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Opting out of the euro

06-06-2012 11:02 BJT

As the Eurozone crisis goes from bad to worse-- many countries that are in line to adopt the Euro are beginning to have mixed feelings about joining the club. Britain and Denmark have already negotiated exemptions from joining.But for eight other countries including Poland, Romania and Estonia-- it's still mandatory.

The Euro the world's second largest reserve currency, the second highest traded currency and in 17 EU countries it's the only currency.
Right now it's in deep trouble, but the jury's out on whether it's a midlife crisis or something much much worse.

EU countries like Britain and Denmark have opt-out clauses, which is a polite way of saying they don't want the Euro and will always stick to their own currencies.
But for eight other member states the Euro is considered destiny.

Sebastian Valentin Bodu is a Romanian member of the European Parliament.
He tells me his country is still committed to joining the Euro in 2014, but concedes there's now debate at home about the wisdom of that decision.

Sebastian Valentin Bodu, Romanian Member of European Parliament, said, "We have to stay the course and adopt the Euro but there are analysts who think we should give more thoughts to the idea because if we are inside the EU then we will lose our monetary instrument, so what we will have then is only pressure on costs in order to be competitive.

Greece is a prime example of that problem the few things the country exports are just too expensive with a Euro price tag on them, but right now all Greece can do is slash wages and jobs to adjust.

Reporter: "In troubled times European Union countries that do not use the Euro have more flexibility when it comes to devaluing their currency. That means their exports are cheaper, but it also makes their imports more expensive, which means more debt."

The Czech republic has made it clear it no longer wants to join the Euro, while other countries in-waiting like Hungary would like IMF funding, but need the Euro to get it.

Then there are pro-Euro countries like Poland, which believes it still represents stability.

The fact is most of the eight countries in line to adopt the Euro are still failing membership criteria, which requires among other things conforming to the EU's strict exchange rate mechanism.

Something very few candidates have been able to do, though some have been accused of intentionally dragging their feet.

Either way, countries are most certainly now waking up to the joys and pitfalls of adopting the currency.

Hans Martens, Chief Executive of the European Policy Centre, said, "The lesson that has been learned is that it's not a club you join for the fun of it, you need to do very hard work and in the end if you can't devaluate you need to be as competitive as the others and I think that's the lesson some of the countries should learn because you're not going to get an advantage by joining the Euro if you're not competitive and I think Greece is a fantastic example of that."

But there are countries like tiny Estonia. These are the celebrations last year when it joined the Euro, and this year it's economy is still booming.
Proof that it's not all bad news for Europe's beleaguered currency, and those who still wish to join it.

 


 

Editor:James |Source: CNTV

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