Selected transition and Mediterranean countries: an institutional primer on EMU and EU accession

Abstract

The paper examines the institutional channels through which Economic and Monetary Union (EMU) in the European Union (EU) can affect the transition countries of Central and Eastern Europe and three Mediterranean countries that aspire to join the EU.After describing the current institutional framework for relations between the EU and these countries, the paper considers two categories of institutional implications of EMU. The first stems from the need to satisfy the Maastricht convergence criteria before joining the euro area. Although the Maastricht criteria are not accession criteria, many of the countries reviewed are already formulating their macroeconomic policies in a way that will facilitate convergence toward the Maastricht targets. The second implication stems from the need to adopt the EU's institutional and legal provisions in the area of EMU, such as those referring to the establishment of independent central banks, the prohibition of central bank financing of the government and the liberalization of capital movements. Finally, 742 the paper discusses some of the key policy issues that EMU raises for the countries reviewed, in particular regarding exchange rate policy, capital account liberalization and the possible conflict between growth-enhancing measures and the Maastricht criteria.JEL classification: F15, F33.

Adjusting to the EMU

“…Even Romania's score was above the mid-point of his index's continuum. The International Monetary Fund (2000: 157) as well as Temprano-Arroyo and Feldman (1999) reported that all transition economies acceding to the EU had accepted Article VIII on current account convertibility and had removed most restrictions on transactions related to foreign direct investment. At the end of 1997, the Baltic countries had achieved nearly the maximum score on their capital account liberalization index, and the Czech Republic, Hungary and Poland were in the higher half of the index's range.…”

Mare Nostrum: The Sources, Logic, and Dilemmas of the Euro-Mediterranean Partnership

“…The agreement implementing the final phase of the CU became effective in December 1995. Accordingly, both parties have eliminated customs duties on industrial and processed goods (Temprano-Arroyo and Feldman, 1999). Since the CU agreement, Turkey has demonstrated the ability to cope with the competitive challenge of free trade.…”

“…Since the CU agreement, Turkey has demonstrated the ability to cope with the competitive challenge of free trade. However, Turkey has been denied full membership in the EU on political and social grounds, including its human rights records, hostile relations with Greece over Cyprus, demographic characteristics and high population rate, and concerns over her "European" status (Temprano-Arroyo and Feldman, 1999 ).…”

“…As a result, Turkey liberalized its trade policies, eliminating trade barriers and customs on industrial and processed goods. Capital liberalization during the 1980s and 1990s took place as part of Turkey's obligations as an OECD member and EC associate member (Temprano-Arroyo and Feldman, 1999). According to a 1997 IMF report, Turkey ranked higher in an overall index of capital liberalization than most Central and Eastern European, and Mediterranean countries that had signed associate membership agreements with the EU (IMF, 1997).…”