After a decade of transition from communist regime with centrally
planned economic system to democratic society with market economy
and after several years of negotiations on the European Union
membership, ten candidate countries from Central and Eastern Europe
signed the accession treaties at summit in Athen in April 2003. If they
conduct public referenda successfully and the present members states
complete the ratification, they will become members states in May 2004.
The membership in the European Union implies the prospect of eventual
membership in the Economic and Monetary Union. The consequent
question is: when exactly should they join? According to the Maastricht
Treaty, in order to become members of monetary union, new members
have to fulfil the convergence criteria. As academic and policy
discussions show, from the perspective of monetary policy and economic
reasoning, this question, so far, has no clear answer.
Politically, the majority of new members already expressed the intention
to fulfil the Maastricht criteria as soon as possible and to join between
2006 and 2008. The officials of the European Union and the European
Central Bank prefer a later entry date or tend to be neutral on the issue.
Further popular opinion recommends waiting until the euro area
consolidates its own monetary policy mechanism.
Among economists, the timing of the eastern enlargement of monetary
union is a controversial issue as well. Some argue the nominal
convergence set by the Maastricht Treaty to be far from sufficient to form
a monetary union with less developed economies. As long as the real
convergence in terms of prosperity, functioning institutions or reaction of
economy to economic shocks, is not achieved, a common monetary
policy stays undesirable. Opposition to these arguments points out that
the inclusion of peripheral members of the European Union with
characteristic similar to new members, so far, had no negative effects for
those countries or for the monetary union. Others oppose the eager ambition of an early accession to the euro area,
because economies of candidate countries members need a different
monetary policy, while catching-up the present members. They stress
some of the Maastricht criteria to be contradictory to the catching-up
process and advise to accept the higher inflation rates leading to real
appreciation of exchange rates. [...]
Inhaltsverzeichnis (Table of Contents)
- Introduction
- Legal Basis for the accession to the EMU
- Maastricht Treaty
- Scenario for the adoption of the euro
- Institutional framework of the ECB after the EMU enlargement
- Consequences of the enlargement without the reform of the Governing council
- Models of the Governing Council Reform
- Proposals of the ECB and the DWI
- Optimal Currency Theory and Eastern Enlargement of the EMU
- Benefits of monetary union for new members
- Costs of monetary union for new members
- Benefits and Costs and openness of economy
- Balancing of Costs and Benefits
- Nominal and Real Convergence
- Maastricht criteria
- Inflation criterion
- Interest rate criterion
- Public debt and budget balance criterion
- Exchange rate criterion
- Real convergence
- GDP convergence
- Institutional convergence
- Balassa-Samuelson effect
- Estimated size of the B-S effect in CEECs
- Implications of the B-S effect accession countries
- Implication of the B-S effect for monetary policy of the ECB
- Are the Maastricht criteria contradictory to the catching up process?
- Demand and Supply shock's asymmetries
- Maastricht criteria
- Exchange rate strategies prior to the EMU membership
- Current exchange rate regimes
- Which exchange rate policy is desirable in the run-up to the EMU entry?
- Euro conversion rate
- Conclusion
Zielsetzung und Themenschwerpunkte (Objectives and Key Themes)
This paper examines the economic and political implications of the Eastern enlargement of the Eurozone. It analyzes the legal basis for accession, evaluates the costs and benefits of monetary union for new members, and explores the issue of nominal and real convergence. The paper also discusses the role of the European Central Bank (ECB) in managing the enlargement, focusing on the optimal currency theory and the Balassa-Samuelson effect. It examines the exchange rate strategies available to countries prior to joining the Eurozone, with a particular emphasis on the Maastricht criteria and the potential for demand and supply shocks.
- Legal Framework for Eurozone Accession
- Economic Implications of Eurozone Enlargement
- Nominal and Real Convergence
- Role of the ECB in Managing Enlargement
- Exchange Rate Strategies and Accession
Zusammenfassung der Kapitel (Chapter Summaries)
- Introduction: This introductory chapter outlines the key objectives of the paper and provides a brief overview of the research questions and themes explored. It establishes the context for the subsequent analysis.
- Legal Basis for the accession to the EMU: This chapter explores the legal framework surrounding the accession of new members to the Eurozone, focusing on the provisions of the Maastricht Treaty and outlining the scenario for adopting the euro. It also examines the institutional framework of the ECB after the expansion, discussing the consequences of potential reforms and the various models proposed.
- Optimal Currency Theory and Eastern Enlargement of the EMU: This chapter delves into the theory of optimal currency areas, analyzing the potential benefits and costs of monetary union for new members from Central and Eastern Europe. It explores the link between economic openness and the success of monetary integration. Finally, it discusses the need to balance the potential costs and benefits of Eurozone membership for new members.
- Nominal and Real Convergence: This chapter examines the criteria for economic convergence stipulated by the Maastricht Treaty. It analyzes the different convergence criteria, including inflation, interest rates, public debt, and the exchange rate. It then delves into the concept of real convergence, exploring GDP convergence, institutional convergence, and the Balassa-Samuelson effect. The chapter discusses the potential challenges associated with real convergence and its implications for the ECB's monetary policy.
- Exchange rate strategies prior to the EMU membership: This chapter examines the various exchange rate strategies that accession countries can pursue prior to joining the Eurozone. It analyzes current exchange rate regimes and discusses which exchange rate policy is optimal in the lead-up to EMU membership. The chapter also discusses the crucial aspect of euro conversion rates.
Schlüsselwörter (Keywords)
The paper focuses on the key themes of Eastern Enlargement of the Eurozone, Optimal Currency Area Theory, Nominal and Real Convergence, Maastricht Criteria, Balassa-Samuelson Effect, and Exchange Rate Strategies. The work examines the economic and political implications of integrating Central and Eastern European economies into the Eurozone, emphasizing the role of the ECB in managing this process and the challenges associated with ensuring economic convergence.
- Citar trabajo
- Jozef Vasak (Autor), 2003, When should new members from Central and Eastern Europe Join the Euro Area?, Múnich, GRIN Verlag, https://www.grin.com/document/19375
