Five Years to the Euro for the CEE-3?. CEPS Policy Brief No. 3, April 2001

Gros, Daniel. (2001) Five Years to the Euro for the CEE-3?. CEPS Policy Brief No. 3, April 2001. [Policy Paper]

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Abstract

In terms of meeting the fiscal Maastricht criteria, the Czech Republic, Hungary and Poland are better placed today than were some of the current euro area members from the “Club Med” (Greece, Italy, Portugal and Spain) at a comparable point in time leading up to their joining EMU. The CEE-3 should thus be able to qualify for full membership by early 2006, following a decision by the EU as early as 2005. But this does not imply that convergence will be smooth. Speculative attacks came in the early 1990s, exactly when the process of convergence seemed to have been successfully completed. Some of the CEE-3 share several characteristics of the economies worst hit by speculative attacks in the period 1992 to 1995: Large current account deficits; Large FDI inflows (which finance the current account deficits); An appreciating real exchange rate. On all three accounts, the potential disequilibrium is much larger for countries such as Poland today than it was for Spain, Portugal or Italy in the early 1990s.

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