In June Poland is due to enter the period where it transits to the euro. I’m not sure what this means for the value of the dollar vs. the zloty. I’m asking because I’m having a lot of expensive dental work done, some in June, and right now it’s cheaper than in the U.S. because the zloty is about 3.2 zlotys to 1 U.S. dollar. I just don’t understand the mechanism and if tying the zloty to the fluctuations in the euro will cause it to inflate and make my dental expenses rise. Is there anyone who can explain this to me? I’m wondering if I should pay for the dental work ahead of June.
Prices went up in the uk during decimalisation in 1971, and in all countries in the eurozone when switching to the euro. Retailers took advantage of the change, to use a distorted method of recalculation. A similar thing always took effect in the past with american companies sold to uk customers treating $ / £ pricing as a 1:1 … even when there were $2 to the pound.
If the suppliers who manufacture dental supplies increase costs, the dentists will pass this increase on.
Similarly as Poles who have been working here in the uk to make better money, start to return home, that will mean price increases owing to improved prosperity. House prices in the cities have gone up by up to 25 % in a year.
If it were me, I would pay in Zloty, before the transition; I am almost certain you will save money by doing so…
My instinct says pay now too.
When France transitioned to the euro there were strict controls in place to prevent sudden price rises - thus you had a lof of strange prices for a while €1.53, €2.06 etc. Prices were (& sometimes still are) shown in both Euros and Francs. I think we had a six week handover period, 1st Jan till mid-Feb, where both currencies were in use and I suspect that the price controls only covered that period as prices then became more rational. Strangely shopkeepers preferred to round prices up to €1.60 say rather than down to €1.50. Basically everything did seem to have gone up by spring.
Check how the Poles are going to do things - see if you’ll have a period of grace as in France or if it will be an overnight change as in Germany - but probably pay sooner rather than later.
I just looked into the last month’s news - the official goal of the Polish government is to adopt the adopt the Euro at the beginning of 2012, and to enter the Exchange Rate Mechanism II in the second half of 2009 (I assume the news mentioned in the OP refer to that).
Entering the ERM II will mean the fluctuations of the Złoty against the Euro will be limited to +/- 15 %. No change in the actual currency, i.e. they won’t bill you in euros instead of złotys (except if they do so as an unrelated business decision - since the beginning of this year sums in contracts in Poland may legally be denominated in foreign currencies)
So, does this mean, in the first stage, as the current exchange rate is 3.25 zloty to one USD, that that relationship will not be allowed to change more than 15% up or down? Could it go to, for example, 3.74/1 USD or down to 2.76/1 USD? They are billing me in zloty, but the first clinic I went to only quoted in euros or pounds, and then billed in zloty. I know there is some disagreement amongst Polish economists whether or not the zloty is stable enough to enter the ERM II because apparently they have to drop out of the process if it starts fluctuating too much. Bugger. The timing is bad for me. Not that the Polish economy doesn’t take precedence. ha.
No, the peg isn’t to the dollar but to the euro. So the exchange rate against the dollar could vary by more that 15%.
Just an after thought, have you asked if you can pay them in dollars ? It is not so common now, but there are still places in the eastern bloc, as well as the developing and third world, where the dollar can be acceptable as payment. You could also offer cash ( depending on whether you trust them ) and get a sizeable discount as it may well be accidentally left off their annual tax return.
- Not suggesting you should do this, but it might save you 15 - 20 %. Up to you if you think it’s worth it.