special issue : “ 20 years of east - west integration - hopes and achievements ”, oenb. would have resulted in national interests prevailing, which would have made it nearly impossible to quickly and efficiently counter the crisis. the measures taken are only one side of the coin when it comes to discuss the euro ’ s role as a shelter. it is plain to see that eu membership alone has stabilized the region. it boosted access to international financial markets and enhanced the provisioning of indirect support to local banks. membership in monetary union would have further increased access to liquidity during the crisis and provided shelter against speculative currency attacks. moreover, the longer - term benefits of monetary union include • lower transaction costs, • increased competition and consequently lower profit margins, • stronger financial market integration and • a credible monetary policy target towards price stability. capital flows have enabled the financing of current accounts and have been an important ingredient of the cesee growth model so far. however, whether in or outside the euro area, some cesee countries will have to adjust their growth model in order to render their internal and external imbalances more sustainable. higher returns attracted capital inflows from western europe but in light of the crisis, one was tempted to ask whether this source of financing would dry up. this leads me to the question of whether rapid euro adoption is reasonable for cesee countries. during the crisis a relatively short - lived debate evolved whether countries outside the euro area should be allowed to join monetary union immediately. this would have meant to abolish – or temporarily suspend – the convergence criteria laid down in the maastricht treaty. in this respect, erm ii is an important instrument to stabilize acceding countries ’ exchange rate and guarantees a smooth transition from a national to the single currency. it is important to note that the convergence criteria are key determinants of the sustainability of the fixed exchange rate implied by adopting the euro. while entering the euro area is obligatory for almost all eu members, choosing the right moment is a demanding task. there are several factors that affect the decision : • the mobility of capital and labor and • the flexibility of domestic wages are essential factors for gauging the readiness of a country to join monetary union. besides that, one should bear in mind the maastricht criteria, in particular • convergence in prices, • a focus on long - term interest rates and • fiscal stability. against the backdrop of the current crisis, the discussion is revolving around the fiscal stance of countries

ewald nowotny : achieving balanced growth in the cesee countries opening remarks by prof dr ewald nowotny, governor of the central bank of the republic of austria, at the conference on european economic integration ( ceei ) 2012, jointly organized by the central banks of finland and austria, helsinki, 26 november 2012. * * * good morning, ladies and gentlemen, let me reflect, first of all, on the title of this conference : why is balanced growth an important issue? we are now already in the fifth year of the crisis and the storm is not over yet. the crisis has taught us that the economic difficulties of many countries in europe reflect long - term problems inherent in economic and political institutions. there are no quick fixes for these long - term issues, but it is crucial to take the right measures now. on the one hand, it is important to contribute effectively to business cycle stabilization and to support a smooth recovery in europe. for instance, the reduction of both public and private sector indebtedness is necessary for regaining the trust of international investors. at the same time, however, a vicious circle of consolidation measures which erode domestic demand and therefore delay the recovery has to be avoided. on the other hand, from a medium - term perspective, the right measures have to be taken to avoid a renewed build - up of unsustainable economic positions. achieving sustainable economic growth and thereby rethinking the appropriate growth model is of utmost importance in solving the current economic challenges. this especially holds true for the countries in central, eastern and southeastern europe ( cesee ), where the boom - bust cycle has been extraordinarily pronounced and the catchingup of income levels to those in western europe has been set back for several years since the outbreak of the crisis. from my point of view, one of the most relevant questions in this context is the following : how can we implement a sustainable growth model that remains crisis - resilient and promotes the catching - up process in cesee? let me look into both issues – sustainability and convergence – in more detail now. sustainability what is our understanding of balanced or sustainable growth? it means – first and foremost – that we aim to avoid large business cycle fluctuations as the frequent occurrence of sizable boom - bust cycles is associated with significant economic costs, affecting the longrun growth potential of an economy. second, sustainable growth also implies that economic growth is diversified as much as possible to avoid the economy ’ s dependence on