According to a report put out by the European Central Bank on Wednesday, May 30, 2012, none of the eight countries that are waiting to join the euro currency are ready. Most countries in the group have only been waiting since 2004 or 2007 but Sweden has been waiting since 1995.

Bulgaria, the Czech Republic, Latvia Lithuania, Hungary, Poland, Romania, and Sweden are the eight countries that are members of the European Union but are not a part of the Eurozone – meaning they are not using the euro as their currency. Seventeen countries are currently using the euro, including Greece, although there have been discussions that it may have to leave the Eurozone. Currently the United Kingdom and Denmark are not using the euro either – instead they are using the pound sterling and krone respectively – but the decision to not use the euro was theirs, not the European Central Bank’s.

The United Kingdom opted out of the euro by negotiating an exception within the Maastricht Treaty of 1992. Joining the euro was heavily opposed by most of the United Kingdom, although its close neighbor, the Republic of Ireland, has adopted the euro. Denmark was able to opt out of the euro as one of the four conditions of the Edinburgh Agreement in 1992.

The European Central Bank must report on the progress of these eight countries every two years. So far it appears as if only Latvia will be able to join the euro currency by the next assessment in 2014. According to the bank, “in none of the eight countries examined, [is] the legal framework fully compatible with all requirements for the adoption of the euro.” They also claimed, “incompatibilities remain regarding central bank independence” in all of the countries.

Additionally Latvia and Lithuania are the only two countries of the eight currently taking part in the exchange rate mechanism II for more than two years which is required to be a part of the Eurozone.

Many of the countries’ economies are doing better than current eurozone countries. Seven of the eight countries – the exception being Hungary – have a debt-to-GDP ratio under 60% which is the Eurozone limit. Currently Greece’s ratio of debt-to-GDP is 165.3% and Italy, Ireland, and Portugal had ratios last year above 100%.

According to a statement from Prime Minister Donald Tusk of Poland earlier this May, Poland is still interested in joining the Eurozone even though the euro has been damaged by the current debt crisis.

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Paul Krugman, one of the most famous economists in the world, recently claimed in an interview with the BBC that Greece’s best option is to leave the Euro. Krugman stated, “Greece was seriously, seriously irresponsible even during the good years.” He compared Greece’s spending to those of the US and other European nations and claimed that the irresponsible spending was “not to the same extent.”

Krugman explained that the problem for Greece is that it cannot print its own money which gives it an “enormous vulnerability.” Therefore Greece has two options: accept the demands that Germany is imposing on them in regards to lending or to leave the Euro. Krugman declared, “Greece must and will leave the Euro.”

However, Krugman also points out that it is difficult for any Greek politician to say that Greece should leave. In fact, Krugman believes “whoever says, ‘that’s it’ will have ended his career.” According to Krugman, Greece leaving the Euro could happen in a couple of weeks depending on the outcome of the Greek elections. The other option is that the European banks will eventually refuse to lend to Greece which will force it to create its own currency again.

Ultimately Krugman claims that this is the most desirable thing for the Greeks and for everyone else in the Eurozone. He believes that the main ramification will be the fact that the Euro membership is reversible. The greatest worry is that there will be a run on the Spanish and Italian banks. However, as long as the European Central Bank is willing to supply the Euros for this run there should not be a major problem.

In another interview with the Independent, Krugman also went more in depth as to who should be blamed for the Eurozone crisis. Krugman believes that the Maastricht Treaty of 1992 is what originally caused this crisis because it led the way for the use of a single currency in Europe.

Michalis Sarris, chairman of the Cyprus Popular Bank also commented on the possibility of Greece leaving the Euro on 17 May 2012. Sarris claimed that Greece leaving the Euro was not “inevitable” but was a “clear possibility.”

 Ultimately Cyprus hopes that Greece will recover without leaving the Euro because many of its finances are tied up in Greek investments. Sarris reported that the Cyprus Popular Bank suffered a loss of about 2 billion Euro do to the financial crisis in Greece. Sarris is hopeful and remains positive that Greece will be able to find a way out of this crisis without having to leave the Euro.

Paul Krugman is winner of the Sveriges Riksbank Prize in Economic Sciences (informally the Nobel Prize in Economics), Princeton professor, and a columnist/blogger for the New York Times. His books include End This Depression Now! and The Return of Depression Economics and the Crisis of 2008.

Image Courtesy of  Portokalis / Shutterstock.com

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