The Slow Trip to the East: The Domestic Politics of Euro Adoption in the Czech Republic, Hungary and Poland by Assem Dandashly* and Amy Verdun** *PhD Candidate at the University of Victoria ([email protected]) **Professor and Jean Monnet Chair Ad Personam ([email protected]) Paper prepared for presentation at the Fifth Pan European Conference organized by the ECPR Standing Group on European Union Politics, 23-26 June 2010 University Fernando Pessoa and Faculty of Economics of Porto University (Porto, Portugal)
2 The Slow Trip to the East: The Domestic Politics of Euro Adoption in the Czech Republic, Hungary and Poland Assem Dandashly and Amy Verdun Abstract: Why have some NMS not been able to join the euro area even if they made serious attempts at the outset? What are the circumstances and policies in these countries that have led them not yet to adopt the euro to date? Has it been lack of political will on the part of the government, a strong voice in the opposition or a euroskeptic president, insufficient administrative capacity, or lack of policy learning? Though there is no consensus among economists regarding whether adopting the euro in the short run is a good idea or not, however, we believe that an economic cost-benefit analysis would suggest that in the long run euro adoption is positive for NMS. Yet macroeconomic analyses do not explain the change in government policies that may lead to euro adoption. Constructivist analyses, that focus on collective identity, policy learning, ideas and knowledge transfer among central bankers and other political elites, as well as adjustment to global pressures and Europeanization, are also unable to explain the speed of euro adoption in NMS. This paper adopts a domestic politics approach to analyze the euro adoption process in the Czech Republic, Hungary and Poland. Based on an examination of government documents, reports in the media, academic literature and face-to-face interviews we seek to offer new insights into the role of domestic politics in explaining the process of euro adoption in NMS. Government policies, elections, electoral cycles as well as constitutional rules, turn out to be crucial in explaining the lagging euro adoption process in these countries.
3 1 INTRODUCTION 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) thereby adopting the euro. However, the Treaty on European Union (TEU) does not specify a time frame. Slovenia joined the euro area in 2007, Cyprus and Malta in 2008, and Slovakia in 2009. Other NMS have not yet adopted the euro. Some have made serious attempts at being ready to join; others are still far removed. So, why have some NMS not been able to join the euro area even if they made serious attempts at the outset?