Non-EU countries choosing the euro
Kosovo and Montenegro have adopted the euro without joining the European Union.
- Sunday, 29 December 2013
The euro’s basic architecture may be under increasing scrutiny by its own EU guardians, but the currency still has the imperative of spreading through the world. All European Union members – except the U.K., which has a special waiver – are obliged eventually to adopt the single currency once they meet set criteria. To be sure, Sweden and the Czech Republic take care not to meet these, allowing them to keep their krona and koruna. Others, like Estonia, endure fiscal austerity to join – as the Estonians will in 2014. But there’s another path. Kosovo and Montenegro, for example, have adopted the euro. That was in part a natural outcome, as previously their residents made practical use of the Deutsche Mark. But it also implies an unusual arrangement in which a nation basically outsources its means of exchange to a stronger economic power.
However, Kosovo and Montenegro didn’t set up a currency board or negotiate a deal. They simply abolished their own currencies. Just as the euro’s own destiny appears to oscillate, whether that’s a good choice remains to be seen. Montenegro’s former central bank governor, for example, notes his country made its decision before the euro was actually circulated in order to slash a bout of hyperinflation after the Yugoslav breakup. But it’s not an altogether sound approach, as just using the euro without permission could lead to a country being excluded from joining the European Union. That’s because the normal procedure is to join the EU and only then start the process of qualifying to join the euro.