ISSN 1392-1258. EKONOMIKA 2008 84

EURO AREA ENLARGEMENT: DILEMMAS AND PROSPECTS

Arunas Dulkys, PhD Department ofTheoretical Economics, Faculty of Economics, University Sauh~tekio 9, LT-2040 Vilnius, Phone: +370-5-236 61 47 E-mail: [email protected]

Almost all member states of the new declared their wish to introduce the in the near future. The decision of the European Union institutions concerning Lithuania revealed the peculiarities and problems of the euro area enlargement to the Central and Eastern European countries, which are not easy to explain on a purely economic basis while all of them share the same market, and the economic growth restrictions imposed on them are quite disadvantageous. The article discusses a hypothesis that decision on the expansion of the euro zone is determined not only by fulfilment of the Maastricht criteria, but also by a complex of macroeconomic, institutional and political reasons. This article aims to discuss the problem related to the monetary integration in the Central and Eastern Europe. Of no less importance is the progress in implementing measures provided in the governments' programmes, convergence programmes and national plans of the euro adoption of the countries. Conclusions and proposals are presented on how the Central and Eastern European states must strengthen the monitoring of the monetary integration under dif• ferent standpoints and interests of the players in the decision-making process regarding the euro area membership. Keywords: euro adoption, euro area enlargement, euro zone, Maastricht criteria

"Our countries have become too small for the world ... measured against America and Russia today and China and India tomorrow". Jean Monnet Introduction the plans in most of the states. Neverthe• Almost all member states of the new Eu• less, all of them will have to join the euro ropean Union (EU) declared their wish to area in the future, since they are members introduce the euro in the near future. Later, of the Economic and Monetary Union arguments were voiced for stricter require• (EMU), just with a temporary derogation ments in respect of Central and Eastern not to adopt the euro. The decision of the European (CEE) countries, which conse• EU institutions concerning Lithuania re• quently caused a significant adjustment of vealed the peculiarities and problems of

40 the euro area enlargement to CEE coun• The research results explain that no less tries, which are not easy to explain on a important is the progress in implementing purely economic basis as all of them share measures provided in the governments' the same market, and the economic growth programmes, convergence programmes restrictions imposed on them are quite dis• and national plans of the euro adoption. advantageous. The article provides conclusions and pro• The article discusses a hypothesis that posals on how CEE states must strengthen decision on the enlargement of the euro the monitoring of the monetary integration zone is determined not only by fulfilment under different standpoints and interests of of the Maastricht criteria, but also by a the players in the decision-making process complex of macroeconomic, institutional regarding the euro area membership. and political reasons. The research aim was to discuss the problem related to the Overview of the current situation monetary integration in CEE. On the one hand, owing to the insufficient economic First of all, it is necessary to examine the development, the CEE countries must likelihood of the CEE countries being able meet stricter requirements and solve the to adopt the euro. The next step is to look at problem of the public finance; on the other the time frame in which this could happen. hand, they are under time pressure to dem• Table 1 shows euro adoption dates fore• onstrate their readiness and prove their ca• seen and planned by the CEE countries. pabilities as valuable potential members of Slovakia had applied to join the euro the euro zone. zone on 1 January 2009, dismissing the The research methods of assessment concerns of some economists that its and a benchmark analysis show how the economy was not ready for the rigours of decisions on the euro area enlargement in membership. The application was success• CEE countries can be affected by the indi• ful, and it will become the 16th of the EU cator of the gross domestic product (GDP). 27 countries to adopt the euro. Slovakia

Table 1. The euro adoption dates planned by the CEE countries (Kropiene, 2008) (Source: the table was drawn up with reference to the reports by the on preparations to introduce the euro and statements by the governments of the countries)

State 2004 2005 2006 2007 2008 2009-2010 1 January 2010 Not identified 2012 No target date 2009-2010 1 January 2010 Not identified 2012 No target date Period from Period from 1 Lithuania 1 January 2007 1 January 2007 No target date 2010 January 2010 2009 Not identified Not identified 2012 No target date Euro adoption Slovakia I January 2008 1 January 2009 1 January 2009 1 January 2009 on I January 2009 Euro adoption Euro adopted Slovenia I January 2007 1 January 2007 1 January 2007 on 1 January on 1 January 2007 2007

