December 1, 2008
Thanks to the Euro, members of the Euro-zone have been able to weather the international financial crisis much better than those outside the euro-zone. Hungary and UK, not to mention Iceland, have seen their currencies coming under pressure for devaluation, as they lacked the solidity and solidarity of the single currency.
It is therefore not surprising to witness a renewed interest for rapid membership in the euro-zone, though some countries seem to cherish exaggerated hopes. Hungary hopes to join by 2011, Poland by 2012, Romania by 2014.
Fortunately, membership of the euro-zone is subject to extremely strict financial and economic criteria concerning budget deficits, inflation, exchange rates and public debt. Add to this the time-consuming technical preparations for replacing the national currency by the Euro. Therefore critical examinations and a long transition period precede membership, two years constituting the minimum between the date of application and introduction of the Euro.
Considering these constraints it appears unlikely for the EMU to expand again before 2011, leaving aside the agreed entry of Slovakia in 2009.
Only well-prepared countries like Sweden, Denmark and Hungary, provided it speeds up its reform pace, might be ready that early. The other Central European member countries can hardly expect to be ready much before 2014-15.
A long transition period will enable the euro-zone to consolidate its solidity and internal governance, while the candidate countries will have plenty of time to put their house in order and prepare their economies for the inevitable shocks of EMU membership.
The international financial crisis may have another positive by-effect. It seems much more likely today than six months ago that the UK will finally join the euro-zone. It would have suffered much less if it had realised earlier that the Pound Sterling has no future in the international monetary system: It is going to be obliterated by more powerful currencies like US Dollar, Euro, Yuan, Yen or a common Gulf currency. I therefore bet that by 2020, the UK will also have joined the band-wagon, to its and Europe’s advantage.Author : Eberhard Rhein