- Title: VARIOUS: Eastern Europe still keen on euro zone despite crisis
- Date: 23rd February 2010
- Summary: VARIOUS OF POSTER SHOWING EURO COINS AND NOTES RIGA, LATVIA (RECENT) (REUTERS) LATVIAN BANK BUILDING PEOPLE COMING OUT OF BANK DOOR PLAQUE READING: "LATVIAN BANK" SPOKESPERSON OF LATVIAN BANK, MARTINS GRAVITIS, WALKING THROUGH OFFICE (SOUNDBITE) (Latvian) SPOKESPERSON OF LATVIAN BANK, MARTINS GRAVITIS, SAYING: "It would seem that we as unsuccessful students, having not been able to do something, would go to the teacher and complain about too strict criteria. You see, the criteria itself is not the problem. It is the principles of successful management which have to be observed by any economy." TRAM PASSING PEDESTRIANS ON STREET TRAFFIC ON STREET
- Embargoed: 10th March 2010 12:00
- Keywords:
- Topics: European Union,Economic News
- Reuters ID: LVA7H5C1SZ0Q4EKUUPTL5KHJMIST
- Story Text: Many eastern European countries who are still outside the euro zone aspire to join, but the 'Greek tragedy' and the wider economic crisis signal that good economic management is a vital prerequisite.
The Greek economic crisis will force euro zone members to think hard about the economic stability of future recruits.
Greece is the first country in the euro zone's 11-year history to require a political pledge of support, as fears over its debt sparked a market attack that has dented the euro and lifted bond yields, making debt servicing even more challenging.
However many among the euro hopefuls, such as Poland, Hungary, the Czech Republic and Latvia, still see euro entry as both desirable and inevitable and are cautiously optimistic about their chances.
The latest opinion poll by eurobarometer, from September 2009, showed the number of people supporting euro adoption "as soon as possible" fell to 25 percent, from 28 percent in May. Those who said "as late as possible" rose to 33 percent, from 29 percent.
The crisis in Greece will make it more difficult for countries like Hungary to join the euro zone, analysts warn.
Zoltan Torok, an analyst at Raiffeisen Bank in Budapest, said the effects will be long-term and will push the accession time for Hungary and many other Central and Eastern European countries even further into the future.
''In the longer term the message of the Greece case for the euro zone itself is that it should be very careful what members its gonna allow to join. And the message for Hungary is that Hungary should do a lot of work in order to go ahead in convergence, in real economic convergence as well as financial convergence," said Torok.
The crisis snuffed out a boom that saw some of these economies grow in double digits in 2007, leaving swathes of idle construction sites across the region and shops offering post-Christmas sales well into February.
In Hungary the forint lost 25 percent against the euro at the height of the crisis, wreaking havoc for consumers who had borrowed 25 billion euros in euro and Swiss-franc loans, in the hope of repaying them with euro salaries.
Many will hope to learn lessons from the Greek 'tragedy' and all that implies.
"I think this is a very important lesson because Greece is not a credible country and it was not credible, let's say, a year ago. And Poland being relatively strong today, but we do not have relatively good, let's say, track record. And it shows that you have to be prudent as far as the fiscal is concerned. Not only today, but in the future," said Bre Bank Chief Economist, Ryszard Petru.
That means working all the harder to get their own affairs in order, saying that the pain would be a price worth paying.
The Greek crisis may not dampen the spirit of euro expansionists irreparably, but it will inevitably increase caution when considering new recruits.
"I think that the Greeks are to be blamed for this situation. I think that the situation in Greece should not influence our entry into the euro zone. We should take care of our own problems," said Polish Business Analyst Michal Zasadzki.
While Germany and other euro zone big guns wrangle over how to make sure Athens does not sink the monetary union, euro hopefuls like Poland have plenty of their own problems to worry about. Recovering from recession is for many the key priority.
"First of all we should take care of the unemployment and the crisis, that seems like it doesn't affect us, but in fact does. And to stabilise the economy. Then we can start thinking about the euro," said Warsaw business owner, Maria Jaworska.
Many look to Slovakia which blazed the euro trail in 2009. Many, from Prime Minister Robert Fico down, now enjoy being part of a strong currency zone and hope it will speed up their economic recovery.
"According to my point of view it is very positive, because we have a unified currency with all the member states and it also supporting us during the crisis, because this is a hard currency. So I see it as very positive," said student David from Bratislava.
However many in neighbouring Czech Republic point out the negative effects euro membership has had on Slovakia and fear that now is not the time for them to follow suit.
The Czech National Coordination Board (NKS) has already prepared a report on readying the Czech Republic for euro adoption.
However many Czechs are happy with their currency and feel safe from the economic crisis. They don't believe that euro membership is any guarantee of safeguarding the Czech economy from global crises.
"I don't think it's time yet. Look at the Slovaks who have it - they are unlucky, because they are coming here to shop," said a Prague retiree, Jaroslav.
"When I look at Slovakia I must say no, no, no! We are not ready for it yet," agrees Lenka.
Although many in the EU's emerging economies envy countries like Slovenia and Slovakia, which adopted the euro in 2007 and 2009 respectively, they also appreciate their flexible national currencies.
Not only do aspiring governments have their work cut out to impress the euro institutions and member states, the current global trend in economic management is conservative economics: stable budgets and prudent fiscal management.
Latvian Bank Spokesperson, Martins Gravitis said euro aspirants shouldn't complain about tough criteria.
"It would seem that we as unsuccessful students, having not been able to do something, would go to the teacher and complain about too strict a criteria. You see, the criteria itself is not the problem. It is the principles of successful management which have to be observed by any economy," said Gravitis.
While they are feeling the pain of fiscal belt-tightening in crisis-hit Latvia, where public sector wages have been slashed since the recession took hold, voters are also keen to see their political masters clean up their act. - Copyright Holder: REUTERS
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