Wednesday, June 26, 2013
4.04 (PC Hoofthuis)
The euro crisis has led many Central and East European Countries (CEECs) to take a cautious approach regarding euro adoption. Some countries have pushed the euro adoption date further away (Czech Republic). The Baltic states are relatively keen to join but have had differing success in achieving that goal. How can we understand the fact that Estonia managed to adopt the euro while the other two are still lagging behind? What factors are decisive in this outcome? What was the effect of the financial and euro crises on the three Baltic States? This paper tries to understand the euro adoption strategies in the three Baltic countries and the differential effect of the financial crisis and euro crisis on each of them. It argues that euro adoption policies are shaped by three main factors: the historical legacy and geographical location; the government and opposition politics given a particular election cycle; and macroeconomic conditions—that is, although these are three very small open economies, they are ones that are more in need of catch up than other CEECs. Dealing with growth, inflation and government finances are challenging in differing circumstances.
