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IN OR OUT? Department of Economics at University of Missouri – Kansas City

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IN OR OUT? Department of Economics at University of Missouri – Kansas City About the authors: Zoltán Pogatsa is an international political economist and lecturer at the Faculty of Economics at the University of Western Hungary. He works on questions related to development, public policy, the economics and politics of European integration, as well as issues related to Central Europe and the Balkans and has lectured at various universities in Slovakia, the Czech Republic, Austria, Germany, France, the UK, Italy and Ireland. Katarzyna Sum is an Assistant Professor at the Warsaw School of Economics, Poland. She has authored many publications on the topic of international banking and finances. She has been a Visiting Profes- sor and seminar speaker at several international institutions such as, the Australian National University (Australia), Bocconi University (Italy), Concordia University in Montreal (Canada), the University of Antwerp (Belgium) and the University of Glasgow (UK). Laurian Lungu holds a PhD in Economics from Cardiff University, a MA in Economics from University of Liverpool and a MBA degree from the Canadian MBA Programme in Bucharest. Previously, he worked in academia, teaching courses in Macroeconomics and Mathematical Methods at Cardiff University’s Economics department. His areas of expertise are in the fields of macroeconomic forecasting, policy model- ling, international finance and energy. He is the author of a number of articles and analyses published in internationally renowned profes- sional journals and books. He has been an economic adviser for more than 10 years. Vladan Hodulak is a researcher at the Department of International Relations and European Studies at the Faculty of Social Studies of Masaryk University in Brno. In 2013 he worked as Visiting Scholar at the IN OR OUT? Department of Economics at University of Missouri – Kansas City. In his research he focuses on international political economy, especially on the role of power in international monetary and financial relations and on the development of international economic institutions. He is The Politics of Euro the co-author (with Oldřich Krpec) of „Politická ekonomie mezinárod- ních vztahů and Evropa ve světové ekonomice“ (Political Economy of International Relations and Europe in the World Economy). He further published several research articles and chapters in collective works. Accession for Eastern Gancho Ganchev is a professor at the Department of Finance and Accounting at the South-West University „Neofit Rilski“ in Blagoevgrad. European Member States His main research areas are Monetary Economics, Macroeconomics and Financial Economics. Velimir Šonje is the founder and managing director of Arhivanalitika, active in fields of macroeconomic & financial analysis, competitiveness analysis, financial regulation, deposit insurance, energy finance, silver economy. He has been a board member of Raiffeisenbank Zagreb, Croatia from 2000 to 2003 and Executive Director for Research and Statistics at the Croatian National Bank from 1995-2000. He graduated from the University of Zagreb, Faculty of Economics. Publisher Friedrich Ebert Foundation Office Bulgaria 97 Knyaz Boris I Street 1000 Sofia, Bulgaria Responsible: Helene Kortländer, Director The commercial use of all publications published by the Friedrich Ebert Foundation (FES) is not permitted without the written consent of FES. The opinions expressed in this publication are those of the author(s) and do not necessarily reflect the position of the Friedrich Ebert Foundation. All texts are available online at http://www.fes-bulgaria.org ISBN: 978-954-2979-50-0 Friedrich-Ebert-Stiftung In or out? The Politics of Euro Accession for Eastern European Member States Sofia, 2019 IN OR OUT? – THE POLITICS OF EURO ACCESSION FOR EASTERN EUROPEAN MEMBER STATES Sofia Contents Preface . 4 Introduction: The Adequacy of Adoption of the Euro for Less Developed Economies . 6 The mainstream “Merkelian” view . 7 The Keynesian view . 9 The Marxian view . 17 Summary . 17 References . 18 Poland . 19 Likely Effects of the Introduction of the Euro in Poland . 19 Wages and Employment . 21 Prices and Inflation . 21 Fiscal Situation . 23 Regional Cooperation and Trade Integration . 23 Conclusions . 25 References . 26 Romania . 27 Likely Effects of the Introduction of the Euro in Romania . 28 Wages and Employment . 29 Migration and Labour Mobility . 32 Prices and Inflation . 33 Fiscal Situation . 35 Regional Cooperation and Trade Integration . 37 Conclusions . 39 References . 40 Czech Republic . 41 Likely Effects of the Introduction of the Euro in the Czech Republic . 42 Wages and Employment . 44 Migration and Labour Mobility . 45 Prices and Inflation . 46 Fiscal Situation . 