Economic and Monetary Union in the Accession Countries - Political and Economic Contexts

Abstract

The EU-25 will start operating on May 1, 2004. This paper reviews the position of the new Member States (NMS) in the Economic and Monetary Union (EMU) with respect to future adoption of euro. It argues that further integration in this area is much more about the deepening of the political integrity of the EU than about lowering transaction costs. However, a debate on the political and economic implications resulting from the adoption of euro by the NMS is full of unsolved issues. The central one is to define the possible scenario of the path to the euro. It implies actions on both sides: the NMS need to implement many economic reforms and enhance the political debate on the benefits of the euro adoption. The EU side must proceed with reforms, including the redefinition of the Stability and Growth Pact. The lack of reforms may hamper the political position of the EU.