Institute of European Studies

Now that the decision has been taken to admit to the European Union eight of what were once called the transition economies, attention has naturally turned to whether these countries should also join Europe’s monetary union. But where is a consensus that joining the EU, while posing certain difficulties, will be a source of net benefits, there is no such consensus about the adoption of the euro. In part this uncertainty reflects the unusual difficulty that monetary economists have in translating theory into policy. We specialists, in other words, cannot even agree amongst ourselves.

In this lecture I suggest that this uncertainty is unwarranted. Adopting the euro is clearly superior to the other monetary options available to the new EU members. These countries are right to be committed to joining Euroland as soon as possible. And the incumbent members of the euro area should be happy to have them. To be sure, enlarging the monetary union will pose difficulties for both the incumbents and the new members. But these are minor compared to the difficulties that will arise under other scenarios. From this point of view, it is regrettable that the incumbents appear to be placing unnecessary obstacles in the path of the aspirants.