The euro’s waiting room is empty.
No one is lining up to join the 19-country currency, and the next memberships — if any — will only be years down the road, certainly not in this decade.
It marks a shift from a recent steady growth in membership, with seven countries joining in the past nine years, and reflects a sense that the euro is still patching the problems uncovered by the debt crisis that sank Greece’s finances.
The issue was highlighted this week when the European Union’s executive Commission and the European Central Bank made it clear that none of the seven potential new members — Bulgaria, the Czech Republic, Croatia, Hungary, Poland, Romania and Sweden — have put their economies and state finances in shape needed to join, although progress has been made on many counts.
And no one’s asking to get in, either.
Governments in Poland, Hungary, the Czech Republic and elsewhere are paying lip service to the requirement to join. They committed to the euro simply by joining the EU in the first place.
But they are not moving toward the entrance door. Instead, they are waiting to see whether and how the currency zone sorts out the debt and economic problems that threatened it with collapse and saw Ireland, Greece, Portugal, Spain and Cyprus bailed out. In Poland, the leader of the ruling Law and Justice Party, Jaroslaw Kaczynski, said last year “we could join in 40 years,” and there matters seem to remain.
That’s at least partly due to concern about repeating the experience with Greece. Many think the country was not economically ready to join the euro when it did so in 2001, and people there have suffered under high unemployment, higher taxes and government cutbacks.
Bulgaria, which seems more eager, is being politely told to first sort out its problems with corruption, which can hinder growth and investment. Britain and Denmark won the right to opt-out of the euro when the currency was conceived, and Sweden, though on paper obligated to join, rejected the euro in a 2003 referendum.
While many see stability in binding their countries to rich economies like Germany and France, others are worried it could lead to higher prices, a common view despite the fact that eurozone inflation right now is so low it’s negative, at minus 0.1 percent.
“One thing is for sure: prices would go up 10-20 percent in the switch,” says Marek Liwinski, a 73-year-old furrier in Warsaw.
The most recent Eurobarometer survey in April for the EU’s executive commission showed that the proportion of residents in favor of introducing the euro varies widely, from 64 percent in Romania to 29 percent in the Czech Republic. Less than one in five, 17 percent, said their country was ready.
The no-rush mood extends to the EU centers of power in Brussels, headquarters of the commission, and Frankfurt, Germany, home of the euro’s issuer, the European Central Bank. Asked about the issue at a news conference last week, ECB head Mario Draghi said that while there had been “very significant progress,” ”we have to judge all these issues in perspective, really. We have to give ourselves time.”
Countries that want to join the euro must show they can control inflation and keep budget deficits below 3 percent of annual economic output and government debt below 60 percent. None of the seven countries checks all the boxes.
The upsides of euro membership include streamlining crossborder business by eliminating foreign exchange transactions. It can also help keep inflation and markets stable and is a stronger form of union with the West. That can be appealing to former Soviet-dominated states worried about Russia’s desire to expand its sphere of influence.
There are a few downsides as well, however.
New members must hand over control of interest rates to the ECB, and lose the possibility to devalue their currency, an important safety valve in an economic crisis and one that would have given Greece an alternative to some of the tough austerity cuts it had to impose under the bailouts.
Even top EU officials say the monetary union, launched with optimism in 1999, remains incomplete. Some weak points are being addressed. In particular, big banks are now supervised at the EU level — by the ECB in a so-called “banking union” — to prevent lenient national regulators from ignoring trouble. But other fixes that would soften financial crises, such as EU-wide deposit insurance or a centralized fiscal pot, remain only on the drawing board.
Before others join, “the eurozone will have to completely recover and banking union will have to show full implementation,” said Daniel Gros, director of the Centre for European Policy Studies in Brussels.
When that happens, Poland could be the most likely addition.
Poles remain convinced that integrating with Western Europe is in their best interests. And from the eurozone’s point of view, the large country with its 38 million people presents a chance to extend the bloc significantly.
Eugeniusz Smolar, senior fellow at the Centre for International Relations in Warsaw, thinks Poland will join “when the euro is ready and the applicant is ready.” He estimated that could take 7 to 10 years, as the eurozone fixes its problems and Poland continues to close the economic gap with western Europe: “We need to catch up quite a lot.”
“Poland has been studying the examples of the south of Europe and Greece,” he said. “Poland would hate to find itself on the receiving end of such a process.”