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Staying Outside the Euro Area Has a Price

Published on , , Twitter: @euinside
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During the debt crisis years in the euro area expansion of the currency club was not the fashion, although towards the end of the crisis two Baltic states joined it – Latvia and Lithuania. So far, there is no new expansion visible on the horizon, mainly because there are no takers. Most states outside the euro area but are bound by treaties to join, have no appetite for it. The reason usually is that while there is still smoke coming out of the burning house it is not safe. This is the argument of the governor of the Polish central bank, Marek Belka. In an interview for the British The Daily Telegraph last summer he said that while the euro area is having problems with some of its members “Do not expect us to be too keen to join”. He suggested that Poland will not be ready to join for years to come not only because of Greece, but because of the change in the political situation in the country where, just two weeks ago, the Law and Order political party of Euro-sceptic Jarosław Kaczyński won a decisive victory. 

Beata Szydło, who is warming up to take on the Prime Minister’s seat, urged during the election campaign that the government to abolish the idea of adoption of the euro and promised the first act of her government would be to close down the office that is dealing with Poland’s preparation for adopting the common European currency, writes Paolo Vacca of the European Federalists. Poland feels it owes its survival during the crisis, when it was the only EU state without a year in recession, namely to the fact that it was not part of the common currency. Romania, who did appoint a date last year for its accession to the euro area – January 1st 2019, is of a different opinion. Bulgaria, also outside the euro area, sees accession as a priority no longer, mainly due to the crisis, which made the state hesitant.

Bulgarian deputy PM in charge of European affairs Meglena Kuneva, former EU Commissioner and chief negotiator for EU membership, is probably the only one speaking openly that Bulgaria needs to join the euro area. Earlier this year, she told journalists that staying outside the currency club changed things a lot, for euro area countries are receiving the true aid. She meant the quantitative easing of the ECB. Croatia is another state that has voices that sooner or later it needs to join the euro area, but the country is too far away from fulfilling all requirements, differing from most Eastern European countries that joined the EU before it. Hungary and the Czech republic, however, are highly Euro-sceptic. 

Apart from many of the non-euro states being in a position of waiting out better times in the euro area, ECB President Mario Draghi voiced concerns about its expansion. During one of his hearings in the European Parliament’s economic committee he stated openly that if a choice was to be made between putting energy into the club’s expansion or into making it stronger, “I would certainly choose the latter”. At the moment, this is exactly what is happening. The euro area, but not its expansion, is once more on the agenda, although not a top priority. After the publishing of the second vision on its future (the five presidents’ report) there began deep deliberations in many formats. The European Commission has just recently presented specific proposals based on this report. 

Although so far leaders of member states are receiving the talk on the euro area’s future coldly, because they are busy solving the far bigger issue of the refugee crisis, work on deepening common currency area integration is already working and even managed to cause tension in non-euro area states. This came forward strongly when for the first time in the history of the Union there was a meeting of ministers of labour and social affairs from the euro area. Something like a social Eurogroup. This made some Eastern-European states, which are not members of the euro area, nervous. The issue was even raised by Czech PM Bohuslav Sobotka during the October summit. 

According to Danuta Hübner, a MEP from Poland (EPP) and former Commissioner for regional development, staying outside the euro area has a price. „You know, we can like it or we can dislike it but I think there are facts of life which have to be taken into account. There is eurozone, which so far has not had yet what I would call a social foundation, but we had the four presidents' report, first prepared by Mr [Herman] Van Rompuy 2 years ago, there was this important, I think, contribution on social foundation of the eurozone and see very clearly from everything that is happening that it is an important dimension for the eurozone”, she said in an interview for euinside,dedicated on the meeting of euro area states’ social ministers.

“So, we're moving in this direction and those countries, even my home country, which are not eurozone probably have to be prepared that there is a price to pay, that there are issues which have to be solved, which are EMU-specific. As long as this can be discussed among 28 is very good, but I can imagine that we will have to live to when we can have such moments, more of such moments, where eurozone will have to find a solution for the eurozone-specific issues and then will get together”, added Ms Hübner. The European Parliament is still struggling to avoid any kind of division, for the euro is the European currency and the future of Europe is the euro area. Thus the solution is membership in it. “So, that's the price that we're paying”, she concluded. 

Countries, obligated by treaty to join the euro area have no deadline for it. They are only required to fulfil the five requirements for convergence, which are price stability, sound budgets and public debt, stability of exchange rates, long-term interest rates. There is more and more talk, however, of one of the reasons for the large-scale crisis in the euro area being uneven economic development. Deepening integration will make entering the euro area considerably more difficult and will have two aftermaths. One is, that this process will lead to pushing non-euro states to the periphery, and the other being that requirements for common currency membership will become way stricter.

Translated by Stanimir Stoev

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