Post-Transition Monetary and Exchange Rate Policies: Dilemmas on Eurozone membership in terms of Global Recession

When the transition process started 25 years ago, one of the most important dilemmas was the choice of exchange rate arrangement and, consequently, national monetary policy. During the transition, countries used arrangements from all three major groups (fixed, intermediate and floating), primary trying to keep control of inflation, preparing for Eurozone membership. Despite the positive aspects, there have been difficulties and negative side effects as well, such are high levels of euroisation and “fear of floating” deviations from officially announced regimes towards de facto hard pegs, resulting in real appreciations with negative consequences on international competitiveness. Still, in terms of asymmetric economic shocks resulting from the global crisis there is a changed perspective on the Eurozone membership, challenging the ideas on more active use of national monetary sovereignty. Consequently, there are permanent dilemmas on monetary and exchange rate policies for national authorities: redefining monetary policy goals while there are still disposable instruments for more active policy (including de-euroisation) or continuing the accession process for Eurozone membership. At the same time, there are also the European semester and Macroeconomic Imbalance Procedures that are generally seen as an informal criterion for entering the European Exchange Mechanism II, supplementing the Maastricht criterion. Analyses in the paper are based on exchange rate regime strategies and comparison of macroeconomic indicators for selected post-transition countries that are grouped as eurozone members and EU members outside the eurozone. In the aftermath of the crisis, with doubts on the future of European economic and monetary integrations (including unclear procedures for leaving and/or changing the status into the Eurozone), sovereign national monetary frameworks enable more or less active policy. Paper discusses the pros and cons of different policy choices, focusing on the possibility of wider sovereignty use during the crisis.