A rushed adoption of the euro that ignores the differences in levels of economic development between Hungary and the euro area could sacrifice Hungary’s growth and even pose risks to its stability, a member of the bank’s Monetary Board said on Wednesday. central.
Countries with uneven levels of economic development could be hurt if they were unable to chart their own monetary policy due to the use of a single currency, Peter Gottfried said at a panel discussion in line organized by the scientific periodical Financial and Economic Review and the Hungarian Economic Association. . A decision by the European Central Bank could prove too lax for one country while being too strict for another, he said.
Contrary to expectations, the introduction of the euro has not accelerated convergence within the euro area, Gottfried said, adding that some members were even lagging behind in terms of development.
While countries like Germany, Austria and the Netherlands have benefited from the use of the euro, countries in the south of the euro area, for example, are stagnating, he said. In addition, countries like Sweden, Denmark, Poland, the Czech Republic and in some ways even Hungary have managed to close the gap with the more developed EU member states without the euro, he added.
Gottfried said that for Hungary to introduce the single currency, it might not be enough for it to meet the criteria for the country’s GDP per capita reaching 85 to 90 percent of the EU average. Hungary also needs to catch up in terms of competitiveness, he said.
Due to the interdependence between the euro area and the Hungarian economy, Hungary has a vested interest in the success of the euro, even though it is not the official currency, he said, noting that Hungary does 85% of its foreign trade with the euro. zoned.
He also said that the introduction of the euro had failed to stem the EU’s decline in economic power on the world stage. However, the system has “stood the test of crises,” he said.
The central banker also suggested that the political benefits that could flow from Hungary’s accession to the euro area would not exceed those that the country obtained when it made a political commitment to the European Union and the NATO.
Gottfried said it would be worth waiting for the implementation of reforms to improve Hungary’s competitiveness, put growth on a sustainable basis and reduce its public debt permanently before adopting the single currency. But if the will to carry out these policies is lacking, it may be worthwhile to change priorities and, in the hope of a favorable development in yields, to bring forward the introduction of the euro.