Some Implications of the Developments in Eastern Europe for the European Economic and Monetary Union

Abstract

This chapter will consider what could be some important consequences of recent developments in Eastern Europe for the present fabric of the European Community (EC) and its evolution into a European Economic and Monetary Union (EEMU).The main issue discussed will be the possibility that the recent developments in Eastern Europe could make it more attractive for the countries at the core of the EC to widen the geographical scope of the Community as a common market for goods, while at the same time making it less attractive to proceed further towards integration of the old Community within a full monetary union. Thus, the issue is whether the attempt to enlarge the EC in order to help reshape the economies of Eastern Europe may widen the “economic” side of the EEMU (let us call it the EEU)) at the cost of shrinking its “monetary” side (let us call it the EMU). The first side of this issue—widening the EC—is mainly discussed in section 1; the second side—deepening the EC—is mainly discussed in section 2. Interrelations between the two sides are intrinsic to the issue, and so such programmatic separation is somewhat artificial. Thus, in section 3, an attempt will be made to pull together the two arguments and attempt some conclusion.The analysis of this issue will be limited to economic reasoning, even though because of this limitation, the conclusions may very well be different from those that would follow if political elements were also considered. In fact the very distinction between economic and political points of view is artificial in the context of structural changes such as those that have affected Europe in the last few years.KeywordsEuropean CommunityReal Exchange RateStable Equilibrium PointEuropean Monetary SystemEast European CountryThese keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.