41 recorded the economic growth that causes zloty into the exchange rate mechanism-2 some EU officials to worry about the risks (ERM-II), therefore it is unclear when the of overheating. Slovakia has met all of the EMU membership may be achieved. As• Maastricht criteria for joining the euro and suming Poland's plan to call a referendum overcame a hurdle on the road to adopt• in 2010, it could enter the ERM-II in 2011. ing the common currency. The problem for According to the Credit Suisse Economic Slovakia had been fears that it could not Research, the euro could then be adopted sustain the low rate of inflation after join• in 2014. By the opinion of the Nat~onal ing the euro, but according to the European Bank of Hungary, the country is likely to Commission's economic forecast inflation be the last one to join the euro area those would fall in 2009. However, the Euro- entered EU in 2004 and should adopt euro pean Central Bank (ECB) is still wary of sometime after 2014. Conditions allowing letting countries join too early. It warns on joining the ERM-II are indeed unlikely to recent experience: Slovenia, which joined be in place before 2010. The Czech Repub• the euro zone at the start of 2007, now has lic government could achieve convergence the highest inflation rate in the euro zone. quite quickly if it gave priority to euro The European Commission (EC) and adoption. ERM-II entry is possible in 2009 the ECB in their latest reports emphasize or 2010, followed by accession in 2011 or that the idea is not to meet all the Maas- 2012 (Credit Suisse, 2007). But the proc- tricht criteria at a single moment in time, ess in the mentioned CEE countries may but to fulfil them on a lasting basis. As the be postponed if their governments do not test case of Lithuania showed in 2006, the prioritize the EMU membership. ECB intends to apply the Maastricht cri• In the 2004 convergence report, Lithua• teria strictly, if necessary to the last tenth nia was found to have fulfilled the criterion of a percentage point. They are thus more on price stability (European Commission, important than ever, and this attaches great COM (2004) 690). In 2006, the EC noted importance to the expected sustainability that in a longer-term perspective, buoyant of fulfilment. Of the three countries that domestic demand and increases in certain had targeted the euro zone entry in 2007, excise duties represented risk factors of only Slovenia as the richest of the newcom• inflation because Lithuania did not meet ers, in terms of GDP per capita, succeeded the criterion on price stability (European to adopt the euro. Given the difficulties that Commission, COM (2006) 223). Slovenia many countries are having with at least one did not fulfil the criterion on price stabil• of the Maastricht criteria, it is clear that ity in 2004. However, the country had re• Lithuania, Poland, Hungary and the Czech spected the reference value for inflation Republic are falling behind schedule. They since the end of 2005, and the EC agreed probably will join the euro zone only at the that it was likely to continue to do so in middle of the next decade. future because Slovenia fulfilled the cri• Poland could become the biggest coun• terion on price stability (European Com• try to join the euro zone since its launch in mission, COM (2006) 224). From this mo• 1999, but it is still far from inserting the ment, opinions have been voiced that the

42 old members of the euro zone do not want serious convergence examination and its Lithuania to join for other reasons, and the comprehensive assessment is an integral inflation criterion just comes in handy. Is part of the institutional framework govern• the real reason why neither Lithuania nor ing the euro area. It indicates whether a any other CEE countries should join the country has demonstrated that it is ready to euro zone that they are still too poor? Was integrate smoothly into the single currency Slovenia probably ready to join the euro area, or whether additional time should be zone in 2007 exactly because it was much used for preparation (Almunia, 2006). In wealthier? These are the points that neither 2008 Convergence Report, the EC noted the EC nor the ECB had made in their of• that the criterion on price stability was not ficial reports. fulfilled by Lithuania, the Czech Republic, The euro zone must be operated by a Hungary and Poland, the exchange rate clear set of rules, and countries should fully criterion by the Czech Republic, Hungary respect them. Lithuania's relatively small and Poland, the criterion on the govern• size means that its impact on the euro zone ment budgetary position by Hungary and economy should be fairly limited. On the Poland, the criterion on the convergence other hand, the perspective of the country's of long-term interest rates by Hungary. economy could contribute positively to the In the light of its assessment on the fulfil• euro zone. Perhaps some aspects of the ment of the convergence criteria and tak• rules should be reconsidered and improved. ing into account the additional factors, the But that was not an issue for Lithuania. It EC considers that all these CEE countries started its way to the euro following the do not fulfil the conditions for the adoption current rules of entering the euro zone, and of the euro (European Commission, COM needed to finish it according to the same (2008) 248). The implicit assumption of rules. The reason why the Maastricht cri• EU officials that all new EU members will teria have never been an ideal set of mem• work towards to meet the Maastricht crite• bership criteria is because they exclude the ria has largely been correct until recently. productivity, jobs and wages. The problem But things have changed significantly: the of real convergence has been ignored to this public acceptance of the euro among the day. And the question how long the EU will populations of new members often runs at continue to judge applicant members on the less than 50%, and political elites have also basis of these criteria is still open. become much more sceptical (Credit Su• "The euro is like an old Catholic wed• isse, 2007). According to Francesco Paolo ding: like it or not, happy or not, you are Mongelli from ECB, first, European mon• married forever. But fortunately, you know etary integration has been part of a broader the bride in advance. You know what it process of economic and financial integra• takes and what it needs to live with her tion. Second, European integration is a and make sure your union is a happy one", political process. Third, economic, finan• said Mr. Joaquin Almunia, EU monetary cial and monetary integration has evolved affairs commissioner, at the Vilnius con• gradually over a long period, and is still ference in October 2006. In his opinion, a evolving. Fourth, the advancement of Eu-

