Second, euro area interest and exchange rate developments will be critical determinants of the external economic environment of Central and Eastern European countries. The decline of long-term interest rates in Western Europe will reduce the interest servicing costs of CEECs which hold sizeable foreign debt denominated in Western European currencies or which intend to tap the euro credit and bond markets.
Finally, the above-mentioned structural changes that EMU brings about in euro area financial sectors, will also affect CEECs. The creation of the euro area might have an impact on both FDI and portfolio investment flows from the euro area countries to CEECs.