The Western Balkans and the “unconventional” expansion of the euro area

Abstract

In academic and professional circles and in European politics, the Western Balkan region has been in the spotlight. The policy makers of the European Union and the member states have declared that the six countries in the Western Balkans aspiring for EU membership should not be left behind, even under the geo-political situation that emerged after the attack on Ukraine. However, Serbia, Bosnia-Herzegovina, Montenegro, North Macedonia, Kosovo, and Albania are still far from meeting the political and economic criteria of EU membership and EU standards, and then, as members, from later entering the euro area. The authors point out that in most countries in the region, due to the particular South Slavic common past, and their unique historical paths, dual or multiple currency systems have been present for a long time, the economies have experienced an advanced spontaneous euroisation process, and Montenegro even adopted the euro unilaterally. Under the customary logic of enlargement, the integration process starts with establishing a single market for goods and services, then continues with the harmonisation and liberalisation of the factor markets, labour and capital, before adopting the common European currency – but that pattern would not fit this set of countries well. The usual schedule for euroisation, that is, assuming the fulfilment of the membership conditions while formally maintaining monetary sovereignty before the euro-­adoption path opens up, would not thus serve the region’s development and convergence towards the EU framework. The political and economic interests of both the region concerned and the EU would be served better by allowing the countries to go on using the euro, and gaining admission into Eurozone institutions “before due time”, i.e. before attaining full EU membership. The phasing of the accession process proposed here differs from that of previous enlargements, but it may contribute to maintaining integration impetus in the region, while ensuring the full enforcement of the relevant EU standards.