setting a date for the adoption of the euro "would be very risky and unwise.", Robert Holman

Just a year ago, Poland and the Czech Republic is preparing to join the euro currency and share with the nations of Italy to Germany and Ireland to Greece.

Now, the Czech central bank board member Robert Holman said setting a date for the adoption of the euro "would be very risky and unwise." Polish central bank governor Marek Belka wants the euro zone to "normalize" before the country joins.

The worst crisis that hit the euro since its inception a decade ago, causing the two largest economies of the European Union to withdraw a commitment to give up their currencies in the short term. That is encouraging investors who see Poland as a better bet without its currency is linked to the nations receiving emergency rescues, while austerity measures and reduction of inflation could push borrowing costs lower than Germany Czech Republic, according to BNP Paribas SA.

"Countries in Eastern Europe clearly see the benefits of having a flexible currency at this time," said Thomas Kirchman, who helps manage 12 billion euros ($ 16,000,000,000) in European bonds at Deka Investment GmbH in Frankfurt. "In the end, will join the euro, but this will be a longer process."

The zloty will increase by 5 percent against the euro in six months, the biggest rise in emerging markets, and the crown strengthened by 4 percent. The Czech bond yields in the best of Europe from June performers will be reduced to 60 basis points on German 10-year bonds next 96 years, BNP Paribas and Raiffeisenbank AS predict.

Lower debt

Czech 10-year bonds is likely to yield 15 basis points, or 0.15 percentage point less than German bonds in late 2012 and 70 basis points less than 12 months later, according to Bartosz Pawlowski, chief London-based strategy for Eastern Europe, Middle East and Africa at BNP, France's largest bank. The yield on the 10-year Polish bonds probably will be reduced to 275 from 307 a year, said in a report earlier this month.

Both countries have less debt than the average for the eurozone of 87 percent of GDP, with Poland at 57 percent and the Czech debt at 43 percent, European Commission forecasts show. The Czech economy is forecast to grow by 2.2 percent next year and Poland may expand 3.7 percent, up from 1.5 percent in the euro zone, according to the International Monetary Fund in Washington.

Closer links with the euro zone, which helped fuel gains of more than 25 percent in the crown and the zloty from 2004 to 2008, have become the biggest drag on the currency as the EU policy makers of the struggle to restore confidence in the most indebted countries in the monetary union. The zloty weakened 3.5 percent against the dollar in the last year and the crown fell 4.5 percent, the biggest drop in emerging markets after the currency of Romania, Bulgaria and Hungary.

Ireland Rescue

The EU and the IMF provides rescue € 85000000000 for Ireland and 110 billion euros to Greece this year. Irish rescue sent the Spanish bond yields to the highest in relation to German bonds since the inception of the euro late last month. Portugal may face downgrades as reducing risk budget stalemate in the "slow" economic recovery, Anthony Thomas, principal analyst with London-based Moody's Investors Service in Portugal, said in a statement.

The debt crisis has raised doubts about "whether the euro area is standing on solid foundations," said Ceska Narodni Banka board member Holman in an interview in Prague on 09 December. Polish central bank governor Belka told reporters in Warsaw the same day, while the adoption of the euro remains "a strategic objective," the EU must find a solution to its debt crisis in the first place.

No target date

Poland and the Czech Republic agreed to relinquish their national currencies as part of its entry into the EU in May 2004. Hungary will not set a deadline for adopting the euro before 2012, Economy Minister Gyorgy Matolcsy told a press conference in Budapest on 08 September.

"A couple of years it was negative" crown and the zloty, "said Ulrich Leuchtmann, head of currency strategy at Frankfurt-based Commerzbank AG, the second largest bank in Germany. However, stagnation in the euro is "net positive" because the financial health of Poland and the Czech Republic is better than most members of the euro, he said.

While Romania has an official goal of euro adoption in 2015, President Traian Basescu said on 22 September, the exchange may require a delay of up to two years. Bulgaria scrapped a plan in April to enter the exchange rate mechanism this year after reviewing the 2009 budget deficit beyond the limit of the EU.

Baltic expansion

European monetary union continues to expand with Estonia will become the 17 member euro zone on January 1 and the third post-communist country to adopt the single currency after Slovenia in 2007 and Slovakia in 2009. Lithuania and Latvia have their currencies pegged to the euro and the two nations intend to enter into monetary union in 2014.

Eastern European currencies weaken as speculators debt counseling Irish and Greek now turn its attention to countries with stronger links with the euro area, "said Savvas savouries, chief economist Toscafund Asset Management in London. Hungarian forint may lose more than 50 percent of its value to lead the decline, said savouries.

"It will be a domino effect and the last domino to fall will be bigger," he said. "It will be Poland."

Currency strategists at some of the world's largest banks, like Barclays and Credit Suisse AG are more optimistic. The crown will join the 24.4 euros in late June, 25,234 on 17 December. The zloty appreciated to 3.91 per euro from 3.9927, median 20 shows the projections.

The forint may weaken 0.5 percent against the euro, according to forecasts by the strategists.

Consolidation

Czech government bonds and Polish and are overcoming the debt of countries in the euro area. The notes yield 10-year Czech koruna has fallen 42 basis points since June to 3.84 percent. German Bund yields rose 29 basis points to 2.93 percent during the same period. Poland 10 - year bond yields rose 5 basis points to 5.98 percent, compared with an increase of 160 basis points for Greece and 335 for Ireland.

Czech lawmakers approved the 2011 budget on 15 December that the spending cuts in public wages and social benefits to help meet the prime minister's promise Petr Necas, in June to cut the fiscal deficit within the EU limit of 3 percent of GDP by 2013 from 5.8 percent last year.

The Czech Republic is ranked A by Standard & Poor's, the fifth lowest rating of investment grade, and Poland is a step below A-. Germany has the top AAA rating from S & P.

"Fiscal consolidation and the prospect of better grades" may increase the Czech bonds, said Michal Brozka, a Prague-based analyst at Raiffeisenbank. "The question remains, of course, the amount of ransom from the periphery of the eurozone will weigh on German bonds."