43 ropean integration has proceeded hand in viding a clear guidance to all sectors and hand with the advancements of economic actors involved in the country's practical theory (Mongelli, 2008). preparations, thereby encouraging and fa• cilitating the transition of both the public Steps leading to the adoption and the private sectors. Practical prepara• of the euro tions in the Czech Republic, Hungary and Poland in 2005 were in a very preliminary A successful adoption of the euro requires stage. not only compliance with the EU treaty re• The EC insisted that the countries in• quirements, but also carefully planned and tending to introduce the euro had little time extensive practical preparations. The EC left to prepare and implement a full-fledged reports on a regular basis, at least once a conununication campaign, their plans were year or whenever justified by specific de• very ambitious, despite the short time span velopments, on the state of these prepara• for their implementation. An additional tions. According to the EC, the countries reason for implementing comprehensive that invest in early, thorough preparations conununication progranunes was that the are rewarded for their efforts in terms of state of public opinion vis-a-vis the euro in the speed ofthe changeover, public accept• the CEE countries remained unsatisfactory ance of the new currency and smoothness (European Conunission, COM (2005) 545). of the transition. The preparations for the According to the Euro barometer survey in practical introduction of the euro have tak• 2006 the Slovenian public was one of the en nearly six years in the countries which most enthusiastic about the introduction of are part of the euro zone since 1999 (Euro• the euro in the acceded CEE countries. In pean Commission, COM (2004) 748). its report in 2006 the EC agreed Slovenia's The EC report in 2005 on the practi• practical preparations for the introduction cal preparations for the future enlargement of the euro covered most of the relevant of the euro area indicated that Lithuania, change over features. Slovenia and Slovakia had adopted na• The EC noted that the setting of a cred• tional changeover plans, but the state of ible target date remains a very important preparations was quite uneven among instrument to foster the convergence proc• the countries. In general, the EC warned ess. It notably provides incentives to all ac• its pace needed to be stepped up. In Slov• tors and sectors involved and helps to build enia preparations were generally advan• up a momentum for completing practical cing well. However, Lithuania definitely preparations on a timely basis. The EC has needed to accelerate ongoing preparations, officially pointed out that the extension while closely associating all economic of the original time frame should thus be sectors and actors most directly concerned used to enhance and complete the ongoing with the changeover. In the opinion of the preparations. Some countries have so far EC, the situation in Slovakia was satisfac• refrained from setting a target date for euro tory since a comprehensive national plan adoption, notably because they consider had been approved on a timely basis, pro- that it will take them several more years

