Community Research and Development Information Service - CORDIS


The Eastward Enlargement of the Eurozone (Ezoneplus), Final Report

Project ID: HPSE-CT-2001-00084


Before long the EU�s new member states will join the European Monetary Union (EMU) and introduce the Euro. There can be no doubt that taking such a step will accelerate their incorporation into the European integration process. At the same time, however, fierce economic and political risks are likely to arise both for the new and for the old member countries.
In the first place, the new EU members in Central Europe (CE) expect an early accession to the eurozone to result in a rise in capital imports which will allow for a narrowing of the economic gap between the old and the new members that will undoubtedly continue to exist for decades to come. Fixed exchange rates and even a common currency will foster trust and intensify the exchange of goods, services, capital and labour between both regions, while the concurrent economic growth will contribute to political and economic stability in CE.
The introduction of the Euro in Central Europe, however, will be attended by considerable economic, political and social risks. Both production and finance structures in Central and Eastern Europe have not yet completely overcome the heritage of decades of communist central planning. Thus, a rapid and premature elimination of monetary and exchange rate autonomy may lead to social hardships that are likely to destabilise these countries. This is particularly true for the labour markets which, as a consequence of monetary opening, are likely to be liberalised. Since structural unemployment, inherited from the planned economic system, remains high, the number of social losers is likely to rise and societal polarisation increase.
Probably the biggest problem the new EU members have to face is their current account deficit, which limits the rooms for political and economic manoeuvring. These deficits, however, are almost entirely financed by volatile capital imports.

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