Template-Type: ReDIF-Article 1.0

Author-Name: Peter Gottfried
Author-Workplace-Name: the Monetary Council of the Magyar Nemzeti Bank
Author-Email: gottfriedp@mnb.hu


Title: Thoughts on the Dilemma of When to Introduce the Euro in Hungary

Abstract: In its EU accession treaty, Hungary committed to introducing the euro without
a legally binding deadline. The question is therefore not whether the country will
introduce the common currency, but when it will do so, and what factors play a role
in the decision. Developments in recent years have confirmed that the euro system is
able to weather a crisis, but also highlight that the euro does not in itself guarantee
sustainable convergence. In addition to accession, members' rights and obligations
have also changed considerably, and these changes have not been completed.
There are examples for successful economic policies without the euro and also
for frustrated growth with the euro. Only one area has been identified where the
advantages of membership are indisputable: yield spreads. In today's international
environment, this is much less important than in the past, but it is impossible to
know how long this situation will last. Accordingly, the Hungarian strategy should
target sustainable convergence, rather than the introduction of the euro. If the
country can substantially reverse the increase in the government deficit and debt
and keep them low, it would be worth waiting until the development paths related
to the euro are outlined more clearly, while continuing with convergence. If this is
not possible, the option to join the euro area as soon as possible should be preferred,
which offers greater security but less room for autonomous manoeuvre.

Classification-JEL: E58, F36, F42, F45, H63, N14, N24, N44, N90, N94, O40, O52, O57, P43
Keywords: EU, euro area, EMU, euro, European integration
Pages: 110-126
Volume: 20
Issue: 3
Year: 2021
File-URL: https://en-hitelintezetiszemle.mnb.hu/letoltes/fer-20-3-ove1-gottfried.pdf
File-Format: Application/pdf
Handle: RePEc:mnb:finrev:v:20:y:2021:i:3:p:110-126