Brussels, 19/04/2001 (Agence Europe) - In a study on Economic and Monetary Union and on enlargement, carried out by the European Parliament, the Netherlands Economic Institute took stock of the progress made by the candidate countries regarding their integration into the EMU and the major strategic challenges linked to this process. Considering that such countries are still in the process of stabilising their economic transition, the institute is opposed to any haste and recalls that the essential conditions for joining the euro area are mainly the completion of price liberalisation and the restructuring and recapitalisation of the banking system, in addition, of course, to real and sustainable convergence in conformity with the Maastricht criteria.
In parallel to the slow process for accession to the European Union, partly attributed to the differences in revenue and productivity between the regions, the European Commission and most of the candidate countries see accession to the euro area as a gradual process. It would begin with a period of two years at least, as set out in the Treaty, during which these countries would be members of the EU but not the euro zone and would meet in the exchange rate mechanism 2 (ERM2). The initial enthusiasm shown by these countries for rapid adoption of the euro, states the report, has dwindled under the effect of opinions rendered by international institutions and university circles but, for the countries of the "first wave", the timetable for accession to the euro area still seems somewhat optimistic. The main challenge to be raised is the implementation of Community acquis. Some countries seem to be coming up against several stumbling blocks: liberalisation of capital movements, total independence of central banks, and the lack of access to preferred sources of financing. The Dutch institute considers that the candidate countries are "on the right road" regarding their conformity with the Maastricht criteria in respect of controlling inflation, the tax parameters and, for some, the exchange rate stability. It notes, however, that the rates of interest sometimes remain high, which "reflects the high level of real interest rates, the still hesitant control of inflationary anticipation and the immaturity of the capital markets". These results are interpreted as a sign that the candidate countries are still in the phase of stabilising their transition towards the market economy. The study notes, for example, that countries such as Hungary and Poland have gone further towards reforming their economy, but are also the least well placed as regards convergence criteria. It suggests that the candidate countries should reach a threshold of real convergence before aiming at nominal convergence, because of the structural pressures that weigh on the rate of inflation and the real exchange rates, due themselves to the effort of transition and to catching up productivity. This priority is all the more justified as, after their accession, these countries will be subject to the coordination mechanisms of Community economic and tax policy, such as the broad economic policy guidelines, the convergence programmes and the procedure applicable to excessive deficits. From the pre-accession stage on, the Maastricht criteria exercise an influence on coordination, even if they do not condition accession. Regarding exchange rates, the study remarks that only some candidate countries have a clear strategy for rapprochement with the countries of the euro zone. It cites the example of Poland, which has planned to gradually relax its exchange rate before entering ERM2, which will establish complete parity compared to the euro, with the possibility of intervention and realignment, in order to allow the possibility for the exchange rate to find its point of balance before entering the euro zone. Most of the candidate countries are invited to elaborate medium and long-term strategies in concert with the Commission and the European Central Bank.
According to the study, hasty accession by the candidate countries to the euro area seems to be ruled out, as it would involve over-strict monetary and taxation policies that could slow down the economic growth of these countries. In addition, the inappropriate diversification of production structures and the insufficient orientation of exports to the EU would expose these countries to exogenous shocks from the Union. Solutions for this kind of inconvenience can be envisaged, such as salary flexibility, migratory flows towards the main EU countries and massive tax transfers, but for many such solutions seem hard to achieve at both economic and political level.
At the external level, the conditions for allowing the candidate countries to enter the euro zone, depending on whether it is a success or not, will reinforce or weaken single currency, considers the Dutch institute. The study also notes that enlargement of the euro area should entail deviation of capital towards the new arrivals, in an initial period, to the detriment of third countries oriented towards the EU such as Russia and Ukraine.