Euro for Eastern Europe? Not so fast.(Read article summary)
The European Central Bank quashed speculation Monday that failing eastern economies might adopt the currency in response to the financial crisis.
BERLIN – Whether the European Union’s newest members in the east would rapidly move to ditch their moribund currencies for the euro has been a favorite topic of speculation among observers here ever since the economic crisis first hit the region last fall.
The European Central Bank, which sets monetary policy for the 16-member eurozone, sought to quash such speculation Monday. The ECB says it will not relax euro entry rules for Eastern European countries such as Poland and Hungary so that they can adopt the single currency more quickly.
The eurozone is not an easy club to get into.
Countries must meet a host of stringent criteria that they ECB lays out, including: low inflation, stable exchange rates, and, most significantly, public debt below 3 percent of gross domestic product. Most countries in the region would fail to meet that last one alone.
The ECB is reacting to a recent article in the Financial Times newspaper that reported an internal memo from the International Monetary Fund, which advocated euro adoption for Hungary and Poland without full membership in the eurozone. They would be like half-members, able to print and use the euro currency but not hold seats on influential monetary policy boards.