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Financial and Monetary Integration in the New Europe

Financial and Monetary Integration in the New Europe

Convergence Between the EU and Central and Eastern Europe

Edited by David G. Dickinson and Andrew W. Mullineux

Potential new entrants to the European Union from Central and Eastern European countries face many challenges to achieve financial convergence with the existing EU nations. Using detailed case studies from Bulgaria, the Czech Republic, Latvia, Lithuania and Poland and analysis of cross country data from these regions, Financial and Monetary Integration in the New Europe looks at the key issues for applicant countries as they negotiate the terms of their membership in the European Union. Of major concern to these countries is the financial sector and its implications for economic growth and the conduct of macroeconomic policy. The book examines, in particular, monetary and exchange rate policies, banking regulation and financial market efficiency. The overall impact of building a market driven financial system on economic development is also explored.

Chapter 6: Latvia on the way to the European Union: economic policy convergence

Inna Steinbuka

Subjects: economics and finance, financial economics and regulation


ÿ Inna Steinbuka INTRODUCTION Full economic transformation is directly linked to European integration. The potential economic advantages of closer integration with the high-income, large EU market are: ¥ increasing EUÐLatvian trade and investments; ¥ strengthening the legal framework and institution-building in the process of gradual harmonization of Latvian legislation with EU standards; and ¥ promoting LatviaÕs macroeconomic and structural convergence towards the average level of the EU member states as a result of access to the structural funds of the EU. The Copenhagen Summit criteria provide a very broad guiding principle in several areas for the accession of the Central and Eastern European (CEE) countries to the EU. The Latvian adoption of the ÔMedium-term economic strategy in the context of accession to the European UnionÕ (Ministry of Finance . . . 1998) and signing of the ÔJoint assessment of the economic policy priorities of LatviaÕ (Ministry of Finance 1998; IMF 1999a) clearly demonstrates a strong determination to stick to the integration approach. The concept of distance from the EU is multidimensional. While the political, legal and institutional criteria cannot be overestimated, we focus more on the economic aspect. Thus, the focus of this chapter lies more in distance in terms of economic space. To approach the average level of EU living standards and to ensure sustainable economic development, Latvia has to pay special attention to evaluating its competitive capacity. The question of how long it will take Latvia to close the income gap with EU countries depends on the competitiveness of the economy in the...

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