26 November 2007, 16:11  ECB's Tumpel-Gugerell: "Sustainable convergence" key for future euro members

Central and eastern European countries should ensure their inflation is low and their currencies stable for a sustainable period before joining the euro, ECB executive board member Gertrude Tumpel-Gugerell said. Tumpel-Gugerell said in a speech in Warsaw countries tend to face "upward pressure" on inflation and their exchange rates in the run-up to adopting the common currency. "This suggests that the timing of euro area entry needs to be carefully considered, also in view of the fact that a key challenge relates to the sustainability of convergence," she said. "Only when a country is certain of being able to maintain simultaneously an environment of low inflation and a stable exchange rate can it be confident of functioning smoothly within Monetary Union," she added. Getting public finances into shape should be the main priority for the accession countries, Tumpel-Gugerell said, adding a large share of foreign currency-denominated loans in central and eastern European economies could raise concerns for financial stability. Still, Tumpel-Gugerell said it was not "insurmountable" for future euro members to meet the inflation requirements and it remains important for central and eastern European economies to avoid overheating. Tumpel-Gugerell said the ability to join the common currency will be judged on a "case-by-case basis", while European Union members from outside the euro zone are under no pressure to decide when to join the area. "It's up to Poland to decide on the path and date of euro adoption," she said. "There is no pressure from ECB or the European Commission to decided on the date."

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