Business, Economics and Jobs

Euro: from zero to hero


BOSTON and ARAD, Romania — Greek rioters, uncertain exchange rates and fears of defaults in Ireland, Portugal and Spain haven’t tarnished the euro’s image in Eastern Europe.

While many observers are pessimistic about the future of the European Union’s official currency, Bulgarians, Romanians and other EU citizens in the former communist bloc still consider it a safe haven in stormy economic times.

“I agree with the goal of switching to the euro,” said Frunza Andra, a 23-year-old student in Arad, a small Romanian city near the Hungarian border. “There won’t be such big differences among countries anymore, like Romania and Germany. In the long run, I think it's for the best.”

Bulgarian economist Svetla Kostadinova of the Sofia-based Institute for Market Economics echoed Andra, saying euro adoption was a crucial step in the region’s long transition from communism. “First we had the target to create a market economy,” Kostadinova said. “Then the next target was joining NATO. Then the EU. Now the logical next target is the euro.”

Among the eight former communist EU countries, only Slovakia and Slovenia have joined the 16-member euro zone. All are required to join once they meet stringent requirements, including low inflation and national deficits within 3 percent of their gross domestic products. Estonia is scheduled to join on Jan. 1, 2011. Latvia and Lithuania plan to join in 2014. Others have reluctantly postponed entering until 2015 or later.

“The crisis in Greece has not reduced the attractiveness of the euro for Bulgaria,” said a Bulgarian Finance Ministry spokesman via e-mail.“The political sensitivity regarding the accession of new members from the region to the euro zone has a restraining effect on our intentions.”

Americans — and, in Europe, Britons — often equate adopting the euro with surrendering sovereignty. But East Europeans fatigued by corruption and political interference in their economies welcome the single currency because it hands monetary policy over to competent bureaucrats at the European Central Bank, said Kostadinova.

“Joining the euro will guarantee that local developments will not harm the country’s future,” she said.

Last month, for example, Western media outlets portrayed Estonia’s successful bid to enter the euro zone as curious in light of doubts about the currency’s future. But Estonian politicians cast the move as
a triumph. “The euro is a sign of quality and trust with which to celebrate our past two decades of existence,” said Estonian Finance Minister Jurgen Ligi in a statement.

Joining the euro zone also makes de jure what is already de facto throughout Eastern Europe. Street transactions are conducted in Bulgarian Leva or Romanian Lei in their respective countries, but salaries, mortgages and other deals are usually arranged in euros.

Tiny EU aspirants Kosovo and Montenegro haven’t even bothered to create their own money; the euro is their legal tender.

Yet even though East Europeans remain euro boosters, their chances of joining the exclusive club are slimmer than ever.

Relatively affluent countries like Poland are struggling to meet the euro zone’s demands, while Bulgaria and Romania — the EU’s two poorest countries — have almost no chance of enacting the austerity measures necessary to qualify anytime soon, experts said.

“All the industry went bankrupt after 1989,” said Gheorghe Popescu, an economics professor at Babes-Bolyai University in Cluj, Romania. “More or less what we consume here are imported goods. All the efforts by the Romanian government to stabilize the economy and to stabilize prices are fruitless because the money pumped into the Romanian economy goes abroad.”

Others noted, however, that most euro zone members would fail to meet Brussels’ requirements if they were put to the test today. Europe might need to change its standards if it wants the instill the euro zone with the confidence that expansion brings, they said.

“It’s hard to see how Europe — let alone small countries like Bulgaria — will compete internationally unless the euro zone expands,” said Bulgarian economist Ivan Angelov. “If European countries are not
economically and politically united, they have no chance to face the economic challenges coming from the United States and the new giants in Asia — China and, in the future, India. Europe has no alternative.”

Anca Cighi contributed to this report from Arad.