Assessment of the euro's implications for economic development in the Central and Eastern Europe

Abstract

This paper assesses the impacts of Economic and Monetary Union and the euro on developments within the eight most advanced accession candidates in Central and Eastern Europe.The single currency completes the project for a single market in Europe, and overall, clear efficiency gains for participating countries are expected. This should spur foreign trade with e.g. the accession countries. Accession candidates may use a variety of foreign exchange rate regimes before they join the EU, but ultimately their economic policies become a matter of common interest.Pressure to peg to the euro obviously increases as membership approaches, but there is compelling evidence that countries should hold back on pegging to the euro until they have achieved sufficient convergence to attain credibility for a policy of fixed exchange rates. Keywords: Economic and Monetary Union, Central and Eastern Europe, exchange rate policy, integration