Another week, and another Greek crisis looms. It might seem only yesterday that the markets were on tenterhooks over whether the country would finally bring its miserable experiment in sharing a currency with Germany and France to an end, or whether there would be a last-minute compromise that would keep the show on the road for a few more months.
Now, with elections due on September 20, and no clear victor likely, the whole circus is about to start up again. Investors could be forgiven for tuning out of the whole saga, and going back to worrying about whether anyone will actually pay £60 for an Apple Pencil, or what dramas lie in store for the Crawley family in the new series of Downton Abbey instead.
There is, however, an election coming up that genuinely matters to the future of the single currency – only it is taking place not in Greece, but in Poland. When that country elects a new government next month, the likely victor, the Law & Justice Party, will effectively close off the option of joining the euro one day. In reality, Greece was always too small and chaotic an economy to matter one way or another to the eurozone. But if Poland, along with the other rising economic powers of eastern Europe, turns its back on the euro, then that is far more serious.
Who wins the Greek election remains to be seen. After capitulating to the Germans and the rest of the EU, and agreeing to impose yet more austerity on an economy that has already shrunk by more than a quarter, the prime minister, Alexis Tsipras, squandered much of his support. It now looks as if he will fall far short of a majority, and will have to cobble together some form of coalition to push through the tax rises and cuts in public spending that are the price of its latest bail-out. The Greek economy may not survive that. It has already shrunk almost as much as the US during the Great Depression. Capital controls and political chaos, perhaps not surprisingly, have not done much to revive growth. Unemployment has climbed relentlessly, and the 50pc of young people who are jobless look likely to be out of work for so long they will never acquire the skills needed to get back into jobs.
In the end, however, Greece is a relatively small country, with only 11m people. Its GDP only ever amounted to 2pc of the entire euro bloc, and of course that is getting smaller all the time as its output shrinks. A single year of respectable growth – that is, more than 2pc – across the rest of the zone would more than replace the whole of Greece in terms of total output. The hard reality is that if Athens does finally leave the euro, it will not make much difference to the currency.
Poland is a very different matter. When the euro was created by theMaastricht Treaty, every member of the European Union was committed to joining the common currency eventually, except for Britain and Denmark, which negotiated opt-outs. When the big new countries of eastern Europe joined the EU, all of them were technically committed to joining the single currency as well. A few of the smaller ones have done so. Slovakia, Slovenia, Latvia and Lithuania have all joined since the currency was launched. But with a combined population of less than 12m people, none of them has the weight to make much of an impact.
The big countries are a different matter. With a combined population of 60m, Poland, Hungary and the Czech Republic are of a similar size, taken together, to Britain or France. Whether they ultimately join or not can have a big impact.
From next month, that is going to be increasingly unlikely. Parliamentary elections are likely to result in the Right-wing Law & Justice party taking power. The party’s Andrzej Duda already overturned the odds to win the presidency earlier this year. It is about as keen on the euro as Nigel Farage. Only this week, Duda insisted that if Poland was to ever join the euro there would have to be a referendum: there is more chance of Nicola Sturgeon getting elected MP for Tunbridge Wells than of any country voting to join the euro – it usually gets pushed through without consultation.
Duda has also insisted it shouldn’t happen until Polish wages are equal to German pay levels – and since Germany is one of the most productive countries in the world, that is setting the bar about as high as it can go.
The simple conclusion is that under Law & Justice, Poland isn’t going to join the single currency. Period. The Czech Republic is no keener: the latest polling showed 70pc opposition. Likewise, Hungary has set ever more stringent conditions for even considering membership.
That matters. Amid the crisis in the eurozone, and the booms and busts in China, the steady modernisation of eastern Europe is easily overlooked. These economies are tortoises rather than hares – but as everyone knows, it is the tortoises that win the race eventually.
Hungary’s economy grew at a robust 3.6pc last year, and is forecast to match that this year. Its stock market has easily outperformed other emerging markets this year, rising by 20pc up until the start of September while other developing economies were crashing. The Czech Republic is growing by more than 3pc this year, and in the first quarter chalked up growth of more than 4pc. Poland will expand by another 3.2pc this year – it was about the only significant economy to sail through the financial crisis without a recession.
Even more remarkably, the region’s big cities are overtaking western Europe – a recent study by the Bruegel Institute found Warsaw and Prague are now richer than Vienna, measured by GDP per capita, and richer than Rome, Lisbon and Madrid as well. Poland in particular is gradually establishing itself as a major power within the European economy. It is certainly the equal of Spain. On current trends, it may soon be more important than Italy, and don’t rule out the possibility that it will eventually overtake France as well.
Currencies are not so different from companies. They are either expanding or retreating. The euro was created specifically to challenge the might of the dollar, and to create a dominant power in the global capital markets. If a few small and not very successful economies fall by the wayside, that does not matter very much. When big and growing economies turn their back on it, that is something else.