Economic and Monetary Union: What Kind of Convergence?

Abstract

This paper explores the complexities of convergence within the European Union, focusing on both nominal and real convergence in the context of the Economic and Monetary Union (EMU). The authors revisit the theoretical underpinnings of monetary integration, drawing from Optimal Currency Area (OCA) theory and its evolution, while analysing the benefits and costs of membership in a monetary union. Special attention is given to the convergence paths of EU Member States not yet part of the Eurozone, evaluating their alignment with Maastricht criteria, structural preparedness, and real convergence trends. Through a combination of theoretical insights and empirical assessments, the study presents a comparative analysis of inflation rates, exchange rate volatility, long-term interest rates, and fiscal indicators in non-EMU countries. It highlights growing disparities in economic performance and inflation post-2020, intensified by recent macroeconomic shocks. The research underscores the importance of not just satisfying nominal entry criteria but achieving sustainable real convergence – reflected in GDP per capita, labour market flexibility, and structural similarity with Euro-zone economies. The findings suggest that while Denmark, Sweden, Czechia and Bulgaria appear institutionally and economically aligned for euro adoption, countries like Hungary, Poland and Romania lag in meeting core convergence metrics. A more holistic and policy-driven approach to integration could be essential, promoting structural cohesion and solidarity mechanisms to mitigate regional disparities and ensure the long-term viability of the EMU.