The Possibility of Introducing the Euro in the Countries of Central and Eastern Europe

Abstract

The introduction of the euro has been one of the most significant steps in the economic integration within the European Union, with twenty Member States having adopted it at different times. The enlargement of the euro area has taken place under varying conditions, due to a series of economic crises and reforms, among which the fulfilment of the convergence criteria is of particular importance. Although widely assumed economic benefits such as accelerating growth and inflation stability are associated with the introduction of the euro, literature suggests that the reality is more nuanced: neither the pace of economic growth nor inflation dynamics show a clear correlation in the countries adopting the euro. With regards to inflation, it is particularly important, that despite some assumptions, accession has in practice not led to significant price increases. The convergence of price levels towards the euro and the dollar is also discussed, which is significant for the CEECs, except for Slovenia. The article also refers to a US economic narrative that the rigidity of the euro may hamper economic adjustment. In the context of the possibility of Hungary joining the euro area, it is argued that membership of the currency area alone does not guarantee sustainable economic convergence. The advantages and disadvantages of accession can vary considerably depending on country-specific factors, reform capacity and economic policy strategy. Therefore, further up-to-date research would be needed if Hungary were to reconsider joining the euro area. In the latter case this would be particularly important, especially in the current European economic and political context.