Candidate countries with currency board arrangements: are they better prepared for joining the EMU?

Abstract

When preparing its accession strategy, candidate countries with currency board arrangements have to deal with two basic issues: on the exchange rate system and on entering the EMU. The national legal framework regarding monetary issues and the negotiation positions of individual countries are the sources of information about these two aspects of monetary integration with the EU. As regards the first issue on exchange rate systems the accession to the EU is not connected with the requirement to apply any exchange rate system. The candidate country is independent in choosing the exchange rate system. The EU institutions however are very clear, that the unilateral eurisation is an unacceptable instrument. This position is in contrast with the entire logic of the Treaty regarding the introduction of the euro. The second issue, on entering the EMU, can be currently approached to the extent of the basic principles rather than of the details in designing the national strategies. It is clear however, that this process will pass through three stages: accession to the EU; participation in the ERM II; introduction of the euro (after meeting the convergence criteria). It becomes evident, that although particular restrictions are imposed at the very beginning, the options of the respective country in choosing an exchange rate regime are gradually reduced when following the three stages.