This opinion was expressed by the deputy chairman of the NBU, Volodymyr Lepushynsky. He noted: the experience of many Central-Eastern European (CEE) countries shows that a country with rather different economic challenges from the EU requires its own monetary policy.
“Of the 11 CEE countries that joined the EU after 2004, only 7 have switched to the euro. In contrast, the largest CEE economies still have no plans to join the euro zone. And while Romania has problems with fiscal discipline, for Poland, the Czech Republic and Hungary it is above all a conscious choice,” the NBU representative said in a statement.
One of the reasons why some CEE countries have not switched to the euro, according to Lepuszynski, is the position of the society, “which wants to use its own currency”. However, according to him, there are also “purely pragmatic macroeconomic aspects”. In particular, the desire to preserve: an independent monetary policy, a floating exchange rate as a mechanism to counter economic shocks. “With the accession to the euro zone, the country actually outsources its monetary policy to the ECB”, – states the deputy chairman of the NBU.
Moreover, he notes, although the integration of CEE countries into European supply chains has contributed to the synchronization of their economic cycles with the euro area, common shocks usually have less impact on GDP and inflation of CEE countries. Accordingly, it is “appropriate for them to pursue their own independent monetary policy”.
Inflation and price growth denominated in euros
Another risk of premature transition of Ukraine to the euro, notes Lepushinsky, are more powerful convergence processes than those currently observed in the economies of other CEE countries. That is, price growth to the average European level.
The point is that, he says, the accession of countries to the EU is usually accompanied by productivity growth, which leads to an increase in GDP per person to the level of the leading EU economies. This is usually due to growth in both real GDP and euro-denominated prices. However, if the switch to the euro is premature, higher inflation becomes the only way to convergence.
“For Ukraine in the recovery phase, accelerated productivity growth could trigger even more powerful convergence processes than those currently observed in the economies of other CEE countries. After all, our economy will grow from the low levels that are a consequence of the war. Getting a significant increase in inflation in this scenario, which will eat up a part of income, is hardly an optimal choice,” Lepushinsky stated.
