THE RUN-UP TO THE EURO II: EMU/EU ENLARGEMENT. Week 6 Ch.7. Additional Material : Gros, D. “The Maastricht Criteria after Enlargement: Old Rules for New Members?” Material for individual / group presentations Convergence reports material (more later). WHICH FLOOR ARE WE ENLARGING?!.
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What about the remaining eight? When will they take the steps to the third floor ?
- private sector: mortgages were more convenient abroad (especially in Sweden)
- public sector: current account deficit (on average around 10% of GDP; in Bulgaria 25%).
In other word: internal savings were not enough to cover the needed (private and public) investment.
- Depreciation of the currency
- Nominal value of the debt increases (because it is denominated in foreign currency, whose value has increased, following depreciation of national currency)
Criterion on interest rate:
Yes. Preventing arbitrage opportunities after exchange rates are locked is a ever-lasting need.
Past (and future) discussion on the 3% and 60% figures.
See also Gros paper (pages 10-17).
What about exchange rates and inflation?
Let’s work out a framework which helps us rationalize the situation.
ON THE ADMISSION TO EMU – 7 countries (Czech Rep, Estonia, Latvia, Hungary,Poland, Sweden).