The Euro's Slow Way East
The deutsche mark, franc, lira -- all currencies that don't exist anymore. But some others, like Poland's zloty, Hungary's forint and the Czech crown, could be around longer. EU membership doesn't mean automatic euro.
Many Europeans these days, simply take the euro for granted. Whether in Paris, Lisbon or Berlin, purchases can be paid for with the same coins and bills. However, somewhat less clear is how many countries actually use the common currency.
Is it :
a.) 12,
b.) 16,
c.) 18 ?
The answer: all of
the above. Strange, but true. The first answer seems obvious,
since there are 12 EU states which are official members of the European
currency union. But, in addition, there are four smaller states that also use
the euro: Andorra, Monaco, San Marino and Vatican City. They already
used the former currencies of their bigger neighbours, like the franc or the
lira, and so indirectly became members of the euro zone. All except Andorra
even have permission to mint their own euro coins. So b.) 16 is also correct. But answer c.) 18 is
also perfectly acceptable. There are two additional regions in Europe, which
aren't actually countries in their own right. In one of them, Kosovo,
the deutsche mark was introduced by international administrators. The other, Montenegro,
opted for the deutsche mark on its own. When the deutsche mark ceased to exist,
the euro automatically became the de facto currency in these areas as well. Opt outs
Since the Maastricht
Treaty was signed in 1992, currency union has been one of the pillars of the
European project. A common currency is meant to aid in the free exchange of
goods and services, making, for example price, comparisons easier across
borders and eliminating currency risks. In theory, the member states of the
EU are meant to join the currency union when they fulfill the criteria. But
three of the 15 old members have not done so, much to the dismay of the former
president of the European Central Bank (ECB), Wim Duisenberg. "That message is to
Denmark, to Sweden, to the United Kingdom : Come and join us!" he said on
New Year's Eve 2001 when presenting the new euro currency. But so far his entreaty
has fallen on deaf ears. Denmark and Great Britain ensured that a clause was
inserted in the Maastricht Treaty enabling them to opt out of the currency
union. A referendum in Sweden showed the populace there is not interested in
deserting the Swedish crown. The government found a way to
"disqualify" itself from euro acceptance.
Chances for the
newcomers ?
The ten new members of
the EU also "must" adopt the euro when they fulfill the Maastricht
criteria. But so far, none of them has, according to a sober assessment made in
October by ECB head Jean-Claude Trichet.
"Let me also use
this occasion to stress again that there is no preset timetable for the
enlargement of the euro area," he said. "In order to adapt the euro,
non-participating EU member states have to achieve -- and it is a necessary
condition -- a high degree of sustainable economic and legal convergence."
Among the new EU states,
there are large gaps between their preparedness for the euro -- Estonia,
Lithuania and Slovenia riding at the front of the pack, Poland, the
Czech Republic and Hungary pulling up the rear.
Over- and
underachievers
For example,
Estonia's finances could make about every third EU politician from the 15 old
member states green with envy.
The Estonians achieved a
budgetary surplus in 2003 of more than three percent of GDP, without a deficit in
sight. The entire national debt, at 5 percent, is so low that it wasn't even
possible for the ECB to calculate long-term interest rates for securities.
The Estonian crown has been pegged
to the euro for several years and, since July, the country has been a member of
the European Exchange Rate Mechanism II, which aims to reduce exchange-rate
variability and achieve monetary stability.
Those countries pulling
up the rear, the Czech Republic, Poland and Hungary, have less to brag about
and their finances have raised concerns at the ECB. Their budget deficits are
well over the Maastricht limit of 3 percent. In fact, the Czech deficit reached
12 percent in 2003.
It will be quite a
while, central bankers say, until the three can start dealing in euros. But
then again, much the same was said about Portugal and Spain in the mid-1990s
when few thought they could get their households in order.
But in these cases, the
desire to be early members of the euro club brought about the kind of political
pressure needed to do some budgetary weightlifting and get in shape for the new
common currency.
Johannes Beck (jam)
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