Ezoneplus Newsletter | Third Issue 2002/5/6


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Contents of this Issue



News 1:


Research workshop in Berlin


News 2:



News 3:

Working paper no. 4 (forthcoming)


News 4:







News 1


Research workshop in Berlin:

On Friday, April 26, the Jean Monnet Centre of Excellence and the graduate programme “Das neue Europa” of the German Research Foundation (DFG) conducted a joint research workshop on key issues of the Eastward Enlargement of the eurozone. Located at the Berlin city hall “Rotes Rathaus”, Prof. Dr. Gert-Joachim Glaeßner (Humboldt-University), Prof. Dr. Michael Bolle and Prof. Dr. Hanns-Dieter Jacobsen (Free University Berlin) led the discussion, involving PhD-students, researchers and representatives of the media.

Dr. Hubert Grabisch from the Institute for Economic Research Halle delivered the key note speech and focused mainly on the exchange rate criterion outlined in the Maastricht treaty. Apart from necessary efforts to lower inflation and long-term interest rates, to him, participation in the exchange rate mechanism ERM II imposes the biggest obstacle for CEE countries, since financial markets will become tempted to “test” the credibility of any semi-fixed exchange rate arrangement. Due to the decision making process while fixing the parity (ECB, Commission and Council), choosing the equilibrium rate will eventually remain a political question. Thus, Prof. Bolle argued that the ECB will strongly oppose any deviation from the criteria set while anticipating this political room of manoeuvre. The full text of Dr. Gabrisch: “Politische und Ökonomische Dimensionen einer Osterweiterung der Euro – Zone” is available at:


The second part of the workshop was devoted to the development of capital markets (Thomas Meyer) and the Social Dimension of the eastward expansion of the eurozone (Achim Kemmerling). Thomas Meyer explained the far reaching maturation of CEE capital markets thus already anticipating both rounds of enlargement and realising efficiency leaps. However, the issue of corporate governance bears much more controversy to the CEE countries. Whether the huge influence of foreign investors via FDI and/or portfolio investment will induce governance structures and behaviour similar to western European standards and e.g. thus improving the effectiveness of corporate law in these countries is far from evident. Quite the contrary, though less probable, could also hold true: foreign investors may become tempted to “squeeze” regulatory loop holes and benefit at the expense of domestic actors and financial intermediaries. This question has immediate implications on the timing of EMU membership. Another aspect of foreign entry is whether the import of modern banking institutions comes at the expense of domestic lending and third, Thomas Meyer concentrated on forms of capital supply and possible effects of destabilisation from the exposure to reversal of flows. However, EBRD date strongly suggests that given continuous liberalisation and diversification, the GDP growth effect of international capital flows easily outweighs this risk.

Finally, Achim Kemmerling took a closer look on what kind of social aspects will become relevant in the upcoming years and how mainly western labour markets will be “reshaped” by EU-enlargement. Contrary to conventional wisdom, the most significant risk ahead is much less migration rather than the enhanced competition within labour markets across the eurozone itself. Due to a reallocation of agricultural/regional and structural funding and due to a much more heterogeneous union, budgetary restrictions to finance the welfare state become higher and pressure on wage bargaining procedures should grow. In fact, since costs as well as benefits will be dispersed asymmetrically across Europe, competition within labour markets and their institutions will gain momentum. By now, it appears unclear whether this form of external impulse will be sufficient to trigger substantial reform or rather induce social dumping or will leave western member states “sitting on the dock of the bay...”.





News 2



On April 11 Thomas Meyer of the Berlin group presented the main research aspects on capital markets during the Eastward Enlargement ”The Shaping of Capital Markets” (see Working paper no. 2) in Svishtov/Bulgaria at a conference of the Tsenov Academy. By the end of May, he will represent Ezoneplus in Kiev/Ukraine participating at the conference: ”Financial & economic problems of the transition countries development” and take part in June on the ”First Conference Amadeus on European Enlargement” near Paris.

Finally, July 4-5 will see the next major Ezoneplus conference. This time organised our the Italian research partners the event will take place at the University of Bologna

For more information follow this links





News 3


Working paper no. 4 (forthcoming)

Christian Fahrholz and Achim Kemmerling of the Berlin group currently work on a working paper covering so far neglected labour market developments in the CEE countries. If the Balassa-Samuelson effect holds true and structural inflation will appear, then this might have negative impact on the labour markets since employment ratios may remain below the optimum level, indicating an “employment gap”. The paper will be available online by the end of May.

For more information follow this link





News 4


Literature - Below you will find recent papers and studies relevant to our research project which you may find helpful.

European Commission: Economic Forecasts for the Candidate Countries, Spring 2002: (Enlargement Papers No. 9), April 2002.

European Commission: Report on macroeconomic and financial sector stability developments in candidate countries (Enlargement Papers No. 8), April 2002.

This is the first annual report of the DG ECFIN on CEE countries. It entails an overview, outlining main common themes on macroeconomic and financial sector stability challenges in candidate countries, and thirteen country-specific chapters.


Lommatzsch, Kirsten; Tober, Silke: ”Geldpolitische Aspekte der Erweiterung des Euroraums”, in: DIW Wochenbericht 15/02.

The authors present an empirical analysis on the impact of the so-called Balassa-Samuelson-effect and conclude that no significant impact on CEE countries or the eurozone is to be expected. Moreover, given stable expectations of the financial markets , CEE countries should be quite easily able to bring inflation down according to the Maastricht criterion. However, more urgent than to focus on real inflation developments seems to concentrate on the decision-making process within the ECB. According to Lommatzsch, Tober a combination of constituencies and rotation would be appropriate,  thus securing a major clout of the biggest economies of the eurozone.



Quaisser, Wolfgang; Hall, John: ”Toward Agenda 2007: Preparing the EU for Eastern Enlargement”, Osteuropa-Institut München, Working paper no. 240, February 2002.

This paper provides a concise overview of the expected (asymmetry of) costs and benefits of the eastward enlargement of the EU, including urgent reformulation of agricultural, structural and regional policies. Whereas enlargement itself should not induce any sort of financial crises, since it has been underway in fact since 1990/1991, the European Union “ - at present - is not in a financial and institutional position to cope with the full range of challenges looming on the enlargement horizon.”



Schweikert, Rainer: Der Euro als Ankerwährung. Die mittel- und osteuropäischen Beitrittsländer zwischen Transformation und Integration. Kieler Studien 312, Berlin, Heidelberg: Springer, 2001.

Reflecting the risks of fixing the CEE currencies too early to the Euro, Rainer Schweikert offers a concept of an enhanced convergence indicator including business cycles, composition of trade flows, real effective exchange rates and developments of the PPP, in order to assess possible costs for the CEE countries. Comparing the candidates to a “reference group” of Greece, Ireland, Portugal and Spain, the study concludes that Estonia already comes close to EMU member Greece whereas, by 2004, Poland, Slovenia, the Czech Republic, Hungary and Lithuania should reach comparable levels of economic maturity, too. Thus, risks if any, stem from the adoption procedure, namely the membership in the ERM II.






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Note: Content for the Ezoneplus newsletter is submitted by the Jean Monnet Centre of Excellence, Freie Universität Berlin. Although the Centre had editorial discretion, we will not accept any liability in respect of the information presented above.

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