The Euro’s First Steps into the East

This paper, prepared by Credit Suisse Economic Research, analyses the prospects for further expansion of the eurozone into the new member states and the possible timeframe in which this could occur.

The paper says that the creation of the eurozone as the largest multinational currency union in 1999 was an unprecedented experiment, making the euro one of the world’s most important currencies. Today, eight years later and five years after the euro was introduced in cash form at the start of 2002, 314 million people in 13 countries share a single currency. 

The currency union was originally intended to embrace all the members of the European Union, which now number 27. Three of these – the UK, Denmark, Sweden – are not planning to introduce the euro for the time being. However, all 12 of the post-2004 joiners have undertaken to do so as soon as they fulfill the necessary conditions. Slovenia already succeeded and introduced the euro on 1 January 2007. 

At present, of the Maastricht criteria that stipulate whether a country may join or not, inflation has proved to be the biggest hurdle with, eight out of the 11 candidate countries failing to meet this requirement. The budget-deficit requirement has also been a problem.

According to the authors, on the basis of current evidence, Malta and Cyprus will be ready in 2008 and Slovakia by 2009. However, people living in the Baltic states and the “big three” of Poland, the Czech Republic and Hungary, as well as the two newest EU members, Bulgaria and Romania, will probably not join the euro until the next decade.