Sunday

1st Aug 2021

ECB rejects eastern fast-track to eurozone

  • Adopting the euro remains a distant option for troubled eastern European member states (Photo: Wikipedia)

The European Central Bank (ECB) on Monday dismissed proposals made by the International Monetary Fund for eastern European member states to adopt the euro even without full membership of the eurozone.

"This [IMF proposal] is not realistic. The membership for European monetary union has very clear rules and these rules have to be followed. From an economic point of view, it would not be a good signal [for] the confidence . . . towards the euro," Ewald Nowotny, ECB governing council member, told Reuters.

Read and decide

Join EUobserver today

Become an expert on Europe

Get instant access to all articles — and 20 years of archives. 14-day free trial.

... or subscribe as a group

The bank was responding to the publication in the Financial Times of a confidential report drafted by the IMF last month as part of a regional anti-crisis strategy for the eastern EU countries.

It suggested that the EU should relax euro entry rules for countries like Hungary and Poland so that these countries can join as quasi-members without needing to hold a board seat in the ECB.

Eurozone accession is guarded very strictly by the European Commission and the ECB. Countries wishing to adopt the single currency need to keep a low inflation rate, a public deficit of below three percent of gross domestic product and stable exchange rates – all criteria which seem particularly hard to meet amid the current financial and economic crisis.

Countries also have to spend two years in a pre-accession phase, called the exchange rate mechanism II.

Jean-Claude Juncker, prime minister of Luxembourg and chairman of the Eurogroup of finance ministers, has consistently stressed that countries wishing to adopt the euro may not take short cuts.

The commission on Monday played down the IMF report, saying that it was drafted before the bloc's decision to double the fund for eastern EU members to €50 billion and to bolster IMF lending capacity.

Meanwhile, in New York, US billionaire and currency speculator George Soros praised the euro and suggested it was the only solution for troubled eastern European countries.

Mr Soros told Reuters Financial Television the euro has been "a tremendous advantage" to countries that use it and said there was "no question of a weaker country dropping out."

While the IMF was helping to stabilize struggling eastern Europe, Soros said the Baltic states still face "serious problems" even as Germany, the euro zone's biggest economy, is becoming more open to offering help.

Mr Soros also backed the Chinese idea of replacing the dollar as a world reserve currency, possibly with the IMF's special drawing rights.

"In the long run, having an international accounting unit other than the dollar may be to our advantage," he said.

Luxembourg tax scandal may prompt EU action

An investigation into Luxembourg's tax regime has uncovered how the Italian mafia, the Russian underworld, and billionaires attempt to stash away their wealth. The European Commission has put itself on standby amid suggestions changes to EU law may be needed.

Investigation

Portugal vs Germany clash on EU corporate tax avoidance

Portugal's taking over the EU presidency puts the tax transparency law for corporations - which has been fought over for years - to a vote in the Council of Ministers. The resistance of the German government has failed.

News in Brief

  1. Officials worried at infection-surge on Greek holiday islands
  2. EU calls on online platforms to tackle vaccine hesitancy
  3. Russia accused of falling short on Sputnik V deliveries
  4. France: UK quarantine rules 'discriminatory'
  5. Italy's government reaches deal on judicial reform
  6. EU adopts guidelines to 'climate-proof' infrastructure projects
  7. US backs WHO plan for further Covid-origin investigation
  8. EU to buy 220,000 supplies of potential Covid treatment

Vietnam jails journalist critical of EU trade deal

A journalist who had demanded the EU postpone its trade deal with Vietnam until human rights improved has been sentenced to 15 years in jail. The EU Commission says it first needs to conduct a detailed analysis before responding.

Stakeholders' Highlights

  1. Nordic Council of MinistersNineteen demands by Nordic young people to save biodiversity
  2. Nordic Council of MinistersSustainable public procurement is an effective way to achieve global goals
  3. Nordic Council of MinistersNordic Council enters into formal relations with European Parliament
  4. Nordic Council of MinistersWomen more active in violent extremist circles than first assumed
  5. Nordic Council of MinistersDigitalisation can help us pick up the green pace
  6. Nordic Council of MinistersCOVID19 is a wake-up call in the fight against antibiotic resistance

Latest News

  1. Malta responsible for journalist's death, inquiry finds
  2. Can Greece work with Biden to solve the West Balkans impasse?
  3. EU and UK frustrated at US travel ban extension
  4. Polish judges rally behind EU court ruling
  5. Why 'Fit for 55' isn't fit for purpose
  6. EU hits vaccination target, as Delta variant now dominates
  7. European arms 'displaced over a million people', research finds
  8. Brexit: what is the 'Lugano Convention' and does it matter?

Join EUobserver

Support quality EU news

Join us