By early entry I mean entry close to the earliest possible date, which one can recognise to be around year 2006, given the assumption of entry to the European Union in 2004. It is this time neighbourhood we need to consider. The points would be as follows. First of all, let me say, that, in my opinion, arguments applicable to Poland are also largely true for other candidate countries in most of the cases. Poland has achieved a relatively high level of structural convergence with the European Union. It can be measured, for example, by a share of exports to the EU in relation to all exports. This number is actually higher in Poland right now then it had been in Greece, Portugal and Spain before their respective entries to the EU and the MU. We have also achieved a high degree of cyclical convergence. These two points combined, translate to a situation in which Poland is not so sensitive any more to, what is called, an asymmetric shock. Second, we have achieved a tremendous extent of disinflation. Inflation in Poland this year would be between 4% and 5% and similar figures will apply to other candidate countries. If one compares this data with inflation rates in some of the EU countries, one cannot see much of a difference - look at Holland. Third, Poland had managed to achieve a high level of disinflation while introducing a high level of price liberalization. It means there is only a limited scope for further corrective inflation.
All but few prices are completely liberalized and driven by healthy market conditions. Fourth, in respect to so-called Ballassa Samuelson Effect, I agree with President Duisenberg, that it is mostly an empirical issue. I think the extent of this effect has been overstated and overdone in many theoretical studies. Empirical data in respect to Poland has shown, that in the past the contribution of BS Effect to the overall inflation rate has been in the range from 1% to 1.5%. As a matter of fact, BS Effect is also present in the Eurozone, in countries like Greece and Portugal. This is not the reason for, as some people heralded, a weak euro. Problems of Greece are not responsible for weak euro that is, if one thinks euro is weak. The already mentioned disinflation, limited scope for future corrective inflation, and manageable level of BS Effect make the Maastricht Inflation criteria achievable. Fiscal criteria must be met in the interest of the countries concerned, as it would contribute to their economic growth. Fifth, there is an intermediate period between the date of entry of Poland and other candidate countries into the European Union and membership of the Monetary Union. The question is, what is the optimal length of this period. I would like to point out, that it might be a rather turbulent time. BIS Review 1/2002  1  Economic forces behind convergence and rapid capital flows might create an economic roller caster.