EMU entry strategies for the new member states

Abstract

The recent enlargement of the European Union by ten mostly Central and Eastern European (CEE) countries (the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, the Slo-vak Republic, Slovenia, as well as Cyprus and Malta) heralds the enlargement of the Euro-pean Monetary Union (EMU). By the adoption of the EU Treaty the ten new member states have already become members of the EMU—although still with derogation. In contrast to Denmark and the UK who had the possibility to opt against EMU membership, the new member states are obliged to join the EMU as soon as they fulfill the Maastricht criteria for monetary, fiscal and exchange rate convergence. In addition, while the new member states can postpone the full-fledged EMU member-ship by not meeting the Maastricht criteria (as presently Sweden does), all new member states seem to have to a strong intention to join the EMU as soon as possible. The recent accession of Estonia, Lithuania, and Slovenia to the Exchange Rate Mechanism II heralds a new round of EMU enlargement by 2006/07. Why do the new member states want to join the EMU as soon as possible and how can a smooth EMU accession be achieved? These are the questions analyzed in this paper.