Euro Entry to Get Harder for Wavering States, Portugal Says

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  • Euro area is already core of integration, Santos Silva says
  • Joining later has to remain possible, Portuguese minister says

European Union members that are reluctant to adopt the euro now may find it more difficult to join the currency union in the future if it deepens integration as planned, according to Portugal’s foreign minister.

The EU is already building closer ties on several layers and the so-called multi-speed process offers the advantage for members to decide where they want to participate, Augusto Santos Silva said Monday in an interview in Bloomberg’s Prague office. The potential pitfall is that, as euro nations prepare to further unify their economic policies, countries with their own currencies may need to exert more effort if they decide to join later, he said.

“There’s already a core in the process of European integration, and its name is the eurozone,” Santos Silva said. Joining later would be “not as easy, but it has to remain possible” for countries with their own currencies such as the Czech Republic or Poland. “If you’re not following the path of integration, it’s more and more difficult to return to the integration momentum.”

Eight of the 27 EU nations -- not counting the U.K., which is negotiating its departure -- are outside the euro area and are mostly opposed to the idea of ditching their currencies for now. Of the post-communist members, only Bulgaria is openly pushing for fast euro adoption, with the biggest economies like Poland and the Czech Republic refusing to set target dates. Their EU accession treaty includes an obligation to transfer monetary policies to the European Central Bank at some point in the future.

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Discussions over how to reboot the euro have intensified following the election of French President Emmanuel Macron, a staunch advocate of further integration. While the 19 members have yet to find a consensus on issues such as if and how the euro area should get its own finance minister, budget or a regional monetary fund, talks are set to accelerate after German elections next month.

While the former communist economies have become richer during the nearly three decades since the fall of the Iron Curtain, their currencies have often experienced periods of volatility caused by global financial crises or domestic political turbulence. The Czech koruna, buoyed by strong export industry, has gained 25 percent against the euro since EU membership in 2004, while Poland’s zloty has appreciated 12 percent and the Hungarian forint is weaker than it was 13 years ago.

Five former eastern bloc countries -- Slovakia, Slovenia, Estonia, Lithuania and Latvia -- use the euro. The Czech Republic, the richest of the ex-communist members by economic output per capita, refuses to take concrete steps toward euro adoption given prevailing euroskeptic sentiment. Poland’s ruling party says 10 or 20 years may be needed before making the currency switch.

“If you’re seeing some of your partners creating among them closer and closer relations, and if you don’t want to accompany this process, of course you’re going to be further and further away -- this is pure logic,” Santos Silva said. “So you have to decide what you want.”

— With assistance by Michael Winfrey, Joao Lima, and Ladka Mortkowitz Bauerova

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