Padoa-Schioppa, Tommaso --- "Trajectories towards the euro and the role of ERM II" [2003] ELECD 123; in Tumpel-Gugerell, Gertrude; Mooslechner, Peter (eds), "Structural Challenges for Europe" (Edward Elgar Publishing, 2003)

Book Title: Structural Challenges for Europe

Editor(s): Tumpel-Gugerell, Gertrude; Mooslechner, Peter

Publisher: Edward Elgar Publishing

ISBN (hard cover): 9781843764748

Section: Chapter 23

Section Title: Trajectories towards the euro and the role of ERM II

Author(s): Padoa-Schioppa, Tommaso

Number of pages: 8

Extract:

23. Trajectories towards the euro and
the role of ERM II
Tommaso Padoa-Schioppa

INTRODUCTION

I would like to share some thoughts on the policy challenges faced by acces-
sion countries in the run-up to the adoption of the euro.
Most accession countries have expressed their intention to adopt the
euro as soon as possible after joining the EU. To this end, they have
embarked on policies aimed at achieving both nominal and real conver-
gence with the euro area. This is not a trivial task. It involves (i) advancing
disinflation ­ or preserving the price stability achieved thus far; (ii) com-
pleting the process of transition; and (iii) enhancing the economies'
medium-term growth potential.
In this context, the concepts of real and nominal convergence become
crucial, which is why I will focus on them. After defining the concepts, I will
argue for the need to enhance the processes of real and nominal convergence
with the euro area and provide a rationale for the simultaneous, or parallel,
pursuit of both. I shall conclude by highlighting that ERM II ought to be
regarded as a powerful framework for combining nominal and real conver-
gence, and not as a mere `waiting-room' prior to adoption of the euro.


DEVELOPMENTS IN NOMINAL AND REAL
CONVERGENCE

Let me start by briefly recalling the progress in nominal and real conver-
gence that accession countries have made thus far.
A significant degree of nominal convergence has been achieved. Looking
at the accession countries as a ...