After Croatia, who’s next for the euro?
The euro, once seen as the next great step in the European project, has undergone a tumultuous and fraught existence since its inception in 1999. Following the currency’s debt crisis in 2009, the economies of Greece, Spain, and Portugal were shaken to their core. The euro’s very survival came under threat. Only through the joint commitment and perseverance of its member states did the currency survive.
However, with its survival came a price. A reputation of disrepute and scepticism spread across the continent, held by members of the public, businesses and politicians alike. Only now is the criticism and worry that has so long lingered beside the euro beginning to fade.
Its survival is no longer in doubt. Its own financial mechanisms continue to improve, and its strength on the global stage stands tall beside the dollar and yen. With Croatia joining the common currency club last month, 10 years after it became the EU’s newest member, and Bulgaria still hoping to follow suit next year, the question is now surely who will look to join next?
To date, seven EU member states currently remain outside of the currency bloc.
Although Sweden and Denmark both hold formidable and well-adapted economies, there is no current appetite amongst their public or politicians to expand the euro’s use further north. Therefore, the most likely cases for future accession lie in central & southern Europe.
Bulgaria is still aiming for accession in 2024, providing its fractured parliament can pull together some rag-tag coalition in time for the switchover. Even if it is unable to meet its initial target date, most major parties agree on the desire for euro-accession in the coming years.
Across the rest of central & southern Europe’s non-euro nations, the picture is still muddy, but signs of change are showing. As businesses continue to return to the new normal following the economic shock of the coronavirus pandemic, and the fallout of the ongoing Russian invasion of Ukraine, the idea of a common currency appears to be in vogue once more.
Businesses across the region, including Czech auto giant Skoda, have finally taken the plunge of operating their business transactions in euros instead of local Korunas. Rising inflation has also battered individual currencies more than the combined strength of the euro, something that businesses have been closely watching as the cost of living crisis continues.
Public opinion has also finally begun shifting increasingly in favour of adoption. The most recent eurobarometer from April 2022 showed 44 percent of Czechs, 60 percent of Poles, 70 percent of Hungarians, and an astounding 77 percent of Romanians were in favour of single-currency adoption. Ten years ago such support, especially from the more sceptical central European nations, would have baffled observers.
In the halls of power across the region, so too is the discussion finally coming back to the fold. The Czech Republic’s incoming president, Petr Pavel, is an open advocate for euro adoption. Although constricted politically by his ceremonial role, his election could be the first domino to fall in any potential euro adoption by the country.
A change in government following this year’s general election in Poland could also lead to new discussions on joining the bloc. If PiS is defeated by a more moderate, pro-European coalition this November, the eurozone could be looking at gaining one of Europe’s largest economies.
Although still nowhere near looking towards adopting the currency soon, the increasingly isolated Hungarian government led by Viktor Orban has begun softening its often heavily critical stance towards the euro. What this change of tone could mean for Hungary’s potential accession to the currency club is hard to foresee. What it does represent however, is the broader opinion shift by those in office towards the common currency.
Nonetheless, adoption should not be rushed. At the moment no potential future member gets close to meeting the required acquis, nor are many central governments focusing on such a discussion during a cost of living crisis that shows little sign of abating.
Croatia’s recent adoption also reminded prospective member states of the advantages, as well as the risks, both political and economic, of joining the currency club. Price ’roundups’ by businesses that sought to take advantage of the switchover, alongside discussions surrounding whether the government actually had support from the majority of the public, have muddied Zagreb’s accession.
This is not to say that Croatia was wrong to join. The country will now benefit from a shared economic and currency zone with many of its neighbours, and with simultaneously joining the border-free Schengen zone, its rapidly growing tourism industry will look to take advantage from the currency switch through more streamlined Euro-based transactions.
Convincing the public, businesses, and politicians that there is any ‘right’ time to switch currencies is no easy feat. This is not to say that it is impossible. After years of internal and external doubt towards its long-term survivability, the euro is finally standing tall, ready to compete globally.
Non-members should not be rushed into joining anytime soon. But with possibly two new members in two years signing up, the time is now for discussions to finally begin anew across central & southern Europe on prospective accession. Whisper it for now, but the Euro is back in fashion.
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