FX Week

East Europe may adopt euro by 2006

Addressing delegates at last week’s FX Week Congress in London, Schiavi said the best-case scenario could see some countries gain EMU membership by 2006, but warned that "every country must find its own pace to fulfil euro area membership criteria".

One of the main needs of ascension countries -- 10 are slated to join in 2004 -- is to adopt the ERM II exchange rate mechanism, Schiavi said. With a wide variety of exchange rate regimes in the ascension nations -- Poland and the Czech Republic have free floating currencies while Lithuania for example has a currency board system -- ERM II membership is key for convergence.

"ERM II enables avoidance of large FX fluctuations and gives the freedom to allow some temporary fluctuations," Schiavi said.

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