Transatlantic Economic Frictions Mount

Poland has made clear that it will not rush into joining the eurozone. The stance reflects a judgment that maintaining its own currency, the zloty, remains advantageous for the time being, given that the country’s economic performance outstrips that of many euro-using states. While Poland has surged into the ranks of the world’s top 20 economies on the back of robust growth, the eurozone is grappling with mounting risks tied to simultaneous stagnation among its core members, including France’s deepening fiscal strain and Germany’s economic contraction. Observers note that the widening gap between Poland and the eurozone underscores a broader shift in Europe’s economic balance.

Poland Assesses “Diminishing Incentives” for Eurozone Entry

On the 25th, Polish Finance Minister Andrzej Domanski said in an interview with the Financial Times that “the Polish economy is clearly performing better than most countries currently using the euro,” adding that “the data, research, and arguments in favor of retaining the zloty are steadily accumulating.” As a member of the European Union, Poland is legally obligated to adopt the euro once it meets specified fiscal and monetary criteria. Domanski, however, stressed that the timing of eurozone entry ultimately falls within the realm of political judgment, drawing a clear line by asserting that the decision rests with Warsaw.

Former Prime Minister Donald Tusk had advocated euro adoption by 2012 during his first term in 2008, but the plan collapsed amid the eurozone debt crisis and opposition from the right-leaning Law and Justice party. Even after Tusk returned to power in October 2023 at the head of a pro-European coalition, opinion polls have continued to show that a majority of voters oppose adopting the euro. Over this period, the zloty has strengthened against the euro.

Domanski emphasized that “public opinion favors the zloty, but the primary reason we are not pushing euro adoption at this stage is economic rather than political.” He added that concerns voiced two years ago about Poland falling behind in a two-tier EU outside the eurozone have since faded, noting that Poland now sits firmly in the upper echelon of European economies and lacks compelling reasons to surrender its monetary sovereignty. According to the International Monetary Fund, Poland’s gross domestic product reached approximately $1 trillion last year, elevating it to the world’s 20th-largest economy. The Organisation for Economic Co-operation and Development forecasts Poland’s growth at 3.4% this year, the fastest among EU members as of December.

Fiscal Crisis Warning Lights in Europe

Poland’s reassessment of euro adoption is also shaped by the deteriorating outlook for the eurozone economy. Major European states are straining under the dual burden of fiscal deficits and rising public debt. France’s national debt has climbed beyond roughly $3.6 trillion, intensifying unease across the euro area. As the bloc’s second-largest economy alongside Germany and Italy, France occupies a central pillar of the monetary union, meaning that instability in its public finances carries systemic implications for the euro itself.

Concerns over France-originated risks are also surfacing within the European Central Bank. A eurozone central banking official, speaking on condition of anonymity, said that “France poses a larger systemic risk than Italy,” citing delayed structural reforms despite France being the eurozone’s largest public spender. Public expenditure in France stands at about 58% of GDP, while the fiscal deficit hovers around 5%, well above the EU’s 3% ceiling. Although the European Commission has urged France to reduce its deficit below 3% by 2027, many see this target as unrealistic. Even France’s own finance ministry has acknowledged internally that the deficit is likely to remain near 4% through 2028.

Germany, meanwhile, remains mired in economic malaise. Its growth rate contracted by 0.9% in 2023 and by 0.5% last year, marking two consecutive years of decline. While GDP briefly expanded by 0.3% in the first quarter of last year, it fell by 0.3% in the second quarter, undershooting expectations. Despite sluggish growth, government spending continues to rise. Fiscal resources have been deployed for defense, infrastructure, and corporate relief measures such as electricity price subsidies, but much of the spending has been absorbed by pensions, healthcare, and social welfare, blunting any meaningful stimulus effect. Aging-related structural costs are effectively soaking up fiscal capacity, leaving little impact on growth.

Although some Southern European countries have recently entered a modest recovery phase, doubts persist over the quality and durability of that growth. Spain and Italy have shown gradual improvement through structural reforms, but not at a scale sufficient to lift the eurozone’s overall growth trajectory. This backdrop has amplified fears that monetary integration could function as a conduit for crisis transmission. From Poland’s perspective, eurozone entry risks serving less as a buffer against external shocks and more as a channel for importing macroeconomic vulnerabilities.

Greenland-Linked Tariff Shock Adds to Europe’s Strain

Compounding these pressures is a new layer of uncertainty tied to transatlantic economic frictions. U.S. President Donald Trump has recently threatened to impose a 10% tariff starting next month on eight European countries, including Denmark, Germany, the United Kingdom, and France, citing the failure of negotiations over the purchase of Greenland, a Danish autonomous territory. He has further warned that if talks remain unresolved, the tariff rate could be raised to 25% from June 1. The measures would target high-value European exports such as French wine and perfume and German automobiles.

The economic relationship between the United States and Europe extends far beyond goods trade, encompassing deep integration in services and capital flows. According to the U.S. Department of Commerce, cumulative U.S. foreign direct investment in Europe totaled approximately $4 trillion as of 2024, while European investment in the United States reached about $3.6 trillion, together forming a transatlantic capital market exceeding $7.6 trillion.

Mutual dependence is particularly pronounced in services trade. Data from the Office of the U.S. Trade Representative show that Ireland ranked as the top destination for U.S. services exports in 2022, at around $80 billion, far surpassing China. Ireland’s position reflects its role as a European hub for U.S. technology giants such as Google and Microsoft, facilitating transactions in intellectual property royalties and financial services. Against this backdrop, analysts warn that a tariff confrontation with Washington could strike at a critical vulnerability in the European economy, further accelerating the bloc’s downside risks.