WARSAW – The European Union’s new member states from Central and Eastern Europe are required to join the eurozone as part of their accession agreements. But deciding when to adopt the euro is a matter of heated debate.
At stake is not just an economic calculation, but also a judgment about the outlook of the single currency itself. For many, the benefits of membership have diminished since the financial crisis, and prospective members, such as Poland, can derive maximum advantage from joining only if they are clear about the economic conditions that must first prevail in their own countries.
The formal criteria for entry are contained in the 1992 Maastricht Treaty, which sets targets for government debt, budget deficits, inflation, interest rates, and exchange rates. But merely hitting these targets (or, worse, just approaching them) at any given point in time has proved to be an inadequate foundation for membership. Indeed, the malleability of the Maastricht criteria has caused many of the eurozone’s problems. As long as eurozone debts continue to rise and member economies diverge rather than converge, prospective members should also be stress-tested to see if they can withstand external shocks and sustain the membership criteria over the long term.
Before Poland decides to share a currency with its main trading partners, it should consider three vital economic conditions: its international competitiveness, the flexibility of its labor market, and the health of its public finances.