European Monetary Integration

European Monetary Integration

Past, Present and Future

Edited by Eric J. Pentecost and André Van Poeck

This highly topical book examines the development and future prospects for economic and monetary union in Europe. European Monetary Integration examines the background to economic and monetary union from a historical perspective that distinguishes between national and supranational currency areas, and an optimal currency area theory. The gradualist transition process is also considered.

Chapter 9: Exchange rate strategies of new EU entrants

Jens Hölscher and Lúcio Vinhas de Souza

Subjects: economics and finance, financial economics and regulation, money and banking


Jens Hölscher and Lúcio Vinhas de Souza 1 INTRODUCTION The Eastern enlargement of the European Union (EU) includes a large number of countries. Official accession processes have been opened with Bulgaria, Cyprus, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Romania, Slovakia and Slovenia,1 through the mechanism of the Accession Partnerships.2 Substantive negotiations for accession were opened on 10 November 1998, with Cyprus,3 the Czech Republic, Estonia, Hungary, Poland and Slovenia, the so-called ‘first wave’ countries. These six first-wave entrants would add over 63 million inhabitants to the current Union’s population (almost two-thirds of them in Poland alone) and over 240 billion euros to its GDP (again, over half of this figure in Poland). That will mean, respectively, a 17 per cent increase in the Union population, but a mere 3 per cent increase in its GDP. The so-called second-wave entrants (Bulgaria, Latvia, Lithuania, Malta, Romania and Slovakia) would add to these figures another 57 million people and 97 billion euros. That is a 15 per cent increase in the population of the Union, but an even more marginal increase of 1.2 per cent in its GDP. In terms of the number of countries, this will be the biggest wave of expansion of the Union since 1957, surpassing the North Sea Accession of 1973 (the Kingdom of Denmark, the Republic of Ireland and the United Kingdom), the Mediterranean Accession of 1982 (the Greek Republic), the Iberian Accession of 1986 (the Kingdom of Spain and...

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