On May 1, 2004, in the Þfth enlargement round, ten more countries, eight of which are from central and eastern Europe, became members of the European Union (EU). The Þnal monetary objective of EU accession and, indeed, a treaty obligation for these countries, is the adoption of the euro. The requirement for the introduction of the euro is compliance with the Þve Maastricht convergence criteria. They comprise the insation, the interest rate, and the exchange rate, as well as the public deÞcit and public debt criteria. There has been a lot of controversy regarding the economic wisdom of these criteria and, in particular, the exchange rate criterion. After becoming an EU member the countries are expected, albeit not necessarily upon EU accession, to participate in the Exchange Rate Mechanism II (ERM II) for at least two years in order to satisfy the Maastricht exchangerate criterion for adoption of the euro. The majority of the new member countries have announced that they will strive to adopt the euro at an early, if not the earliest possible, date. Thereby, they opt for a rather brief participation in the ERM II. Indeed, three of the ten new EU members (Estonia, Lithuania, and Slovenia) already entered the ERM II on June 28, 2004, thereby commencing the last stretch on the road to the euro. Although participation in ERM II and the adoption of the euro are to be seen as two distinct issues, technically the three countries could introduce the euro as early as around the middle of 2006. There are a number of interesting, economically and politically challenging issues regarding the Þnal mile to the euro. First of all, the ten countries have been following a wide range of monetary regimes covering the whole array of possibilities from free soating to hard currency pegs in the form of currency boards (see Table 1). Secondly, their economic situation at the present juncture differs widely. While practically all new EU member countries now enjoy (relatively) high real growth rates, a number of them have been suffering from sizeable internal and external disequilibria. In this context, Þscal and balance of payments (current account) disequilibria stand out. Thus, the economic environment might not only insuence the timing of entry and the duration of participation in the ERM II but also the broader issue of fast or slow entry. The latter point has to do with how one sees the role of the ERM II. Is it merely to be seen as a (in fact unwelcome) legal requirement, a waiting room (i.e., one of the Maastricht convergence criteria) or as an instrument that can also foster domestic economic adjustment by providing a disciplining framework (i.e., a training room for convergence)? Other important issues to be decided by (multilateral) mutual agreement before the adoption of the euro include the choice of the central parity and the width of the exchange rate suctuation band. While the former requires an assessment of the (unknown) equilibrium exchange rate, the latter initially sets a standard suctuation band of + or 15 percent. Only later closer exchange rate links between the euro and the participating non-euro area