Focus on Central, Eastern and South-Eastern Europe
Edited by Ewald Nowotny, Peter Mooslechner and Doris Ritzberger-Grünwald
Chapter 4: A Case for Rapid Euro Adoption?
Sławomir S. Skrzypek* The chapter presents considerations about adopting the euro in light of the financial disturbance of 2008 and beyond. First, arguments for and against rapid euro adoption are considered, presenting the broader context of the balance of costs and benefits in the euro area countries so far, and pointing out challenges emerging from the crisis. The second issue raised here is the potential risk of euro overvaluation as a consequence of potential changes in the international monetary system. PAST EXPERIENCE – NET BALANCE OF THE EURO ADOPTION A case for rapid euro adoption can be considered from three different time perspectives: past (experiences of the euro area members), present (euro blessing – stabilizing role of the euro as a global currency and the actions taken by the European Central Bank (ECB) and future (growth potential, which is a key condition for closing the gap between the East and the West). There is a broad economic consensus reflected in the literature that euro adoption can impact positively on the economy. However, the experiences of its member states show that many other growth factors can be very important for the smooth functioning of a monetary union – such as the labour force, research and development, rule of law, quality of governance, and so on. While the euro has been key in fostering economic growth, past experiences show that it is unable to create real convergence on its own. Bearing this caveat in mind we should distinguish between costs and benefits on the...
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