The new European Union members and the euro : advantages and disadvantadges of joining the euro, an assessment

Résumé du document

Over the last few years, twelve countries, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Cyprus, Poland, Slovakia, and Slovenia in 2004, and Bulgaria and Romania in 2007, joined the European Union. This came as the result of a long political process, followed by the fall of the Berlin Wall in 1989 and the collapse of the Soviet Union in 1991. When these countries joined the European Union, they were soon promised by the members of the Eurozone, Austria, Belgium, Finland, France, Germany, Greece, Ireland, Italy, Luxemburg, Malta, the Netherlands, Portugal and Spain that they would join the Euro quickly, most probably within a couple of years. For Eastern European and Baltic countries, understood here as the twelve new European Union members, excluding Malta and Cyprus, joining the Euro was one of the key advantages of joining the European Union, as this meant that they would become part of one of the greatest currency zones in the world, which would certainly give a boost to their economies and enhance their integration into the global markets.

Extraits

[...] Paris: Presses Universitaires de France "How wealthy are Europeans?" Europa. European Commission Nov Evaluation of the 2001 Pre-accession Economic Programmes of Candidate Countries. The European Commission. January 2002. Brezinschek, Peter. Scenario 2020 - Central and South Eastern Europe, a success story to be continued. Research Department, Raiffeisen Investment AG. [...]

[...] Perhaps Eastern European and Baltic countries should thus not rush to take another identity, that of sound capitalist countries, because they are not yet totally comfortable with it. However, the most important effect related to the loss of sovereignty issue deals with the fact that, under the Euro, countries give up their monetary powers to the European Central Bank, and hence are not able to absorb economic shocks through a devaluation of their currency. This leaves the countries with weak economic powers, as they only retain fiscal powers, which are extremely limited because of the Maastricht criteria they must respect. [...]

[...] For this reason, if Eastern European and Baltic countries do not want to have to deal with any sort of stigma attached to their joining the Euro, these countries should probably wait until the financial crisis has been overcome, and economic outlooks are looking better. Finally, and as mentioned before, inflation is still high in Eastern European and Baltic countries , and reaches in Latvia and in Hungary. If these countries joined the Eurozone, they would lose all of their monetary prerogatives, as their Central Banks would be left with only residual powers. [...]

[...] There are several reasons why the Eastern European and Baltic countries have not been able to meet the convergence criteria presented above. This part of the study will briefly present some of them First of all, it must not be forgotten that Eastern European and Baltic countries emerged from a former communist system only two decades ago. This means that before the 1990s, they had never contemplated implementing any sort of market economy, had no capitalist and liberal mindsets, but only Marxist ideals, and lacked the necessary infrastructure, such as decent highways, railways or bridges, to enter into the global economy. [...]

[...] One of the first disadvantages of the Euro, which is applicable to all of the Eurozone countries, is related to the cost of joining and adjusting to the Euro. Even though, as m entioned before, joining the Euro is supposed to increase the European Union output by to changing all the accounting and technological systems to adapt to it has a cost. In other Eurozone countries, these costs have often been absorbed by the costs related to updating technological systems 3 This last aspect remains quite controversial within the European Union, as several observers criticize the idea of imposing ines to a country which already f registers deficits for the year 2000, which has not been the case in Eastern Europe, as the first Eastern enlargement dates back to 2004. [...]