Why the New EU Member States should Adopt the Euro as Soon as Possible

The new EU countries are facing two major macroeconomic policy challenges. The first is to manage the process of rapid real convergence that comes with high real GDP and productivity growth rates and large capital inflows. The second is to achieve nominal convergence required for the adoption of the euro. These two challenges are related, as rapid real convergence makes it more difficult to achieve nominal convergence. We argue that for some of these countries, real convergence would be easier to manage if they adopted the euro as soon as possible.