An Appraisal on the Earlier Euro Adoption by the new Member States in the Frame of the Current Global Economic and Financial Crisis

• Author: Iulia Lupu, Camelia Milea, Adina Criste, Alina Georgeta Glod, Floarea Iordache
• Pages: 195-202

Performance and Risks in the European Economy

195

An Appraisal on the Earlier Euro Adoption by the New Member States in

the Frame of the Current Global Economic and Financial Crisis

Iulia Lupu

1

, Camelia Milea

2

, Adina Criste

3

, Alina Georgeta Glod

4

, Floarea Iordache

5

1

Financial and Monetary Research Centre „Victor Slăvescu”, Bucharest, iulia.lupu@gmail.com

2

Financial and Monetary Research Centre „Victor Slăvescu”, Bucharest

camigheorghe75@gmail.com

3

Financial and Monetary Research Centre „Victor Slăvescu”, Bucharest, cristeadina@yahoo.com

4

Financial and Monetary Research Centre „Victor Slăvescu”, Bucharest, alina.glod@gmail.com

5

Financial and Monetary Research Centre „Victor Slăvescu”, Bucharest, alina.glod@gmail.com

Abstract. The pathway of the new member states towards the euro area was stopped, but not modified b y the

current world economic crisis. Their inflation declined but the fiscal status suffered. On the verge of the

financial crisis, the European Centr al Bank overruled the Central and Eastern European member states’

intentions for an earlier adoption of the euro, requiring compliance with the Maastricht criteria. The objective

of this paper is to analyze the main proposed solutions and to draw attention on the most suitable ones in

keeping with the particular features of these countries. Our conclusion is that fast results on the euro adoption

will definitely depend on the fisca l consolidation, the soundness of global economic rehabilitation, the capital

availability, and the domestic policies. The nature of the approached problems and the authors’ experience

recommend this study, both for researchers and practitioners.

Keywords: convergence criteria; unilateral euro adoption; ERM II stage reduction

1 Introduction

On the background of this new economic crisis, it has been raised the issue of relaxing the euro

adoption convergence criteria. The Hungarian Prime Minister Ferenc Gyurcsany asked for a

shortening of the period in which a state must maintain its currency in the ERM II (exchange rate

mechanism II) in order to join the euro area and the Polish Prime Minister Donald Tusk advocated for

the same change.

Western leaders had different reactions in the discussions on this topic. Although heads like Angela

Merkel

1

(German Chancellor, a country that is considered the most intransigent as regards the

fullfilment of the euro adoption conditions) or Luxembourg Jean-Claude Juncker

2

considered that the

measure of reducing the period of euro area pre accession can be reviewed, the criteria for entering

into the euro area remained te same. The majority reject the possibility of making more flexible the

strict membership criteria that limit the budget deficit, the public debt and the inflation. The president

1

„The criteria must be met as they are set out in the Maastricht Treaty. We can not change the treaties.”

2

„There is no q uestion of revising the accession criteria, since the stability of the euro currency and the euro area depend on

them.”