In a surprise move, the Commission proposes that euro zone-hopefuls should keep their currencies within a narrow 2.25 per cent trading range against the euro.
According to the Commission, the new Member States wishing to enter the euro zone will have to join the Exchange Rate Mechanism (ERM) II for two years and will have to keep their currencies within a 2.25 per cent trading range against the single currency. Through a suitable exchange rate system, ERM aims to guarantee stability and solidarity between the euro and the national currencies of the non-euro zone countries.
Under ERM II, currencies are generally required to trade within a 15 per cent band around a central euro rate. However, Economic and Monetary Affairs Commissioner Pedro Solbes has said that the narrower 2.25 per cent band will be applied when judging the stability of the currencies preparing to join the euro. Mr Solbes did not elaborate on the duration of the narrower band's application.
According to analysts, the move will make it more difficult for the ew EU Member States to join the euro zone. In 1992, Britain was forced to drop out of ERM I after a tidal wave of selling the pound on the foreign exchanges left it defenceless against international currency speculators. The UK could not keep the sterling within a narrower band than that allowed under ERM II.
"The important point [for the new EU Members] is not to join the euro as soon as possible", Mr Solbes said.