44 before they will be able to meet the Maas• country should definitely step up its prepa• tricht convergence criteria. But the EC rations. In this report, the Czech Republic stated its opinion that even in those coun• was presented by the EC as a good exam• tries, public and private operators have a ple of timely preparations for the changeo• clear interest in starting to prepare them. ver in the absence of a target date (Euro• They might first have to inform themselves pean Commission, COM (2007) 434). In on the modalities and consequences of the July, 200S, in its last report the EC invited introduction of the euro for their activi• all countries to take into account extensive ties (European Commission, COM (2006) practical preparations in order to prepare 322). all sectors of their economies, administra• However, in October 2006, the Lithua• tions and citizens for the introduction of nian government decided that "Lithuania the euro. The EC noted that Slovakia had will aim to join the euro area as soon as respected the provisions of the EC recom• possible. The more favourable period for mendations and elaborated a comprehen• Lithuania to join the euro area starts from sive strategy for the euro adoption, but the 2010" The postponement of the introduc• central monitoring of Slovakia's prepara• tion of the euro has slowed down from tions to the euro should be reinforced with this moment not only the information ac• a view to improving the coordination of the tivities, but also the whole preparation pro• actions and being able to solve efficiently cess in the country (European Commis• potential crisis situations (European Com• sion, COM (2006) 671). Moreover, in the mission, COM (200S) 4S0). final national changeover plan approved It should be noted that the state and de• by the government's resolution in 2007, gree of the progress of preparations should Lithuania fixed that "1 January of a re• be assessed in the context of the target date, spective year" has been selected as the as preparations tend to step up with the euro adoption date. Unfortunately, this proximity of the changeover. In its reports, abstract and declaratory formulation could the EC provided for the countries a list of not be called as a target date for adopting the relevant changeover characteristics the euro. The EC report at the end of 2007 that should be implemented in the national took into account that after Lithuania had changeover plans. Additionally, in order not fulfilled all convergence criteria and to facilitate preparations for the changeo• its derogation was consequently not lifted, ver, the EC has built on the experience Lithuania failed to set a new specific target acquired in the course of the introduction date for adopting the euro (European Com• of euro in 2002, 2007 and 2008 in order mission, COM (2007) 756). to prepare the "Recommendation on meas• In the middle of2007, in its fifth report ures to facilitate future changeovers to the regarding the future enlargement of the euro" (European Commission, 2008/78/ euro area, the EC remarked that in Slova• EC). Figure 1 provides an overview of the kia preparations slowed down too, mainly relevant changeover characteristics in each because of parliamentary elections, and the CEE country in 2005-2008.

45 90% -~~~------• November 2005

_June2006 70% November 2006 60% .July 2007

l1li November 2007

, July 2008 30% 20% 10% 0%

Poland Hungary (lceh Slovaklil Slovcnia Republic Figure I Status uf the changeover characteristics in the CEE countries, 2005-2008 100 of all r~l~vant changeovcr C"haracteri~tics, offiCially approved / e..;,tablished and published in the natIOnal changeover rliln / Source: European CommissIOn. Reports on the practic<..ti preparations for the future enlargement of the euco area. :>005 ~008)

The EC officials argued that the disci• of eurn area enlargement poses a dilemma: pline required hy members would be ben• it is pointed out that setting the inflation eficial to their own economics. Progress criterion in relative terms - against the reports issued by the F.C always highlight three best perfol111ers in the EL - was 3n the patchy performance by countries for• appropriate option 10 years ago. hut toda) mally committed to joining the eufO. The the definition of price stabilit\' is applied reviews show whether the countries have by the ECB. hccause today the benchmark made any progress in economic COI1\ er• should be the price stahilitv benchmark genee. Lithuania and other CEE countries used by the ECB and not by the countries have not set a new specific target date for that hapr~n to have the lel\\'est inflation. adopting the cura and provide their plans f)a\'id Cobham. professor of econom• with their formulation in a very abstract ics at Herrim-Watt University in Edin• way. declarative form and for an unlimited burgh, thought that for a real con\ l'rgence term. It is clear that in these CEE countries there are no niteria. The Maastricht crite• there have been setbacks regarding prepa• ria are about nominal COI1\ ergl'l1ct'. Some rot ions to adopt the euro. economists argue that you Ilced to ha\ (' The EU policymakers designed a set of some Ie\ eI or real cnnYcrgl'nc(' to enh.'r rules 15 year5 ago that the country is re• the EMU. but the states that arc weaker quired to comply with the Maastricht cri• in terms of rea I corl' ergl'l1cl.! knd to get teria and also to stay ti.lr at least two years more from entering the EMl' (Cobham. within the ERM 11 ti·amework. Th~ prnc~ss 200X). An issue related to the rl'" I con-

