Feasability and Timing of the Euro Adoption by the New EU Member States

1. The commitment to adopt the euro The 10 new member states are now facing the chal-lenge of framing and implementing policies for adopt-ing the euro. They are all bound by the EU Treaty to replace their national currencies with the euro at some future time as they were admitted to the Union with a derogation to this effect. In order to prepare adequately for entry to the euro area, the candidates need to un-dergo fi scal and monetary convergence. In principle, they should refrain from lax fi scal policies that could skew the eurozone policy mix by forcing the European Central Bank (ECB) to tighten monetary policy. They should consistently reduce any public debt accumu-lation that could result in a banking crisis and sub-sequently put pressure on the ECB to monetize it. On purely technical grounds, to enter the European com-mon currency system the euro candidates must satisfy the Maastricht fi scal and monetary convergence cri-teria. The original criteria are spelled out in the Treaty protocols dating back to 1991. Their viability and appli-cability to the new member states are currently subject to intense scrutiny, as they refl ect the European Com-mission’s apparent precept that the euro candidates should be treated as an isomorphic block, disregarding their structural and institutional differences (Kenen and Meade 2003)