Reuniting Europe

Guy Verhofstadt proposes that the East European EU countries which are still oustide the eurozone adopt the euro as a parallel currency. The proposal concerns Poland, the Czech Republic, Hungary, Estonia, Latvia, Lithuania, Bulgaria and Romania.

I’m not sure this is a very good idea. If the euro was introduced as a parallel currency in the country I know best (Bulgaria), this would result in hiking prices. The national currency, the Lev, is worth 50 cents. I’m sure that overnight many goods costing one lev will cost one euro. Also, a lot of cheating will take place, for instance when you get change in leva after paying in euro, or vice versa. At the end people will end up paying twice the price of what they are buying.

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  1. Strange idea Mr Verhofstadt! A parrallel currency could be a security against the crisis but it also risks to fragilise the local currencies. Moreover, fixing the exchange rate between euro and the local currency is a step towards the euro accession, a situation in which countries will be during two years before getting the euro “in their pockets”.
    For sure euro benefited to Sloavak economy during the crisis compared to Hungary and the Baltic states. But look at Poland. Polish economy performed well in spite of the crisis and with its Zloty.
    Please don’t go to fast, don’t rush into euro to secure your economies. As analysts said here “You can eradicate exchange rate volatility by adopting the euro. However, this step will not be profitable for you unless you fulfill certain conditions.”
    Patience et longueur de temps font plus que force ni que rage…

  2. Under Lisbon Treaty it’s going to be difficult to bridge not only the cultural and historical gap but also the macroeconomic gap between western-eastern europe. Already the dislocation of their natioanl economies is serious and may even get critical, if nothing is done to ameliorate the downward spiral.
    In that context, ex-Belgian PM’s ideas have to be tested in EP for its efficacy under ECB mandate. Provison of a currency or trading clearing house may also facilitate interim arrangements; however it’d then need to be implemnted collectively: ie, all non-euro member states in eastern europe.

  3. I tend to agree with Hari Naidu : “… difficult to bridge not only the cultural and historical gap but also the macroeconomic gap between western-eastern europe “.For me that tought gave rise to an imaginary scenario : what if the east europeans form their own united block including greece, bulgaria,albania, serbia, romania, hungary, ucraina, slovakia,belorus and as well turkey and israel with possible inclusion of syria, saudia, jordan,irak and why not iran.They will achieve a pace of delvopmnt. more suitable to their cond. and their relationship in the hyistorical context.As an eastern european I will feel much more at ease in the above prsnt. environment than trying to integrate in one where I dont belong.

  4. I agree with Gabriel Margineanu, Eastern Europe and the Eastern Mediterranian share a great portion of history, and they should definitly work some sort of a strong integration agreement, sort of reunification of the Eastern Roman Empire to speak.

  5. History does not have much to do with compliance to a common currency area (although it’s true that, generally, countries with a common history have similar economies), but yes, a regional Eastern European currency, rather than the euro for the whole EU at this time, would bring more benefits to the area. An optimum currency area is achievable only if the member countries have similar economic cycles, which means having a nominal (Maastricht) and real (unemployment rate, GDP / capita etc.) convergence. This is the case between Romania and Bulgaria and, perhaps, Turkey, Serbia and Ukraine. Buy let’s be serious, such a common currency won’t show up in the near future!
    Even so, euro accession shouldn’t be rushed and must happen only if there exists a sustainable fulfillment of the upper-mentioned criteria, otherwise countries will be, at some point, forced to leave the currency area and the risk of a eurozone break-up over the long term is unavoidable. I am Romanian and want my country to adopt the euro, but not sooner than 5 years from now, or later.

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