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February 23rd 2009

Eastern Europe Plagued by Currency Instability

The credit crisis continues to exact a devastating toll on the economies of Eastern Europe, and capital flight has caused the region’s currencies to plummet precipitously. This has prompted internal debate in countries such as Poland, Czech Republic, and Latvia – to name a few- as to whether the effects of the crisis would have been so blunt had they adopted the Euro. While certainly Euro membership would have spared them from currency instability, it would not have necessarily facilitated financial and economic stability, as Italy, Spain, and Greece have learned the hard way. Regardless of whether Eastern European countries are politically willing to commit to the Euro (itself doubtful), this debate is largely moot, since the credit crisis has all but eliminated their ability to meet the preconditions of membership in the short run. The New York Times reports:

The Baltic states would like to join as quickly as possible, but their economies are contracting so much that it would be impossible to meet the criteria, which, among other things, stipulates that budget deficits should be below 3 percent of gross domestic product.

Read More: Currency Issues Weigh on Eastern Europe

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Posted by Adam Kritzer | in Emerging Currencies, Euro, Politics & Policy | 4 Comments »

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4 Comments of “Eastern Europe Plagued by Currency Instability”

  1. Yohay Says:

    Currently, the problems in Eastern Europe hurt the Euro, since these countries owe a lot of money to West European banks.

  2. yourforexreview Says:

    i agree with yohay and forexblog. current situation in eastern europe hurt the euro.

  3. MOG Says:

    This the worst time ever…agree with you all

  4. pauldavid Says:

    The credit crisis has had a devastating effect on the currencies of Eastern Europe and has prevented some of the countries from acquiring a membership.

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