46 vergence process is whether these criteria what does it take to meet the Maastricht will unavoidably keep outside of the euro nominal convergence criteria? The next zone the countries that will have already point should be whether the convergence reached a stage where they could function process can be better managed inside or normally in the euro area. Is it time to raise outside of the euro area. Afterwords, this the question of modifying the Maastricht has to be then weighed against the well inflation criterion? Some economists argue known benefits of being a member of the that the countries cannot reap the benefits euro zone. The timing of euro adoption of membership and suggest an approach will also depend on how successful the that has a more justifiable economic logic. country is in implementing the structural The inflation criterion states that the reforms that help increase productivity inflation rate of a country wishing to join and the overall efficiency of the economy the euro zone cannot exceed by more than and in consolidating the fiscal position in 1.5 percentage point the average inflation a sustainable manner (Darvas, 2008). of the three best performing EU member There can be no doubt that the entry re• states in terms of price stability. It was quirements for the new member states are originally defined at the time when the less lenient than the same requirements or• EMU did not yet exist. Now that the euro ganized at the start of the euro area when a zone exists, the criterion based on the half of the present members did not meet three best performers including those that a real convergence. According to Paul De are not members of the euro area probably Grauwe from University of Leuven, the is more difficult to justify on economic difference between now and then is politi• grounds. Zsolt Darvas from Corvinus Uni• cal. At the start of the euro area, the politi• versity of Budapest and Gyorgy Szapary cal will to start EMU was overwhelmingly from Central European University noted strong. Today, the political will to allow that a reasonable solution would be to de• new members into the euro area is fading. fine the criterion as an average of the euro Too many national idiosyncrasies continue area inflation plus 1.5 percentage points. to exist. The whole panoply of economic The economic justification to use the euro policies remains firmly in the hands of na• area inflation is that this is a relevant in• tional governments, creating sources of di• dicator which contributes to the imported vergent movements. These structural differ• inflation of the new members whose trade ences are at the core of the problem. Each is essentially with the euro zone. As noted member state continues to follow its own above, this is an indicator that the ECB path in too many areas of the economy. P. tries to control. Therefore, it is not logical Grauwe concludes that the insistence of the that the basis for the reference value for the ECB and the EC on a strict adherence to the new members should be different. Z. Dar• convergence criteria by the new member vas and G. Szapary note that the strategy states is misplaced because they work only and timing for euro adoption should be as• temporarily. They are neither necessary nor sessed from two perspectives. First of all, sufficient to guarantee a smooth functioning

47 of the EMU (Grauwe, 2006). The euro zone lems for the formulation of a coordinated has not yet made a transition from mon• monetary policy (Bordo, 2008). etary to economic union. That means the The CEE countries need to grow more euro zone member states should formulate than twice as fast to converge with the old a joint economic strategy and their reforms EU members. Since the mid-1990s, the need to be co-ordinated (Munchau, 2005). CEE countries have consistently outgrown Since the establishment of the euro 10 years most of the old EU. Katinka Barysch, chief ago, it has demonstrated a lot of strength. economist from Centre for European_ Re• Today the euro zone is comparable with the form, gives an example: Poland grew by an United States economy in terms of GDP average of4.4% a year in the decade leading and trade openness. The euro zone could up to its EU accession. Hungary expanded become larger, if the big non-euro zone EU by 3.6% on average in 1995-2004. For countries like Poland join (Papaioannou, comparison, Germany mustered an average 2008). growth rate of 1.3% and France of 2.2% in Michael Bordo from Rutgers University 1995-2004. The CEE countries had gained and Harold James from Princeton Univer• so much already from integrating with the sity suggest distinguishing between short• EU. Only limited further gains could be ex• er-term and longer-term problems. The pected to come from the actual accession to extension of the euro to the CEE countries the EU. Despite the marked pick-up in eco• in itself will create new challenges. The nomic growth across the region in 2004, we CEE countries are rapidly growing emerg• should agree with K. Barysch that it was ing market economies, which experience something like a "post-accession boom". and will continue to experience a rising The average real GDP growth in the new inflation. However, the mature markets of EU members accelerated from 3.7% in the euro zone states are likely to experi• 2003 to 5% in 2004. How far the EU acces• ence periodic bouts. Both these two types sion was behind the improved performance of countries are members of the EMU,just is open to debate. On the one side, the CEE with a temporary derogation not to adopt countries were well into an economic up• the euro, and must to adopt the euro in fu• swing when the accession date approached. ture. These requirements should produce On the other side, they were also reaping serious problems in one or both. The ma• the benefits of structural reforms they had ture markets should have monetary policies pushed through in the run-up to accession. that are less restricted and should be faced The economists agreed that a further eco• for a more growth-oriented monetary poli• nomic boost could come from adopting the cy. However, the emerging markets should euro (Barysch, 2006). be free to conduct tighter policies to mini• The growing scepticism about benefits mize the possibilities of destabilizing surg• from euro adoption and reform fatigue es in asset prices. At present, the disparity also contributed to the weakening of po• in growth is very apparent, and the today's litical support of euro adoption in the CEE situation seems to cause significant prob- countries. It is important to warn that not-

