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Europe

Opinion: The Future of the Euro Zone

With 10 new members, the European Union should push to expand adoption of the euro single currency, but only after the accession states meet its carefully defined convergence criteria.

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Coming soon to an eastern European country near you?

The ink on the treaty of accession signed in Rome this week had hardly dried by the time new member states from central and southeastern Europe began waxing fantastic about their aim to join the euro zone. This is not only their right, but also one of the consequences of EU expansion.

The European Union plans to help these new countries join the euro, but it will adopt a cautious approach. In other words, it won't happen automatically -- and that's good not only for the current members of the euro zone, but also for the countries aspiring to become a part of it. Here's why:

Money lives on the trust that is placed in its stability. But this trust must be earned. The economic strength of a country is paramount, but emphasis on the principle of economic stability is even more so.

Building credibility

In that sense, proclamation of the principle isn't enough: Only when a stability-oriented economic and currency policy is practiced over a long period in a credible and successful manner can trust be built among domestic consumers and investors as well as international currency markets. And, of course, neither the current members of the euro zone nor the guardians of stability at the European Central Bank have any interest in bringing countries with notoriously loose monetary policies into their circle.

Countries that want to take part in monetary union must maintain similar economic practices to those countries currently in the euro zone. That doesn't apply merely to the free market economy, but also to competition laws and the idea of private ownership as a pillar of public order. In addition to basic democratic foundations, these are also basic tenets for acceptance into the political union.

Even more importantly, inside the euro zone, price developments, interest rates, public budget deficits and national debts cannot drift away from each other -- the same standards must be applied across the board. Without those standards, it would be impossible for the European Central Bank to apply unified monetary policies. And without unified monetary policies, monetary union wouldn't function.

Meeting the convergence criteria

For that reason, after their accession in May 2004, the EU's new members will have to prove on a case by case basis that they are qualified for currency union. They have to successfully prove they have met the convergence criteria. It's a process that will be easier for some states -- like the Baltic republics -- but could prove more difficult for the larger members, who are battling considerable budget deficits. If Hungary, Poland and the Czech Republic were to engage in a crash course that, for example, would put caps on budget deficits and controls on price trends and limiting them to the measurements permitted in the stability pact that regulates euro zone monetary policy, they would, at least in the beginning, lose more than they would gain.

Still, the new EU member states won't (and shouldn't) lose sight of the possibility of introducing the euro. For the goal of EU membership isn't just to stabilize the recently achieved democratic relationships, but also to gain access to the western European level of prosperity. In that sense, the euro, like its predecessor, the deutsche mark, is an object of desire. And just as earlier stability policies in Germany ensured the success of the deutsche mark, today's high standards for currency stability are also at the foundation of the successful euro.

The new member states want the euro and they will get it, too -- but perhaps not as quickly as some might expect. But realistically, the euro zone can be best and most successfully expanded after these countries reach not only the convergence criteria laid out in the European stability pact, but also achieve an actual approximation of western European prosperity. Deutsche Welle editor Karl Zawadzky contributed this opinion.

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