All European Union members, except Denmark and the United Kingdom, are expected under EU treaties to eventually adopt the euro. Six Central and Eastern EU members – Bulgaria, Croatia, Czech Republic, Hungary, Poland and Romania – are yet to do so.
In the meantime, these countries have a decision to make: Should they opt in to the Banking Union before adopting the euro? Such a move may offer greater insurance against shocks, but at a certain cost to policy flexibility. In a recent study, we explore some of the trade-offs that countries need to weigh.
Filed under: Advanced Economies, Economic Crisis, Economic research, Europe, Financial Crisis, Fiscal policy, IMF, International Monetary Fund, Public debt | Tagged: banking union, euro | Leave a comment »