Certain Member States of the European Union Do Not Seem Eager to Adopt the Euro. Why? An Example of Arguments vs. Facts

Economic analysis may be threatened by politics and there has been plenty of politics in regard to the euro. Certain Central and Eastern European countries, after they became members of the European Union in 2004, started the process to join the euro area. There seemed to be broad political consensus and enthusiasm for the common currency and the European Monetary Union in those countries at the time. Prior to the global financial crisis that started in 2008, institutional research and academic and other arguments for adopting the euro focused on cost-benefit analyses emphasizing positive effects of the euro. Twenty years after the introduction of the euro, certain EU member states do not seem enthusiastic to give up their national currency. The key reason seems to be that the financial crisis revealed the incomplete monetary architecture of the euro area. This research reviews key arguments for the adoption of the euro before the crisis and compares them to the evidence before and after the crisis. The analytical framework used includes an example of a country with the euro (Greece) in comparison with its two neighboring countries without the euro (Bulgaria and Romania) in the region of southeastern Europe and the Western Balkans. The analysis finds that good times benefit all, while bad times can bring disproportionate harm to the country with the euro.