How has the prospect of EMU membership affected economic reform among current and prospective EU member states?
The prospect of EMU membership has served as a catalyst for further economic reform among both current EU member states and EU applicants from Central and Eastern Europe. The most dramatic case within the EU is Italy, which in the last couple of years has made significant progress in reforming its welfare state and corporatist structures and reducing its public debts and deficits in order to prepare itself for EMU. Greece has also begun reforming its economy, and the drachma was admitted to the ERM (Exchange Rate Mechanism) in March 1998 as a possible prelude to EMU membership. Greece will not join in the first round because it does not yet meet the economic criteria. In Central and Eastern Europe, especially in Poland, Hungary, the Czech Republic, and Slovenia as well as in Estonia and Cyprus, prospective EU membership has also furthered extensive economic and social reforms, but analysts predict that these states would not be ready for EMU for at least ten years. This is also the cas
