POLAND AND CZECH REPUBLIC SHOULD CONVERT TO THE EURO CURRENCY FOR ECONOMICAL GROWTH
After the fall of Iron Curtain, the integration between economies of Western and Eastern Europe proceeded at an increased pace, resulting into several stages of accession of the latter to the European Union (EU) since May 2004. This stage also assumed the adoption of Euro currency as a single currency for all EU members, which was successfully managed by 7 out of 13 newly joined members between 2004 and nowadays (Keppel and Prettner 2015, 18). This integration assumed a mutually favorable effect: while old-EU countries benefitted from gaining access to new, unsaturated markets, new-EU members became net beneficiaries of the European Cohesion Policy and Common Agricultural Policy and achieved an opportunity for strong inflow of foreign direct investment (FDI) from Western European countries.
Other than that, EU integration assumed completely removing barriers for labor force mobility and facilitation of trade agreements which contributed to the increased welfare in both regions and continuous economic growth (Keppel and Prettner 2015, 18).Adoption of Euro as a national currency was one of the conditions of entering the EU, while member states were not forced to do this as a mandatory stage immediately after the membership ratification. The reason is that such step assumes important changes in both the conduct of macroeconomic policy and approaches to access other economies. Mainly, it means that EU members are required to fix the exchange rate against other EU participants, and to resign from autonomous monetary policy in favor of the common one which is owned by the European Central Bank (Gradzewicz and Makarski 2013, 2443).
Present academic literature argues on both benefits and costs of such approach. Frankel and Rose (2002), as cited by Gradzewicz and Makarski (2013, 2443), for instance, argued that accession to common monetary union boosts trade and creates welfare gains, taking into account theoretical foundation of the optimum currency areas (OCA). It states that new countries that entered a common monetary union would benefit from such endeavor, as labor and capital mobility coupled with wage flexibility should be placed in order to abandon floating exchange rate mechanism and gain advantage of free trade (Dandashly 2015, 288).
On the contrary, it is discussed that joining the final stage of monetary union will completely forfeit the ability of changing the exchange rate and that individual monetary policy will be no longer executed by national central banks, which could basically paralyze the economy in times of financial fluctuations (Frankel and Rose 1998, 1024). In particular, this leads to inability of central banks to adjust interest rates independently and prohibition of using currency devaluation or revaluation when necessary, which is partially considered as the reason of Eurozone area crisis since 2011 (Dandashly 2015, 289).
While certain EU members were ready to adopt Euro for its economic benefits of expanded market capabilities, Poland and Czech Republic are among those countries that were not. To the date, there are still continuous debates among academics and economic practitioners …