Central and Eastern Europe and Its Uncertain Road to EMU Summer/Fall 1999 – Volume VI, Issue 2 173 EVZEN KOCENDA AND JAN HANOUSEK Associate Professors Center for Economic Research and Graduate Research, Charles University Central and Eastern Europe and Its Uncertain Road to EMU A fter years of debate, European economic and monetary union (EMU) is becoming a reality with its unifying common currency the euro. Despite the varying extent of distress, it is a commonly shared notion that EMU will positively affect its member countries. On a broader scale, EMU is expected to increase macro-economic stability through lower average costs and enhanced competition, coupled with stable prices and lower interest rates, leading to higher economic growth. While EU members should enter EMU as soon as they are qualified, we suggest that the central and eastern European (CEE) candidates postpone their entry into EU and EMU. In any event, we believe that further institutional and structural changes in the CEE economies are not to be underestimated. Economic and Monetary Union: Origins and Recapitulation After years of debate, the European Union has made considerable progress to- wards unprecedented integration. At the same time, after years of anomalous economic evolution, the central and eastern European countries struggle to pass through difficulties encountered in their own transitional processes. Their aim is to eventually become equal members in the European financial structure nick- named “Euroland.” In order to evaluate the chances of success for CEE countries, it is necessary to briefly review some aspects of the quest for EMU. The arrangement that preceded EMU was the European Monetary System