48 ~: 2003 2007

Lithuania Poland

Figure~. CDP per inhabitant ilt the CEE cOl/lttries

(Source. ELROSTAT,Juiy 31. 2008) withstanding the ne", EU member states' year, speeding up convcrgcnce in living commitment to join the euro area, there standards bctween the new and the old EU are no legal limits on how long they can member states. Gains to the euro zone are stay outside the curo area. Satisfying the likely to be smaller, given differences in Maastricht criteria before entering EMU the relative size of the euro area and the is required, but there are no sanctions for new members' economics. The new mem• not satisfying. Yloreover, in Estonia opin• ber states as a group account for 6% of the ions have been voiced to adopt the euro as curo area's GDP and 25% of population. a parallel currency if the country fails to I:lut for the euro zone the gains are likely to meet the Maastricht criteria in the near fu• be noticeable: they occur through trade, in• ture. However, to adopt the euro otherwise, vestment and migration (Euro, 2(07). Per through "dollari::atiol1" (w,ing the euro as capita incomes in the CEE are generally a legal tender), or to adopt the euro unilat• lower than in the old EU member states erally would be inconsistent with the spirit and are growing fast. Figure 2 provides of the Maastricht Treaty and the FMlJ. figures of the GDr per inhabitant in the According to the International Mon• CEE countries. etary Fund, the euro area membership is Between l'In and 2006, the GDP of likely to boost growth by about I % per the twelve EU countries that joined in the

49 fifth enlargement grew by an annual aver• Conclusions age of 4.3% as compared to 2.2% in the Most of the new EU countries declared 15 old member states. According to the their wish to join the euro zone in the near EC, trade between the old and the new future, but it would be unfair to ignore members increased remarkably in the last the fact that the fulfilment of the Maas• decade. Exports and imports among the 10 tricht criterion for price stability is becom• countries that joined in 2004 and the 15 old ing ever more complicated. The problem member states quadrupled between 1995 of real convergence has been ignored to and 2006, while overall trade between this day. The Maastricht criteria are about them doubled in that period (European nominal convergence, and it is time to Commission, COM (2007) 663). Within raise the question of modifying the infla• a couple of years, the membership of the tion criterion. A reasonable solution would euro zone can be expected to increase to be to define the criterion as the euro zone 19-20. Only two of the 27 EU member inflation. The decision of the EU institu• states fonnally have opt-outs. According tions concerning Lithuania revealed the to lain Begg from European Institute, this peculiarities of the euro area enlargement fact means that pressure will be placed on to CEE countries, but one may understand the others to deal with their derogations the arguments forwarded by the states of from full membership. At the lower end of the euro area concerning stricter require• this scale, the number of members would ments for them. The idea is not to meet all be double as compared with the launch of the criteria at a single moment in time, but the euro. This will affect the institutional to fulfil them on a lasting basis. configurations that have served since the First, the fonnation of the final opinion late 1990s (Begg, 2008). regarding the enlargement of the euro zone has been affected not only by fulfilment of The EC analysts warn that the enlarge• the Maastricht criteria, but also by a com• ment of the euro area into new countries plex of macroeconomic, institutional and requires a sound surveillance framework political reasons. The CEE countries must and an effective supervision of financial meet the stricter requirements than the markets. The rising international relevance other old euro zone members because of of the euro and the euro area raises the re• their insufficient economic development. sponsibilities of the euro area in and poten• The CEE countries are failing to undertake tial gains from the global macro-financial refonns needed to repair public finances. policy coordination and surveillance. This Their governments must regain control of prospect will also make an increasing public finances. It is also crucial that the call on a broad surveillance of candidate principle of equal treatment of the member euro zone countries. Those among them states would be retained during the future that have entered the ERM-II framework enlargement of the euro area. The logic of should become subject to a more intensive assessment and analysis of the discussion coordination (EMU, 2008). suggest that the euro expectations may be

