Poland Just Became A Very Interesting Place to Invest

 | Mar 28, 2013 | 5:00 PM EDT
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The timing seems, well, curious. While Cypriots are still reeling from the eurozone's "solution" to their banking crisis, Polish Prime Minister Donald Tusk has proposed a referendum on his country joining the euro.

But this proposal isn't what it seems -- and that makes Poland a more interesting place to invest than it had been a few days ago.

Rather than representing move toward joining the euro, the prime minister's proposal is actually a step back. Previously, Tusk has said that the country didn't need a referendum, since Poles had already made a commitment to joining the currency: They voted in favor of joining the European Union in 2003. That, Tusk had maintained, had put Poland on a course to leaving the Polish zloty for the euro by 2015.

Now, it looks like Tusk is buying time for the country to rethink its decision. He's now saying he is open to a deal with the anti-euro opposition to change the constitution and allow a vote on joining the euro -- and, as finance minister Jan Vincent-Rostowski explained Wednesday, this has constituted a step away from the euro. (Rostowski also took time out to take a swipe at economist and New York Times columnist Paul Krugman, who had written that Tusk wants to join the euro more quickly. It would help, Rostowski noted, if Krugman could read or speak Polish and go to the source. For the record, I don't read or speak Polish either; my grandmother's best efforts failed.)

In any case, current polls say 60% of Poles now oppose adopting the euro.

Winning a referendum will take time, the finance minister said, because "we have to do a lot of convincing among the Poles." The country would also need to fix its finances and improve its economy before making a euro bid. That would take years, he noted -- and in the meantime, he said, the euro needs to be fixed.

All of this means the zloty is here to stay for a while, which is good news for Poland's economy. The zloty has dropped 50% vs. the euro, making Poland the only no-growth European economy during the global slowdown that followed the financial crisis -- which had turned into an export boom for Poland. A delay in joining the euro would also extend Poland's role as a lower-cost manufacturing base for companies in the eurozone, especially those in Germany. The longer that growth strategy has a chance to work, the more time Poland has to build up its domestic consumer economy.

If you're looking for a way to play this extension of Poland's growth strategy, I'd suggest the country's financial sector as a way to get exposure to both exports and domestic strength. Bank Zachodni (BZW.PW in Warsaw), Poland's third-largest lender, is 70% owned by Spain's Banco Santander (SAN) following a recent sale of shares by the latter and Belgium's KBC Groep. The sale, which has created a dip in the shares, had been prompted by Polish regulators who had wanted to increase the float for Bank Zachodni.

Another suggestion would be insurance company Powszechny Zaklad Ubezpieczen (PZW.PW in Warsaw). Historically, insurance penetration has tended to rise with a country's per-capita gross domestic product -- as incomes rise, more people can afford to buy life and property insurance to eliminate some risk.

Yet another longer-term play is U.K.-based do-it-yourself chain Kingfisher (KGF.LN in London). The company is the largest DIY retailer in Europe, with a big presence in the Polish market, and the third-largest in the world after Home Depot (HD) and Lowe's (LOW). With this name, you'd be waiting for the company's U.K. business to turn, which could take a while. On the other hand, depressed U.K. results have made the stock cheap on future projected growth.

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