Alexander Cettina

European Study Tour Assignments

1. 500 Words regarding Our Experience in Poland

Before I start, I will be the first to admit that we were a bit late to the game in
attempting to find individuals to meet with in our assigned country, mainly due to
what we believed to be ambiguity in the system. Aside from that, however, I believe
that James and I had a very successful trip to Poland. We sent out emails to
numerous individuals, such as Piotr Olzcyk, a member of the Department of
Information, and Tomasz Skwarka, a member of the Department of Sustainable
Development. After a series of email exchanges, we were holistically unsuccessful in
bringing to fruition face-to-face meetings with such individuals. Because they were
unable to personally meet with us, however, we were given access to a multitude of
information regarding the topic at hand: agriculture and its importance in the
economic, cultural, social, and even political environments in Poland. Through this
process, James and I learned the dangers that come with not fully understanding a
research assignment, as we were not able to schedule meetings most likely due to
the tardiness of our cold-calling. That being said, however, I believe that we gained
a lot of knowledge and experience from this tough situation. After our first round of
cold-emailing, we received recommendations from a few individuals to other
members of the agricultural and economic departments. Even with those
recommendations, no meetings came to fruition due to various reasons: scheduling,
lack of time, and even some individuals lack of knowledge regarding our addressed
topics.
Instead of getting increasingly discouraged by the hardships we faced during
this process, James and I continued to persevere by attempting to integrate
ourselves into the Polish public and gain a sense of the citizens views towards the
countrys current economic, social, and agricultural states. For example, we
attempted to converse with multiple waiters, drivers, and even one barista at a
Starbucks near our hotel. Although some of these interactions were helpful in
allowing us to gain a sense of public opinion towards various aspects of Polish life,
our inability to speak Polish made life extremely difficult. Many individuals we
attempted to interview simply did not share a common language, thus ending all
chanced we had at gaining a proper perspective. We understand that the individuals
we were able to converse with come from the elite and wealthy class of Polish
citizens, and because of that fact, of interpretation of public opinion may be skewed.
Overall, public sentiment as relative to the CAP was that EU subsidies are
necessary in order to keep single-family farms alive. That being said however, there
was some skepticism among the elite as to whether the current process of
attempting to prevent large corporations from buying up farmland is in the best
interest of the Polish community. This underlying issue within the public pertains
not only to the economic state of the country, but also to the social, cultural, and
political aspects of this ever-growing nation.

492 words
2. Has the Economic and Monetary Union been a step too far for European
Integration?

Since the inception of the European Union, the free market policies have
aided in the continuous growth of Europes domestic economies. An integral part in
this growth, however, was the integration of the common Euro currency with the
development and expansion of the Economic and Monetary Union in Europe. The
economic and Monetary Union was created in order to perform many different
economic functions on a supranational level: regulation of interest rates, stimulation
of money supply, creation of a last resort, and the desire to eliminate transaction
costs due to currency exchange within Europe. One of the pillars of the adoption of
the European Union was to create a single market. Without a common currency,
however, such a single market is not holistically feasible because high currency
exchange transaction costs pose as a threat to one nation entering surrounding
markets. As a result, the European Union decided that a common currency would
eliminate such barriers to entering other markets, and thus bring to fruition their
idea of one single European market. Another goal of the Economic and Monetary
Union was to limit debt exposure and inflation risks within all member states by
limiting deficits to 3.5% of GDP. The reasoning behind such thoughts was that if a
member states were to keep annual deficits low with respect to GDP, they would not
be at risk of default, necessary bailout, or other last-resort measures such as that of
quantitative easing. With the adoption of the Eurozone have come a multitude of
questions and concerns however, all of which are pertinent to the member country
to which I was assigned to visit, Poland, as they decide whether or not to enter into
the Eurozone and give up their economic autonomy.

Such concerns revolve around the loss of economic independence with
regard to economic policy. For example, with the loss of domestic policy controlling
monetary policy, member-states are now limited in the action they can take to
prevent and alleviate problems relative to short term sell-offs and economic shocks.
As a result, these short term, relatively common instances, run the risk of becoming
long-term digressions that can greatly affect the growth and economic stability of
not only one country, but also all other member-states. On another note, because the
economies of many Eurozone nations differ greatly, policies adopted by the central
bank will almost always have misaligned incentive structures, causing constant
strain across the single market. Finally, with one common currency comes economic
convergence, and such convergence can prove lethal in times of great distress (ie.
The Great Depression of the 20s and 30s). Below, I have outlined my beliefs
pertinent to many of such concerns, and I have determined that Poland should
abstain from joining the Economic and Monetary Union in its current state.

Since joining the European Union, the Polish government has become
increasingly more interested in obtaining the Euro currency. That being said,
however, public support for such a move has been waning. Since the 2008 housing
crisis began in the United States and flooded the global markets with trillions of
dollars of questionable debt, the Eurozone has been experiencing increasingly large
domestic crises. Spain, Portugal, Greece, and Italy, to name a few, have and are
currently suffering from sovereign debt crises, and in turn, have created much strain
within the Eurozone Central Bank and many of its member-states. Germany, long
seen as the Eurozones most dependable economy, has begun to feel the weight of
the other member-states burdens upon its shoulders.