47 Regional Cooperation and Trade Integration . 48 Conclusions . 48 References . 50 2 IN OR OUT? – THE POLITICS OF EURO ACCESSION FOR EASTERN EUROPEAN MEMBER STATES Sofia Hungary . 51 Likely Effects of Introduction of the Euro in Hungary . 52 Wages and Employment . 52 Migration and Labour Mobility . 52 Prices and Inflation . 53 Fiscal Situation . 53 Regional Cooperation and Trade Integration . 53 Conclusions . 54 Bulgaria . 55 Likely Effects of the Introduction of the Euro in Bulgaria . 56 Wages and Employment . 56 Migration and Labour Mobility . 58 Prices and Inflation . 60 Regional Cooperation and Trade Integration . 61 Conclusions . 62 References . 64 Croatia . 65 Likely Effects of Introduction of the Euro in Croatia . 65 Wages and Employment . 67 Prices and Inflation . 69 Fiscal Situation . 72 Regional Cooperation and Trade Integration . 75 Conclusions . 76 References . 78 Annex . 79 3 IN OR OUT? – THE POLITICS OF EURO ACCESSION FOR EASTERN EUROPEAN MEMBER STATES Sofia Preface institutions, experience with monetary and exchange rate policies and capacities for in- The stabilisation of the eurozone is one of the big ternal adjustments (e.g. internal devaluations) challenges Europe is presently facing. when external macroeconomic shocks hit their economies. Last but not least, general While in some states of the EU the euro is still policy orientation towards EU institutions will considered to be a critical integrative factor for also affect a country’s stance vis-à-vis adopt- the European Union, in others it is seen as an ing the euro. unfinished project, whose internal trade and financial imbalances create international re- The Maastricht Criteria that should have ensured distributions and political strains, which are stability within the eurozone and set the path for hard or impossible to resolve within the realm economic convergence and prosperity for new of national policies. While different models for members have delivered sufficiently neither from reforming the currency union are being broadly the perspective of the eurozone member states discussed, the fact that another six countries nor from that of the non-euro-member states. are supposed to enter this Union is hardly men- tioned in the debate. One way of looking at potentials for euro area eastern enlargement is to look deeper into the In the non-euro member states both views of the economies of the non-euro-member states and euro are detectable. Acceding to the eurozone as their political traditions and present preferences. fast as possible is not or is no longer a self-un- In this respect, it is important to understand in- derstood political goal, but a question open for stitutional legacies, economic structures, perfor- political debate – even if the Maastricht Treaty mances and their interplay with politics in order stipulates that all member states that meet the to recognise factors which will determine eco- criteria must adopt the common currency. The nomic cost-benefit of adopting the euro (which four larger non-euro member states are presently may be different for different countries). silent about the euro. Rather, introduction of the euro is a political topic which is kept far away While the studies we present here originally aimed from the table of priorities. at discussing the potential effects of joining the euro, it became obvious that most East European Poland, the Czech Republic, Hungary, Croatia, countries do not plan to join at the current mo- Bulgaria and Romania differ substantially in ment with the exceptions Bulgaria and Croatia. terms of political and economic characteristics. For some of these countries, their national cur- The general feeling is that the Monetary Union rencies are an instrument for economic gover- is currently not very attractive, as long-known nance, others are substantially euro-ised and problems of the euro-area remain unsolved. The can hardly benefit from holding on to their na- flawed institutional set-up, combined with more tional currencies. The political camps are split recent discussions – for instance - about the over the question of adopting the euro in some Italian fiscal stance seem to make staying out of countries, in others there is no clear stance to- this club the most attractive option. Consequent- wards the issue. ly, some countries prefer to peg their currencies more or less closely to the euro, and to keep the There are many factors impacting country option of joining later. preferences, but a few stand out: country’s size and economic openness, internal and ex- Only Bulgaria and Croatia have the feeling of ternal balance (budget and current account having nothing to lose, but only to gain in joining balance, public debt), financial structure (use the euro. The other four countries do not expect of foreign currencies), overall economic struc- relevant positive effects in the short term but ture,
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