When should new members from Central and Eastern Europe Join the Euro Area? (PDF)

Thesis (M.A.) from the year 2003 in the subject Politics - International Politics - Topic: European Union, grade: 2 (B), University of Hamburg (European College, Hamburg), language: English, abstract: After a decade of transition from communist regime with centrally
planned economic system to democratic society with market economy
and after several years of negotiations on the European Union
membership, ten candidate countries from Central and Eastern Europe
signed the accession treaties at summit in Athen in April 2003. If they
conduct public referenda successfully and the present members states
complete the ratification, they will become members states in May 2004.
The membership in the European Union implies the prospect of eventual
membership in the Economic and Monetary Union. The consequent
question is: when exactly should they join? According to the Maastricht
Treaty, in order to become members of monetary union, new members
have to fulfil the convergence criteria. As academic and policy
discussions show, from the perspective of monetary policy and economic
reasoning, this question, so far, has no clear answer.
Politically, the majority of new members already expressed the intention
to fulfil the Maastricht criteria as soon as possible and to join between
2006 and 2008. The officials of the European Union and the European
Central Bank prefer a later entry date or tend to be neutral on the issue.
Further popular opinion recommends waiting until the euro area
consolidates its own monetary policy mechanism.
Among economists, the timing of the eastern enlargement of monetary
union is a controversial issue as well. Some argue the nominal
convergence set by the Maastricht Treaty to be far from sufficient to form
a monetary union with less developed economies. As long as the real
convergence in terms of prosperity, functioning institutions or reaction of
economy to economic shocks, is not achieved, a common monetary
policy stays undesirable. Opposition to these arguments points out that
the inclusion of peripheral members of the European Union with
characteristic similar to new members, so far, had no negative effects for
those countries or for the monetary union. Others oppose the eager ambition of an early accession to the euro area,
because economies of candidate countries members need a different
monetary policy, while catching-up the present members. They stress
some of the Maastricht criteria to be contradictory to the catching-up
process and advise to accept the higher inflation rates leading to real
appreciation of exchange rates. [...]