As the financial crisis drags on, one of the big winners has certainly been euro membership. Being offered shelter from the storm of volatile exchange rates has lead to a surprising line of countries that would like to fast track EMU membership.
But while the potential short-term benefits for the applicants are clear (foremost access to almost unlimited funding in a major global reserve currency), those for the existing club members are much less so. In the longer-term benefits of EMU entry do not exist for either standing members or applicants.
I personally, have never been much of a fan of the Maastricht criteria for access into EMU for the simple fact that they are just a measure of temporary nominal rather than permanent real convergence. The difference between those two is especially important in a currency union that in all other institutional categories apart from sharing a currency is still based along national lines. If the divergence in real per capita income between member states is large, the desirable catch up process implies a need for significant swings in the current account position. But if neither labour mobility (hampered within the EU by different social security systems) nor a fiscal transfer mechanism exist, the burden of adjustment has to be taken solely by workers in the form of outsized swings in unit labour costs (aka compensation). The Maasticht criteria completely ignore this factor of real convergence.
With the exception of Denmark – here no doubt exist either on the side of nominal nor real convergence with EMU – I don’t see a potential candidate that would meet even the nominal convergence criteria. But adding further cases in excess of the currently troubled countries at EMU’s periphery that would have to do their balance-of-payments adjustment the hard way within EMU, is certainly over the top.
While the Maastricht criteria are less-than-useful in themselves to determine EMU membership, watering them down to “no-convergence-at-all” is not an appropriate solution either.