Development and Finance from issue 2007/2

Stergios Babanasis

The Euro in Greece: Experiences and Lessons

- Abstract -

JEL F-36

Important conclusions can be drawn and lessons learned by Hungary and the other member states from the experience of Greece and the other countries in the eurozone in relation to adopting the euro and its resultant impacts. (1) The first conclusion is that introducing the euro creates more benefits than disadvantages. This is why the strategic decision to join Economic and Monetary Union and adopt the euro is the correct one to make. (2) The date for introducing the euro is the second most important question which chiefly depends on being properly prepared, i.e. the euro should be rolled out when the country is actually ready for it. Being well prepared is subject to several conditions. (3) A key issue is the setting of the final exchange rate of the forint and the local currencies of the other new member states to the euro within the exchange rate mechanism. The final outcome could be some sort of compromise: the establishment of a real currency rate based on an agreement which serves the interests of all parties. (4) Another crucial aspect is endeavouring to limit the tendency to push prices up during the transition. The lesson here is that strict market economy measures must be applied in order to prevent this from happening.

Stergios Babanasis, Professor Emeritus, DSc (Hungarian Academy of Sciences), President of the Mediterranean Research Institute

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