In an opinion piece on the occasion of Croatia‘s joining the eurozone on Jan. 1 this year, the Financial Times looks at the prospects of the common European currency and concludes that joining it remains a good option.
According to the journalist, some European countries are still prejudiced against the introduction of the euro, even though recent developments show that it has more advantages than disadvantages. The article also brings up how the Greek debt crisis had led some to speculate that some countries would leave the eurozone.
“So far, we have seen the opposite: The monetary union has just added a member after Croatia joined at the start of the new year,” writes the Financial Times author.
He also notes that this is not unprecedented, as the Baltic states also joined the euro area at a time when the monetary union was going through difficulties. In addition, Croatia could be followed by Bulgaria, and the Balkan country could soon get the go-ahead to adopt the euro, he added.
Despite all this, the author says there is still a strong prejudice against the euro, especially among British and American economists, and many believe that the EU currency is doomed to fail. The FT points out that there have been many signs of skepticism in recent years, and even in the last year, despite the energy crisis.
“Take the example of Slovakia. Yes, they too have to contend with high inflation, just like their neighbors who do not use the euro, but at least they can do so at much lower interest rates (2.5 percent of the European Central Bank). By contrast, the Czech Republic and Poland have almost three times the interest rate, while Hungary has a rate of 13 percent,” reads the article.
The Financial Times also argues that the world economy is still determined by the actions of the U.S. Federal Reserve and that a small economy has no protection on its own, only from the European Central Bank. Moreover, the crises that have affected the eurozone in the recent past have not been caused by the weakness of the euro and can just as easily occur in economies with an independent currency.
Hungary goes its own way
On the same issue, Hungarian officials take a different view. Central Bank Governor György Matolcsy wrote in 2021 that he did not want the euro because “everyone was wrong and those who kept their national currency won.” However, last September he said that Hungary could accept the euro but that it had to be “prepared.”
Márton Nagy, the minister for economic development, said at the time of his hearing that the introduction of the euro was unlikely in the short to medium term and that it was only a long-term option. Last summer, he also wrote a note on the possible collapse of the euro area, referring to the case of Italy.
Critics continue to point out that the euro has contributed to structural weaknesses in countries like Italy and Spain. The euro dramatically harmed the manufacturing sector of both nations, and unemployment remains stubbornly high. In contrast, countries like Poland and Hungary benefit from a strong export model in part due to their currencies, resulting in low unemployment and strong economic growth.