Why can the A-10 not form their own currency?

Dannyboy83

Could the A-10 countries form their own currency within the EU?

I am imagining:
There would be an upper tier - Euro
And a lower tier - Ecu

Could this give the A-10 countries some safety within the EU while they do not meet the criteria for the Euro?

Is this a silly idea and why please?

Note: By A-10, I mean the Accession-8 , i.e. Poland, Lithuanian, Hungary, Czech, Slovakia, Slovenia, Latvia, Estonia, but not including Cyrpus or Malta.
EDIT: The French seem to have a similar thing for Central Africa, the CFA and the CPA

thee glitz

That's a very big question. Maybe a 2nd Euro currency could be set up for
nations whose debt levels aren't up to the terms of the Growth & Stability Pact .
Set a time for the exchange rates of the participating currencies against the Euro
to be fixed with each other, but instead give them a less credible currency which
would float within, say +/- 5%, of that level. We could end up in it too!

Edit: It would be very difficult for just one of them to later give up this second Euro currency for the €.

Dannyboy83

thee glitz wrote: »

That's a very big question. Maybe a 2nd Euro currency could be set up for
nations whose debt levels aren't up to the terms of the Growth & Stability Pact .
Set a time for the exchange rates of the participating currencies against the Euro
to be fixed with each other, but instead give them a less credible currency which
would float within, say +/- 5%, of that level. We could end up in it too!

Edit: It would be very difficult for just one of them to later give up this second Euro currency for the €.

Would it not make sense for them/us to stay outside of the big boy's currency?
For example, if we are constrained by ECB rates which suit Germany, France, (and potentially Norway, Sweden, UK etc.)
Would it not make sense for the likes of Ireland, Spain, Portugal and the A8 countries to be in the lower tier?

The bigger currency could help to stabilise the lower currency?
And if a country grew sufficiently, they could move from the 2nd division to the 1st division.
Or be relegated from the 1st to the 2nd in the event of a banking crisis etc.

They seem to use a similar method to this between London and the rest of the UK I think.
I guess the upper currency would be very strong with just the big boys, but they would have to honour their part and keep large reserves of the lower currency.


(Before anyone freaks out and jumps down my neck, I'm no expert, I'm simply asking questions)

mike65

Club Med currency? Who would underwrite it, who would belive in it? The euro only exists cos of the Deutsche Mark. The DM had credibilty so the markets trusted the euro to a degree. An "Ecu" would be smashed to pieces in no time I suspect unless it was tied to the Euro a la the ERM but then look what happened to Sterling in 1992, as it shadowed the DM within the ERM at ever greater cost until on Black Wednesday Sterling was attacked and the UK dropped from the ERM.

Dannyboy83

mike65 wrote: »

Club Med currency? Who would underwrite it, who would belive in it? The euro only exists cos of the Deutsche Mark. The DM had credibilty so the markets trusted the euro to a degree. An "Ecu" would be smashed to pieces in no time I suspect unless it was tied to the Euro a la the ERM but then look what happened to Sterling in 1992, as it shadowed the DM within the ERM at ever greater cost until on Black Wednesday Sterling was attacked and the UK dropped from the ERM.

But do these problems not already facing the Lit, the Lat, the Zloty, the Kroon etc. to an even greater degree already?

Could it help to mitigate some of the risk?
i.e. instead of 8 small boats, they would be 1 flotilla sailing behind a German Bismark

nesf

Why would the more stable countries (Poland et al) want to go into a currency union with countries that have darker financial futures?

Dannyboy83

nesf wrote: »

Why would the more stable countries (Poland et al) want to go into a currency union with countries that have darker financial futures?

Well, I guess to remove the Russian threat, and for stabilitiy.
Would this not work?

Otherwise why would Germany/France want to go in with Spain/Ireland?

nesf

Dannyboy83 wrote: »

Otherwise why would Germany/France want to go in with Spain/Ireland?

Eh, ideology mostly. That and getting us to agree to be subject to punitive measures if we go past the borrowing limit too often.

That and Ireland's so small that it isn't much of a threat to stability to Germany to be blunt.

Dannyboy83

nesf wrote: »

That and Ireland's so small that it isn't much of a threat to stability to Germany to be blunt.

Gotcha.

I suppose I was thinking that being part of a lower grade currency would protect them while giving them room to manuevere at different interest rates etc., but I guess they can retain their manuverability by retaining their own currency and it would be just Germany bailing them out in the end regardless.

nesf

Dannyboy83 wrote: »

Gotcha.

I suppose I was thinking that being part of a lower grade currency would protect them while giving them room to manuevere at different interest rates etc., but I guess they can retain their manuverability by retaining their own currency and it would be just Germany bailing them out in the end regardless.

More the IMF backed by funding from the bigger EU countries that aren't in the worst shape at the moment but IMF funding is already going into some of the countries you listed. Poland et al are trying their best to stand out as different and not as "****ed" as the likes of Bulgaria, Romania etc.

I'll see if I can dig up an Economist article on this for you.

nesf

How bad things are in Bulgaria (i.e. their Government is proposing a kind of colonisation of Bulgaria with the EU calling the shots and Bulgaria obeying of sorts): http://www.economist.com/world/europe/displaystory.cfm?story_id=13334121

On Germany's proposed role as the bailout paymaster: http://www.economist.com/world/europe/displaystory.cfm?story_id=13184821

On Eastern Europe in general: http://www.economist.com/world/europe/displaystory.cfm?story_id=13144925

On divisions in the EU in general: http://www.economist.com/world/europe/displaystory.cfm?story_id=13184616


Some of those articles are from last month so almost out of date at the pace the global recession is marching ahead at but interesting reading nonetheless.