Euro schism reopens in central Europe

Germany, France up efforts to reform EU

ESZTERGOM, Hungary/ STUROVO, Slovakia, Jan 22, (RTRS): On the euro zone’s eastern flank, some Slovaks in the border town of Sturovo wish their country had never opted for the common currency and now head over the Danube to Hungary for the cheaper shopping.

Unlike Slovakia, Hungary has stayed out of the currency club, but on its side of the river people in the historic town of Esztergom feel they might be better off with the euro — although not yet.

With Germany and France stepping up efforts to reform the EU and make the euro zone more crisis-proof, supporters of European integration say the post-communist countries which are holding on to their national currencies should change their minds.

These countries, they argue, will otherwise be stranded on the European Union’s eastern periphery as the euro zone becomes the bloc’s inner core, pushing the pace of integration.

Esztergom and Sturovo lie a short distance upstream from the castle town of Visegrad where central European leaders formed a loose alliance in 1991, shortly after the fall of communism. The four members of the Visegrad Group joined the EU in 2004 but so far only Slovakia has adopted the euro.

European officials play down any possibility of the other three — Hungary, Poland and the Czech Republic — joining before the middle of the next decade, assuming they want to.

Nationalist governments in Budapest and Warsaw say euro membership would curb their autonomy in running their economies which are growing nicely without the common currency. Prague has also shelved the idea.

But this month a group of Polish economists, including former central bank governor Marek Belka and ex-Warsaw stock exchange chief Wieslaw Rozlucki, urged the government to restart preparations for the euro as European integration advances.

“Poland should take part in this process if it wants to have a real impact on the future of the continent. And also if it wants to permanently anchor itself in western Europe,” they wrote in an open letter published in the newspaper Rzeczpospolita.

Raising memories of Poland’s Cold War past in the Soviet bloc, they offered stark alternatives. “Either we will be in the euro zone in the future or in Russia’s sphere of influence.”

Renew

French President Emmanuel Macron and German Chancellor Angela Merkel laid out their ambitions at the weekend. “We want to consolidate and renew our cooperation with a view to moving ahead with a prosperous and competitive Europe, more sovereign, united and democratic,” they said.

Poland and Hungary are embroiled in political conflicts with Brussels over a variety of issues but argue their rejection of the euro on economic grounds. They say having the flexibility of a national currency helps to overcome tough times and warn against adopting the euro before the wealth and wage gap between the poorer east and more developed west narrows.

Some economists share this view and public support for the euro has also waned in parts of central Europe.

Polish Prime Minister Mateusz Morawiecki told the website money.pl that euro adoption was not on the agenda. “We have not changed our rhetoric with regard to this. This is not an issue today,” he said.

Hungary, run by right-wing Prime Minister Viktor Orban — Poland’s closest ally in its battle with Brussels over judicial reforms and EU migrant quotas - has been similarly sceptical.

The issue of the pay gap with the Western euro members remains highly charged.

Earlier this month National Bank of Hungary Governor Gyorgy Matolcsy expressed doubt that joining the monetary union would solve the problem. “The introduction of the euro is no guarantee of a successful catching up,” he told the weekly Figyelo.

The Economy Ministry takes a similar line. “As autonomous monetary policy has helped overcome the (financial) crisis, Hungary does not wish to enter the fixed exchange rate mechanism for now,” it said in a reply to Reuters questions.

So far five of the EU’s 11 ex-communist members — Slovakia, Slovenia, Estonia, Latvia and Lithuania — use the euro.

According to an EU survey, Slovaks are content with this. The May 2017 Eurobarometer showed 80 percent in favour of the euro, which replaced the Slovak crown in 2009.

But in Sturovo, where many residents are members of Slovakia’s Hungarian minority, not everybody is so happy.

“Wages here are a disaster,” said 33-yearold Zsuzsanna Konozsi, as she took her baby in a pushchair through the town. Konozsi works as a waitress in neighbouring Austria, where she earns one and a half times more than she would at home.