Th
is way, what we have is really two diff erent worlds existing along each other
within a single common group. Th
e fi nancial crisis has only reminded us about that
objective phenomenon.
8
Alojzy Z. Nowak
Consequences of aggressive investments made by some investors from PIGS
countries in real estate are not only experienced elsewhere; they are also felt in
Poland, including Warsaw. Some of them purchased land, factories or buildings
assuming that prices would grow up because Poland, along with other Central and
Eastern European countries, became European Union member state. Th
ey sensed
an opportunity which results from economic rights that prices for that type of assets
would increase according to the principle of price equalization – perhaps they rise 10
or 15, perhaps as much as 20 per cent. Th
e idea, then, was to take credit in Eurozone-
based banks, bearing interest rate of few per cent and invest in assets whose rates of
return seemed healthily above that level. In theory, the attitude was perfectly right.
However, the way things went deviated from the expected course, at least partially.
From the USA came the fi nancial crisis whose eff ects in real estate markets also
became evident in countries which became EU member states in 2004 and later.
Th
is caused prices on real estate markets to fall, thus severely limiting chances to
achieve expected rates of return on investments. In consequence, a large number of
businesses in PIGS countries experienced problems with their liquidity and solvency.
Which is then, the remedy to that situation? Has Eurozone any real chances
of survival and further growth? Is euro enjoying chances to play the role of an
international currency any longer?
Th
ese are not questions that may be answered easily. No unanimous answer may be
found to them, either among economists or politicians, or among the society. On the
contrary, answers are abound, mostly divergent and sometimes even contradictory.
Th
is probably results from the fact that Eurozone was established in the fi rst place
for quite ambiguous reasons, not just due to economic or fi nancial ones anyway.
Nevertheless, in an attempt to fi nd answers to those questions it seems worthwhile
to remind here once again that Eurozone was set up not only for economic reasons; it
was also due to political ones. Th
ey included, among other things, the will to deepen
the processes of integration in the European Union. Th
is was only believed possible
under condition of having a single common currency. Secondly, the intent was to
improve stabilization of global fi nancial system, hitherto based upon really just one
pillar i.e. US Dollar. Th
e Asian crisis of late 1990s revealed a number of weaknesses
of that system. Should it collapse, this would entail a great deal of serious trouble and
bankruptcies around the world. In order to prevent this from happening, it seemed
appropriate to propose fi nancial system based upon at least two pillars – US Dollar
along with another international currency having a similar nature and, possibly, also
similar strength and importance. Finally, third reason and the one increasingly heard
of these days was an attempt to weaken West German currency i.e. Deutsche Mark
9
End of Eurozone?
and to control the strong, united German state. Interestingly, that very reason may
as well be interpreted in an opposite way. Germany favored the idea of the common
currency in expectation that, in early stages at least, it would be weaker than the
Deutsche Mark. Th
at would help German economy to improve its competitiveness
following the process of unifi cation and in eff ect would enable the country, partially
at least, to alleviate the enormous burden of that process, considering that the costs
borne were aggravated by possession of strong national currency. Without involving
in any profound analysis or assessment of reasons why Eurozone was established and
the common currency adopted, its positive role should be emphasized in deepening