Article: Will euro save Eastern Europe?
http://newsvote.bbc.co.uk/2/hi/business/7932770.stm
Comments: The article is about Poland but there have been a lot of talks in the Czech Republic about this topic recently as well.
There are some missing facts in the article. First a most notable one — the eurozone is not an optimal currency zone. You can argue that no currency zone is optimal (and you would be correct) but eurozone is — I think — just the opposite of an optimal one. Remember not only prohibitions that don’t allow East-Europeans to work in the EU15 but also different cultures and languages. It would take a lot of transition cost for — say — a Slovak to come to Finland and work there.
Second, I miss very much that the Euro is not an economic project but rather a political one. I can hardly imagine a monetary without a fiscal one. And I can hardly imagine a fiscal union without a political one.
There is no doubt whatsoever that Euro is a huge step towards a so much closer Europe. The East-European countries must ask themselves if they want such unification.
Third, it’s not been stated that floating of zloty and koruna and other currencies helps the economies cope with the turbulences better than a fixed currency regime.
Not to mention all the talks about which country will be the first to exchange the Euro back for their respective currency, not to mention that the eurozone is a club of debtors, not to mention that the government bonds in the eurozone are now being sold at very different prices and so on and so forth.
I mean the answer simply must be no — the euro won’t save Eastern Europe.