Analysts at Brown Brothers Harriman explained that Central and Eastern Europe pose a challenge.
Key Quotes:
“The Visegrad countries (Hungary, Poland, Czech, and Slovakia) challenge the liberalism of western members and resist efforts on re-settling refugees. It appears that Slovenia (who is an EMU member as is Slovakia) may join the bloc after this past weekend’s election. The former prime minister, Jansa political party, garnered 25% of the votes and will be given the first chance to try to form a government. It is not a done deal most of the political parties shun a coalition with Jansa.”
“We have long maintained that monetary union grew out of the ERM crisis that stemmed from the extreme policy mixed after the Berlin Wall fell, which in proportionate terms, was as significant of a policy mix shock as the Reagan-Volcker shock of the early 1980s. Emphasizing the political nature of monetary union (economic solution to a fundamental political problem posed by the reunification of Germany) helped us navigate through the speculation of Grexit. We have consistently argued another country would join before a country would leave.”
“This still seems to be a good bet. Ironically, the next candidate is meeting resistance by the ECB and EC but appears to be drawing more support from the heads of state. Merkel and Macron seem more sympathetic to Bulgaria’s candidacy. Bulgaria said it will apply for membership in the ERM later this month, which is understood as a precursor to joining the EMU. The ECB and EC want Bulgaria to first join the Single Supervisory Mechanism that would regulate the country’s largest banks. Bulgaria had indicated that it would join the SSM when it was in the ERM.”
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