The European Union's eastern members need to adjust their timetables for joining the euro currency to avoid the risk of creating new bubbles again with overly ambitious plans, policymakers warned today.
European Central Bank executive board member Gertrude Tumpel-Gugerell told a conference in Vienna that credible strategies for adopting the euro were essential and that some countries may need a correction due the financial crisis.
"The recent financial crisis ... has moved euro adoption further into the future," Ms Tumpel-Gugerell said.
"Overly ambitious timetables for adopting the euro can be rather costly for the country concerned," she said. "This may encourage market participants to pursue strategies which may prove risky if the timetable turns out not to be achievable."
In the past, too ambitious timetables have led to credit bubbles in central and eastern Europe, Tumpel-Gugerell said.
"Therefore, individual countries' timetables have to be carefully looked at and adjustments may be necessary."
A Reuters poll last week showed analysts expect Estonia to be the next country from Central Europe to join the euro zone in 2012, a year sooner than predicted in August. Further entrants would not come before 2014, the poll showed.
Ms Tumpel-Gugerell and other policymakers speaking at a conference hosted by the Austrian central bank reiterated the euro had provided stability to the countries that have adopted it already during the current financial crisis.
They also repeated the mantra that rushing into the common currency would not help the central and eastern European countries - which were hit hard by the crisis partly because most of their currencies float.
European Union Economic and Monetary Affairs Commissioner Joaquin Almunia told the conference accelerated adoption of the euro by waiving or loosening entry criteria is not an option for those countries.
"An accelerated euro area enlargement that would require a waiver or a loosening of the entry criteria specified by the treaty is not an option," Mr Almunia said.
"Euro adoption should not be seen as a quick fix to economic vulnerabilities," he said a speech delivered to the conference. "(Euro membership) does not eliminate the need to work out underlying imbalances."
Ms Tumpel-Gugerell's and Mr Almunia's points were not lost on central bank governors from some of the countries concerned speaking in Vienna.
Hungary's governor Andras Simor, one of the first in the region who had to fight attacks on his currency shortly after Lehman Bros collapsed, said he learnt to keep as short as possible the transition period in which rates are already fixed.
"We have ... learned that we should enter the EMU as soon as possible because the country is more vulnerable outside but only once convergence is right on track," he said.
"And we should still spend as little time in ERM-2 as possible and legally necessary because it makes the currency more vulnerable to attacks."
Mr Simor also said it was unrealistic to give a target date before the Hungarian elections due next year: "There will be elections next April or May so at this point it would be inappropriate to announce a target date."
Conference host Ewald Nowotny, head of the Austrian central bank, said the main challenge was currently the budget deficit target as many emerging European countries have loosened fiscal policy to fight the financial crisis.
"Against the backdrop of the current crisis, the discussion is revolving around the fiscal stance of countries," he said.
"It is ... a challenge to manage the trade-off between providing support to those hit hardest by the crisis and correcting fiscal imbalances to ensure sustainability and to qualify for (euro entry)," he said.
However, Mr Nowotny noted that differences were stark between different countries in the European Union and euro adoption should be decided case-by-case.
Estonia's deputy central bank governor Marten Ross said on the sidelines of the conference that his country could meet the conditions for adopting the euro by the spring of next year.