Such an instance is a large reason why public support within Poland has been
on a constant decline since the beginning of such a crisis. In 2010, as opposed to the
average contraction of GDP of 4.2% within the Eurozone, the Polish economy saw
very solid growth of approximately 3.8%. Henceforth, the Polish people do not want
to become a mirror image of their German counterparts, but rather, they want
economic security and independence that will disappear once joining the Eurozone,
due to the necessary usage of the European Central Bank. The loss of such autonomy
would undermine the constant growth that the country has been experiencing, and
due to the fact that Poland is still labeled a developing nation, such a drawback may
have dire consequences.

In contrast with all ideals that a growing economy must adhere, with the
adoption of the Euro will come a constant stream of increasing prices within all
domestic sectors in Poland. For many reasons, the effects of such an occurrence
would likely greatly hinder the significant competitive cost advantages that Poland
currently employs. Such a hindrance would hurt domestic exports greatly, thus
creating a drawback within what has been a flourishing economy of late. As comes
with the label of a strong economy, foreign investors have begun jumping at the
opportunity to put large sums of capital into the Polish economy. If the country were
to begin making large strides toward adopting the Euro, such investment will
undoubtedly begin to taper off due to worldwide skepticism within the Eurozone.

Although Poland has been experiencing unprecedented growth throughout
this crisis, it would be nave to believe that the country will never experience
economic hardship in its near future. In joining the Economic and Monetary Union
within the Eurozone, Poland would essentially be giving up all ability to
domestically handle such a recession. By using international examples to prove my
point, I have to outline why such economic unions such as that in Europe as
inherently inefficient in aiding suffering member-states. When the housing crisis
began in the United States in late 2008, the federal government and bank stepped in
and made a choice to lower shorts term rates to effectively 0%. The thought process
behind such action was to attempt to stimulant investment into what had become a
stagnant economy. If Poland were to join the Eurozone, the luxury of lowering
interest rates would disappear. The Euro Central Bank would assume all
responsibilities relative to setting interest rates, and due to the imbalances within
the Eurozone, such a drastic interest rate lowering is extremely unlikely. Due to this
fact, countries such as Spain, Portugal, and Greece have fallen into an unprecedented
spiral with no conceivable exit strategy. Without the freedom to set interest rates
domestically, countries suffering from high inflation and need cash inflow into their
economies in order to stimulate competition will be unable to do so. As a result,
investment and competition will continue to decline until such a nation (see:
Greece) has no growth and sees constant contraction within its gross domestic
product.

As we studied, agriculture within Poland, although accounting for a relatively
small percentage of its GDP (around 4%), is a very integral part of the countries
export business. By joining the Eurozone, Poland would be exposed to the
competition coming from elsewhere around the world (China, India, US) due to the
necessary increase in prices that would follow. As prices increase, Poland will most
certainly see a sharp decline in demand for its agricultural products, thus holding
back the growth potential of the nation.

The final point that I would like to make resonates with the recent troubles
being faced by emerging market economies such as Argentina, Turkey, South Africa,
among others. This point, as opposed to its predecessors, is a pro for continued
expansion of the Economic and Monetary Union. Although this may be seen as
contradictory, I believe that in order to make an informed decision, I must not only
focus on the Euros negatives, but also revel in and appreciate its positives. The Euro
has long been viewed as a safe haven currency by nations globally, and as
economies in these emerging markets continue to struggle, investors flood to haven
stocks and currencies. The cause of the emerging market tumble has been attributed
mainly towards the United States Federal Reserves decision to taper the bond buy-
backs (quantitative easing). Because the Fed believes the United States economy
has made a strong recovery, the decision to raise interest rates has caused investors
to move away from investing in emerging markets, and back into the United States.
Consequently, foreign invested in emerging markets has fallen drastically, causing
those countries domestic investors to seek haven in safer investments, for example
the Euro currency. Such a process, while devastating to emerging market
economies, bodes well for haven currencies as it provides increased liquidity
numbers into the Eurozone, thus stimulating investment and competition
throughout the Economic and Monetary Union. Such a positive does not come
without concerns, however, which is why I still believe that Economic and Monetary
Union is a bit too ambitious and involved for the good of its member-states.

In conclusion, I firmly believe that although a common currency has its
positives, the drawbacks strongly outweigh them, and consequently, Poland should
stay away from joining the Economic and Monetary Union. The downside for an up-
and-coming economy such as Poland holistically outweighs the potential trade
benefits would come from joining such a union. The establishment of the Economic
and Monetary Union was certainly a step too far in European Integration, however, I
believe that the Euro will withstand all current problems and remain a global safe
haven asset for generations to come.




Sources:

1. http://crisil.com/crisil-young-thought-leader-
2011/dissertations/9dissertations-Ashish-Aggarwal-NMIMS-Mumbai.pdf
2. http://www.philipallanupdates.co.uk/getdoc/9f623b1e-0355-4793-9c66-
ab12424cd0d3/EMU-Jim-Lawrence.aspx
3. http://news.bbc.co.uk/1/hi/special_report/single_currency/25081.stm
4. EST Conferences Brussels, Belgium.
5. Staab, Andreas. The European Union Explained.