Pitfalls in the European enlargement process : financial instability and real divergence

Many of the EU accession countries have announced that they will not only try to enter the EU as quickly as possible but also to adopt the euro at an early date. This is justified by the effort to avoid the danger of financial instability in the period prior to euro-introduction. However, by trying to avoid this danger, the CEECCs, at least the (economically, institutionally and technologically) less developed, may run into another danger or pitfall, namely of real divergence (or very slow real convergence). The paper investigates these dangers or pitfalls. It argues that for some accession countries the costs of entry at an early date may be very high, and that there may also be negative spillovers for the other accession countries and for the EU core countries.