By Dagmara Leszkowicz and Pawel Florkiewicz
WARSAW, Jan 8 (Reuters) - The Polish government's plan to enter the pre-euro ERM-2 currency grid soon is very risky because of high currency volatility and a significant slowdown in growth, a central banker said.
Miroslaw Pietrewicz, a staunch dove on the central bank's 10-strong Monetary Policy Council, is the first rate-setter, outside of Governor Slawomir Skrzypek, to openly question the government's plan to adopt the euro in 2012.
Pietrewicz also told Reuters in an interview, conducted on Wednesday, that the economy may slow to as little as 1 percent growth this year and that this may require another large interest rate cut as soon as January.
"In times of high currency volatility, the decision to enter the exchange-rate ERM-2 mechanism is very risky," Pietrewicz said.
"If the economic situation does not stabilise, there will be no (proper) conditions for entering EMR-2, so it is very difficult to talk about joining the euro zone already in January 2012."
Pietrewicz reiterated, however, that he was a supporter of euro zone entry and that there was a chance the situation would improve later this year.
"I would not rule out the possibility that the situation could stabilise and, as a result, the risk (of ERM 2 entry) would decrease. The situation could stabilise in the first half of the year," he said.
Pietrewicz's remarks on ERM-2 echoed comments of the central bank's deputy governor Witold Kozinski, who said on Tuesday that 2009 was not "good enough" for entering the antechamber for euro entry. He did not elaborate. [ID:nL6446966]
Before entering the euro zone a country must keep its currency inside the exchange rate mechanism for at least two years, trading within a plus/minus 15 pct range around a central parity, to prove it is stable enough to be switched to the euro.
According to the government's euro roadmap Poland should peg the zloty in ERM-2 in the first half of 2009.
The zloty
GROWTH CONCERNS
Pietrewicz presented a grim outlook for the Polish economy and said it could slow much more than previously expected.
"Looking at investments, exports and the construction sector it is difficult to be an optimist. I personally believe that economic growth this year will be at around 1 percent," the policymaker said.
Poland's government expects the economy to expand by 3.7 percent this year, but commercial bank analysts expect growth to slow to 2.8 percent from about 5 percent in 2008 as the euro zone, Poland's main trade partner, battles recession.
"We're in a situation where rates should be cut more noticeably, like in December," Pietrewicz said.
The MPC cut interest rates by 75 basis points in December, more than expected, and brought the central bank's key rate to 5.0 percent in anticipation of a significant slowdown in ex-communist central Europe's biggest economy.
It was the biggest rate cut in six years.
When asked whether another such move was needed already in January, Pietrewicz said: "I think we should continue what we have started last year." (Reporting by Dagmara Leszkowicz; editing by Patrick Graham)