Hungarian economist agrees with Soros's call for early euro adoption
The well-known American financier of Hungarian origin, George Soros, recently said that the ten countries joining the European Union on May 1st should try to come into the euro zone as early as possible because their economies are highly vulnerable to speculation. Judit Barta, a research fellow at the Budapest-based economic research institute GKI very much agrees. She talked to Sandor Laczko of Radio Budapest.
"I think he's absolutely right. Even now you can observe some speculative attacks on the forint or the zloty. These two countries have the biggest money markets in Central and Eastern Europe, and Hungary is especially vulnerable, because we have a very open economy and foreign trade represents a big share of the GDP, and therefore we are an easy target for speculation. There is no exchange-rate mechanism that protects you from being a target for such speculation. Therefore it's better to be for as short a time in ERM2 as possible, because in ERM2 it's against the rules of the game to intervene in the money market by the national bank or any other institution."
How would you place Hungary's efforts to join the euro zone, in comparison with other countries, especially Slovakia, the Czech Republic, Poland and Slovenia.
"If it is possible, I will put it in a broader sense. I think there are three or four countries which can start joining the euro zone immediately, these are Slovenia and the Baltic States. We think that we can gain some advantage if we can comply with the requirements by 2008. It means we can join the euro zone in 2009, and then we can gain a year or even more compared to the Czech Republic or Poland or Slovakia as well."
They have similar problems, especially reducing the budget deficit.
"Yes, it is true, but I think that if you look at the price development of Slovakia, certainly it means that the price increase is quite significant in these countries, and I think that when the Czech Republic starts to increase energy prices, they will have an accelerating inflation rate as well."