No. 37, Thomas Linne (1995): Steps for a monetary integration of the economies in Central and Eastern Europe into the IMS, ERM and EU; Klaus Werner: Structural changes in trade relations between the European Union and Central and Eastern Europe since 1991

On the 9th and 10th of June, 1995 Kopint-Datorg and the Economic Research Institute of Halle (IWH)  held a common seminar in Halle on the integration of the Eastern European transition countries to the European Union. This paper contains two of the studies prepared for this seminar. The previous two publications (No. 35, and No. 36.) do contain the other papers.

The first study is titled “Steps for a Monetary Integration of the Economies in Central and Eastern Europe Into the IMS, ERM and EU” by Thomas Linne.

One of the central aspects of the reform efforts of the Central and East European Countries (CEEC) has been the integration of their economies into the international monetary and trading systems. The special features of the formerly planned economies has made it particularly important for them to liberalize their exchange rat systems and to open their economies for foreign trade. Access to foreign currency for current transactions, i.e. current account convertibility, has been an important step in the reform process. The next step in the liberalization process, is to allow convertibility for capital account purposes as well. The optimal timing for such a move or the necessary steps that have to be taken to achieve this objective is not of concern here. Maybe it is no longer true that the CEEC are facing a Groucho problem. Because of the acute economic and political difficulties of some of these countries Portes (1994) was concerned about the Groucho problem, namely, that these countries would ask themselves: why should they want to join a club that would accept them as members? At least some of the CEEC have already explicitly expressed their willingness to join the EU – in some way or the other.So, what are the important aspects of a deeper monetary integration for the transformation countries? Or more specifically, what are the advantages and risks involved for the CEEC in participating in the exchange rate mechanism of the EMS or, as a subsequent step, in joining a European currency union? The paper is divided into two parts. The first part I want to discuss the important concept of convertibility. The second part takes a closer look at three possible institutional options for a monetary integration. The first is payments union for Eastern Europe, the second is the participation of the countries in the ERM, and the third is a membership in a European monetary union.

The second study is titled “Structural Changes in Trade Relations Between the European Union and Central and Eastern Europe Since 1991” by Klaus Werner.

During the past five years trade between the European Union and the reform countries of Central and Eastern Europe has increased rapidly at above-average growth rates on both sides. This development reflects the progress made in integrating the reform countries into a division of labour encompassing the whole of Europe. Close economic ties to the European Union are an important part of the transformation processes in Central and Eastern Europe. For the EU, trade with Central and Eastern Europe is also gaining in importance. The study examines the aspects of these structural changes in trade between them.

Project leader:
Thomas Linne
Klaus Werner