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November 14th 2005

Eastern Europe prepares to adopt Euro

In the next few years, a bevy of eastern European countries are scheduled to adopt the Euro, and EU officials are already beginning to make the appropriate preparations. Estonia will be first (2007) followed by Slovakia (2008) with Latvia, Lithuania, Slovenia, Czech Republic, Hungary, and Poland slated to adopt shortly thereafter. While the economies of eastern Europe are small in comparison to those nations currently on the Euro, their presence will nonetheless be felt for an important reason: inflation. The collective economic stagnation of western Europe has resulted in low rates of domestic inflation. The economies of eastern Europe, in contrast, have boomed in the last few years, spurring high rates of inflation. Once these nations adopt the Euro, the ECB may begin to think critically about the risks posed by inflation. The Economist reports:

Estonia, due to adopt the euro on January 1st 2007, is a rare economic star by the debt-drenched, slow-growing standards of the euro zone. Whereas growth in the euro area is well under 2%, Estonia’s economy last quarter expanded at a cracking 9.9% annual rate.

Read More: Flights to Frankfurt

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Posted by Adam Kritzer | in Euro, Politics & Policy | No Comments »

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