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The state of the euro area

The state of the euro area

Central and eastern Europe at a crossroads

by Anton Varga in Bucharest

Thu 24 May 2018

OMFIF convened its first Economists Meeting with the National Bank of Romania in Bucharest on 22 May. Senior representatives from European central banks, international financial institutions and the private sector attended the event.

The meeting explored the outlook for growth across central and eastern Europe, Romania's accession to the euro, the benefits and costs of joining the European Monetary Union, and challenges for the European banking system.

With EMU reform at the forefront of debates in Europe, central and eastern Europe are at a crossroads. Whereas some countries are looking for closer integration, others are hesitant. There is scepticism in the region as to the benefits of joining the common currency, with some fearing a lack of fiscal flexibility to handle economic crises at a national level.

This forms part of a wider divide in Europe regarding the issue of national sovereignty and the future structure of the European Union. Some countries favour a federal Europe, while others prefer a union of nation states.

Despite these concerns, Europe, and the euro area in particular, have defied critics and remained resilient. The debate as to whether countries in the region should join the euro has so far focused on 'when' rather than 'if'. If core Europe is able to proceed with the structural reforms needed to facilitate a deeper economic recovery, enthusiasm for integration among the nations of central and eastern Europe is likely to increase.

Anton Varga is Programmes Assistant at OMFIF.

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