50 postponed not solely for Lithuania, but area since 1999. Lithuania, Slovenia and also for the other CEE countries, if any Slovakia had adopted national changeo• slow down in economic growth could leave ver plans, but the state of preparations was public finances exposed. The euro zone has quite uneven among countries. Lithuania's not yet made the transition from monetary progress of honouring commitment for to economic union. That is to say reforms the EC was not impressive enough. Even in EU need to be co-ordinated, and a joint though the commitments were not actu• economic strategy should be formulated. ally analysed in detail at the time, more The euro zone will also require stronger progress could have had a more positive public finances. Consideration of various influence on a favourable decision. Prac• difficulties and fulfilment of commitments tical preparations in the Czech Republic, of the CEE countries while under time Hungary and Poland are superficial and pressure to prove their capabilities as valu• still in a very preliminary stage. able potential members of the euro zone What rational steps could be taken in a should become a relevant element of the situation when the players in the decision• entire coordination process of the econom• making process regarding the euro mem• ic policy. The fulfilment of the Maastricht bership have different standpoints and criterion for price stability poses dilem• interests? The CEE states must strengthen mas: the low rate of inflation and the euro the monitoring of the monetary integration zone membership or sound public finances and form much clearer expectations. The and the national house in order. This stress setting of a credible target date remains in public finances could endanger all their a very important instrument to foster efforts to join the euro. the convergence process. Unfortunately, Then, accordingly, a closer analy• Lithuania and the other CEE countries sis of the economic figures suggests that have not set a new specific target date for the criteria for the euro area enlargement adopting the euro and provide their plans could be set by the indicator of the GDP with abstract and declaratory formulations per capita. However, per capita incomes and indefinite terms. In case of Lithuania, in the CEE are generally lower than in the they remained unchanged even after the old EU member states, and the course of two years of participation in the ERM-II. events has revealed that euro area enlarge• Furthermore, no monitoring is provided ment looks rather like a coordinated solu• to ensure a proper fulfilment of the com• tion of political type. mitments. It should be noted that the state Third, analysing the lessons of the and degree of progress of the preparations practical preparations, we find that of no should be assessed in the context of the tar• less importance is the progress in imple• get date or a comprehensive result, since menting measures provided in the national the necessary preparatory work for the in• plans of the euro adoption. The prepara• troduction of the euro requires early plan• tions for the practical introduction of the ning. Coordination of the monetary and euro have taken nearly six years in the fiscal policy and measures of the practical countries that have been part of the euro preparations could enhance the monitor-

51 ing of how the commitments are fulfilled, economies. Therefore, the dialogue among while discussing their honouring by au- the members needs to be enhanced, as is thorities and the discipline required by the also the transparency in decisions concem• members would be beneficial to their own ing the euro area enlargement.

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EURO ZONOS PLĖTRA: DILEMOS IR PERSPEKTYVOS

Arūnas Dulkys Santrauka Beveik visos naujosios Europos Sąjungos valstybės gų integracijos Vidurio ir Rytų Europoje problemą. narės pareiškė norą artimiausioje ateityje isivesti Ne mažiau svarbi yra pažanga jgyvendinant šalių vy• eurą. Europos Sąjungos institucijų sprendimas dėl riausybių programose, konvergencijos programose ir Lietuvos atskleidė euro zonos plėtros Vidurio ir Rytų nacionaliniuose euro ivedimo planuose numatytas Europos šalyse ypatumus ir problemas, kurias sunku priemones. Pateikiamos išvados ir pasiūlymai, kaip paaiškinti grynai ekonomiškai. nes visos šalys turi Vidurio ir Rytų Europos valstybės turi didinti pinigų bendrą rinką ir joms taikomi ekonominio augimo ap• integracijos stebėseną esant skirtingiems sprendimų ribojimai yra gana nepalankūs. Straipsnyje nagrinė­ dėl narystės euro zonoje priėmimo procese dalyvau• jama hipotezė, kad sprendimą dėl euro zonos plėtros jančių veikėjų požiūriams ir interesams. lemia ne tik tai, ar tenkinami Mastrichto kriterijai, Pagrindiniai žodžiai: euro ivedimas, euro zonos bet ir makroekonominių. inslitucinių ir politinių plėtra, euro zona, Mastrichto kriterijai. priežasčių visuma. Straipsnyje siekiama aptarti pini-

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