No country can simultaneously have high convergence growth, a fixed exchange rate and low macroeconomic imbalances, be they internal or external. In our case, catching up with our wealthier, low-inflation Western peers means a long term tendency for our currency to appreciate. This is hardly consistent with a permanently fixed exchange rate. 4. The paradox of the Eurozone: The Eurozone paradox is that the best possible members of the club are the countries that are so stable themselves in monetary and economic terms that they don’t need “to buy in stability”. Such countries have fewer and fewer reasons to adopt the euro. Conversely, the more a country begs to have the euro, the bigger the problem will be. This explains why almost no one is conducting a euro debate in Sweden, even though it does not have a derogation and many would like to see it in the Eurozone. Canonically, the same goes for us: either we can continue to stabilise ourselves, in which case we don’t need the euro, or we will destabilise ourselves, but in that case we will potentially harm others in the euro club and Eurozone membership will be a hindrance in bad times. 5. There’s no story in our case: The Baltic states took the euro as a geopolitical and security safeguard and paid a huge economic price for permanently fixing their currencies to it. Slovenia wanted to cut itself off from the Western Balkans. Slovakia wanted to seal the reforms of former Prime Minister Mikuláš Dzurinda.
Macro costs and micro benefits: The Eurozone has so far failed to make its member states wealthier quicker (the non-euro EU states are constantly growing faster on average) or to make them converge structurally. Rather, one could argue that the opposite is true. A truly strong measurable result of the euro is lower and less volatile inflation. This is hard to see as a bonus for our country, where we are consistently achieving the same objective with our own currency. The oft-mentioned bonus of lower interest rates due to the euro does not apply to us either. We have long known what it’s like to live with rates below the Eurozone level. Likewise, it’s hard to believe that the euro will deepen our trade relations with the euro countries given that we are one of the few countries enjoying not only growing trade, but also a constantly rising trade surplus with Germany. The euro has micro benefits at firm level, but unfortunately they come with the aforementioned macro costs. The latter are constantly rising and their final size and structure are impossible to quantify. Besides the known contribution to the stability funds, they include mandatory participation in the banking union, which is another unfinished structure. For a country of our type, currency arrangement and monetary history, joining the Eurozone is generally an extremely tough question. It was ever thus, but it is currently all the more so.