Publication overview

Implications of the euro for the integration process of the transition economies in central and eastern Europe

Abstract

This paper discusses some of the consequences and challenges of the introduction of the euro for the transition economies in central and eastern Europe (CEE). The first part of this paper identifies the various channels through which EMU may affect financial and commercial relations in central and eastern Europe. The second part of this paper turns to a discussion of the institutional implications for those transition economies that have applied to accede to the EU. Real convergence is likely to take much longer than meeting the Maastricht convergence criteria and transition economies should not peg their currencies to the euro too quickly. In addition, a gradual approach to financial integration and thus a sequencing of capital account liberalisation seems appropriate. This paper concludes by considering some of the possible effects of EMU on political debates about eastward enlargement of the EU.