The Domestic Politics of Euro Adoption in the Czech Republic, Hungary and Poland

Abstract

Following their accession to the European Union (EU) on May 1st, 2004, ten New Member States (NMS), and two more that joined in 2007, are expected to fulfill the Maastricht convergence criteria and enter the last stage of Economic and Monetary Union (EMU) in due course thereby adopting the euro. However, nothing in the Treaty on European Union specifies a time frame for joining the euro area. Some countries have already joined; the others have not. Slovenia joined in 2007, Cyprus and Malta in 2008 and Slovakia in 2009. The other eight NMS have not yet adopted the euro. Some have made serious attempts; others are far removed from having made the necessary preparations to be ready to join. How can we explain the difference in speed of euro adoption? A cost benefit-analysis indicating positive economic effects of euro adoption and the existence of shared economic values and beliefs among central bankers are insufficient to bring about speedy euro adoption. This paper develops a domestic politics approach to analyze the euro adoption process and applies it to three case studies: the Czech Republic, Hungary and Poland.