Rolf-E. Breuer
Ladies and Gentlemen:
It is one of the most difficult things to get back to work after lunch and the second
difficult thing to keep one's listeners awake. Hopefully the panel will successfully
do both; at least the first task seems to be achieved now. This is the third panel of
today's congress and the session is labelled "The Euro Goes East". For the sake of
the panellists who were not here yet, the first session dealt with the political and
macroeconomic implications and ramifications of Europe going East, meaning EU
enlargement. Then we had a session on banking in Eastern Europe in the wake of
the upcoming enlargement. And now our panel will deal with the currency, the
euro itself, going East. Some people could argue that is still too far away, so why
do you discuss it? I think that is too superficial. I would like to share three observations
with you suggesting that the euro going East is closer than we think.
The first observation is that future participation in EMU is part of the acquis
communautaire and therefore it is a consequence of joining EU. So it is expected
that candidate countries for the EU become full members of EMU once they have
joined the EU. We should talk about meeting the convergence criteria in time
without sacrificing growth and that, of course, requires long-term strategies. We
will discuss what kind of strategies might be the right ones.
The second observation in this context is that there are some countries in the East
which are de facto already members of the euro club, for instance Estonia with a
currency board. We have to discuss the controversial issue of "euroisation", i.e. the
introduction of the euro without complying to the rules of the EU Treaty and fulfilling
the convergence criteria. "Euroisation" seems to provide some sort of a
short-cut to the euro for countries not willing to go through the regular prescribed
process of joining EMU. We know very well that not everybody here approves of
eurorisation.
The third observation is that we will see the euro going East already on January
1st 2002, namely in the form of coins and notes. As we know, there are a lot of
Deutschmarks in eastern Europe in "piggy banks", as so-called "mattress money",
or wherever people keep the personal cash reserves. So the question in this
context is a very interesting one: what happens with that money and will it just be
changed into euro coins and notes and meet with the same fate as the former
Deutschmark personal reserves, the black-market money or whatever. So that
means the euro going East starts in less than forty days.
Now, the envisaged EMU membership of EU accession countries is accompanied
by a lot of expectations on the one hand and concerns on the other. For one, there
is a rather superficial argument in the world, specifically here in Germany, which
says that enlargement could potentially contribute to the weakness of the euro
rather than to its strength and that part of the present external weakness of the
euro is due to the expectation of candidate countries joining EU and later on
EMU and adding volatility to the currency. We have to discuss that even though
my personal feeling is that this is a terrible prejudice. We have to talk about the
famous convergence criteria and we must discuss whether those convergence
criteria should be handled as strictly as in the selection of the first-round EMU
member states. We have to keep in mind that the economic situations and structures
of the candidate countries are extremely different compared with the current
member states. Just take per-capita income which in the case of Bulgaria is one-fifth,
and in the case of Cyprus four-fifths of the EU average. It shows that the candidates
start from extremely different situations. And then real convergence. We heard
this morning from the Swedish Minister of Foreign Affairs, Anna Lindh, about the
bumpy road to the euro. Indeed, there are a lot of problems to solve. I hope the
panel will discuss some of those difficult issues.
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