The Euro and Economic Stability
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The Euro and Economic Stability

Focus on Central, Eastern and South-Eastern Europe

Edited by Ewald Nowotny, Peter Mooslechner and Doris Ritzberger-Grünwald

The Euro and Economic Stability assesses the euro area’s merits as a shelter and the merits of euro assets as a safe haven and reviews the case for rapid euro adoption from a post-crisis view. Policymakers and economists provide relevant lessons from euro area divergences for future euro area members and, more generally, from the financial crisis, while banking representatives discuss post-crisis business models of banks in the area. Last but not least, a theoretical introductory chapter fills the gap between mainstream macroeconomic modelling and real-world decision-making.
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Chapter 6: Preparing for Euro Adoption

Gertrude Tumpel-Gugerell


Gertrude Tumpel-Gugerell1 For the European Central Bank (ECB), the topic of the optimal timing of euro adoption for the European Union (EU) countries in Central and Eastern Europe (CEE) that have not yet done so is very important. According to the Maastricht Treaty, all EU countries are called upon to adopt the euro at some stage. So it is not a question of if, but rather of when to join. However, to ensure that the monetary union is working smoothly, it is essential – and the Maastricht Treaty has foreseen this – that the countries joining the euro area have achieved a sufficient degree of sustainable convergence. This is first of all in the interest of the country concerned. Moreover, sustainable convergence is a cornerstone of the European Monetary Union (EMU) on which the success story of the euro is built. Since its introduction back in 1999, the euro has become one of the major currencies of the world. The low inflation environment in the euro area can be largely attributed to the well anchored inflation expectations and the high credibility of the ECB’s monetary policy strategy to ensure price stability over the medium term. During the global financial crisis, it became apparent that the euro has been an important shelter for the euro area countries to protect them against what otherwise may have resulted in an exchange rate and balance of payments crisis. In the following this chapter discusses the economic situation in the CEE countries and their prospect of joining...

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