The case for reforming euro area entry criteria

Zsolt Darvas

Society and Economy, 2010, vol. 32, issue 2, 195-219

Abstract: The global economic and financial crisis has raised further concerns about the euro-entry criteria, in addition to other factors, such as the effective tightening of the criteria due to the enlargement of the EU from 12 to 27 members, the highly unfavourable property of business cycle dependence, the internal inconsistency of the criteria due to the structural price level convergence of Central and Eastern European countries, and the continuous violation of the criteria by euro-area members. The interest rate criterion became a highly volatile measure. Many US metropolitan areas would fail to qualify to be members of the US monetary union by applying the currently used inflation criterion to the US. It is time to reform the criteria and to strengthen their economic rationale within the legal framework of the EU treaty. A good solution would be to relate all numerical criteria to the average of the euro area and simultaneously to extend the compliance period from the currently considered one year to a longer period.

Keywords: Euro; EU institutions; financial crisis; Maastricht-criteria (search for similar items in EconPapers)
JEL-codes: F33 F36 F53 (search for similar items in EconPapers)
Date: 2010
Note: This article partly draws on the paper that the author prepared for the conference on “The Future of the Baltic Sea Region in Europe”, held on 27–28 August 2009 in Hamina, Finland. The conference was organised by Centrum Balticum and the Town of Hamina together with the Finnish Prime Minister’s Office to commemorate the 200th anniversary of the Treaty of Hamina that established the autonomous Grand Duchy of Finland within Imperial Russia, which marked the gradual emergence of Finnish nationhood. The author is grateful to Torbjörn Becker, Daumantas Lapinskas, Jean Pisani-Ferry, Indhira Santos, André Sapir, Karsten Staehr, György Szapáry, Vilija Tauraitë, Jakob von Weizsäcker and two lawyers who wished to stay in anonymity for stimulating discussions about this paper, to the conference participants in Hamina and to the seminar participants at the German Marshall Fund in Berlin for helpful comments. However, ###
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Related works:
Working Paper: The Case for Reforming Euro Area Entry Criteria (2010)
Working Paper: The Case for Reforming Euro Area Entry Criteria (2010)
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