Verhofstadt's tabled his proposal, which concerns Poland, the Czech Republic, Hungary, Estonia, Latvia, Lithuania, Bulgaria and Romania, as part of his plans for Eastern Europe, which has been hit badly by the economic crisis.
"East and Central European governments may want to explore the possibility of introducing the euro as a joint legal tender. The euro would function alongside national currencies for all transactions and thus enhance the credibility of the exchange rate arrangement," Vehofstadt states in a press release from his political group, the Alliance of Liberals and Democrats for Europe (ALDE).
Up till now in Europe, only Montenegro, an EU-aspirant country and "divorcee" since 2006 of the former Serbia and Montenegro, has adopted the euro as its national currency, doing so unilaterally. Verhofstadt's plan differs slightly from the Montenegro case, as he is proposing that national currencies co-exist with the euro until the country concerned joins the eurozone.
The idea of introducing the euro early in Eastern Europe is not new. Last April, a leaked IMF report making such proposals was broadly rejected by economists from Central and Eastern European countries (EurActiv 07/04/09).
A spokesperson for Vehofstadt told EurActiv that the main difference with these earlier proposals was that the countries would keep their national currencies, and therefore the Exchange Rate Mechanism would not be undermined.
Verhofstadt, who has just returned from a visit to the Baltic states, tabled other concrete proposals for Eastern Europe:
- The European Central Bank should temporarily provide liquidity to Eastern EU countries' local banks. This support - currently available only to eurozone banks - would help fuel investment and consumption.
- The European Investment Bank (EIB) should adopt a specific lending mechanism for small and medium-sized enterprises in order to stabilise lending in these countries and to support their economies.
- The EU should make some of its subsidy programmes, such as the European Social Fund, the European Cohesion Fund and the European Globalisation Adjustment Fund, more accessible by temporarily lowering national co-financing requirements.
- The European Globalisation Adjustment Fund should be widened in scope and its procedures simplified so that those who have been left jobless as a result of the world financial crisis are better able to access the money.
- East and Central European governments may want to explore the possibility of introducing the euro as joint legal tender. The euro would function alongside national currencies for all transactions and thus enhance the credibility of the exchange rate arrangement.
- Road, railway and energy networks in the East are generally still behind those in the 'old' member states. The EU must enhance its funding mechanisms to fill these development gaps. A combined EIB-EU 'Infrastructure Trust Fund' could well serve this purpose. Such a fund would target investments in cross-border infrastructure.
Verhofstadt, a former Belgian prime minister, is a well-known author of works on economic theory. Indeed, his latest book is entitled 'Exiting The Crisis: How Europe Can Save The World'.
At the ALDE leader's initiative, the European Parliament has decided to hold a debate during its next session in Strasbourg (14-17 December) on the particular economic and financial difficulties experienced in Eastern and Central European member states who are outside the protective umbrella of the euro zone.
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