Among CEE countries, only Croatia is thinking about early euro adoption
|CEE countries want to advance more in economic convergence and be more competitive before joining the Eurozone.
‘Have recent calls for deeper EU integration triggered discussion about euro adoption in CEE countries?'
Croatia: At the beginning of 2017, there were a lot of media reports on the 'informal agreement' between PM Plenkovic and Governor Vujcic that the government and central bank would put euro adoption among the top priorities on the policy agenda. However, political instability and several other situations (e.g. Agrokor) have moved the focus and recently we have not seen much progress on this matter. However, regained political stability, the end of the excessive deficit procedure and announced cost-benefit analysis of euro adoption from the Croatian National Bank (due in September) could bring the attention of policy makers back to this important question. In addition, the Croatian Banking Association initiated a conference on this topic to be held during summer (representatives of banks, the central bank and government), during which we could see a lot of media attention, bringing discussion on euro adoption back to the covers of the popular media.
Czech Republic: Public opinion is still tilted against the euro, and this also spills over into the negative attitude of many Czech politicians. For this reason, we do not see any significant change in public debate or a higher willingness to join the Euro Area. However, besides the political factors stemming from higher demand for tighter economic cooperation among several EU representatives, we also expect rising demand for joining the Eurozone from Czech firms, due to the high openness of the Czech economy, and this should intensify in the future. An optimistic estimate is that the Czech Republic could join the Eurozone in around 2025.
Hungary: Currently, there is no official target date for euro adoption; however, the economic policy has not given up its intention of joining the Eurozone. Despite the fact that the importance of deeper integration has emerged on the EU level and the topic has been in focus to a greater extent for a while, Hungary is expected to maintain its wait-and-see stance on the issue. According to Economic Minister Mihály Varga, the lack of a unified fiscal policy coupled with a common monetary policy could make it impossible to maintain a common currency system. Although Hungary more or less meets the nominal convergence criteria, entering the ERM2 is still not on the agenda, as the economic policy seeks to increase the country's competiveness and make progress in the field of real convergence before adopting the common currency.
Poland: We do not see a high probability of euro adoption in the coming years. Although three out of four main Maastricht criteria are fulfilled (the only exception is the ERM II program, in which Poland is not taking an active part), public opinion is strictly against the euro. Recently, Minister of Development and Finance Morawiecki said that the Polish economy is not ready to adopt the euro and in fact there is no need to enter the Eurozone. He claims that, after adoption of the euro, Poland would lose its main advantage, meaning its independent monetary policy. That is in line with comments from Jaroslaw Kaczynski (the leader of the ruling Law and Justice party) that adoption of the euro would significantly lower the quality of life in Poland and decrease the competitiveness of Polish export.
Romania: Euro adoption has been a moving target in Romania over the past ten years that has never been tackled too seriously. With no clear-cut agenda, officials have usually contented themselves to only noticing that Romania has to catch up to the Eurozone average GDP/capita and that more has to be done in terms of improving productivity to sustainably lift the country's economic potential (strong need for structural reforms, increasing EU funds absorption, developing infrastructure, etc.). Romania's GDP/capita at PPS reached 55.8% of the Eurozone's in 2016, from 48.2% five years ago. Arguably, if the country continues to gain 1.5pp per year on the Eurozone and assuming that the convergence point for the GDP/capita stands at 70%, Romania will need around ten years to be able to join the single currency area. In a bid to adopt the euro, Romania will also have to address the significant regional disparities when it comes to GDP/capita.
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