EU VALUES outside the euro: Czech Republic, Hungary, Poland and Romania

EU VALUES outside the euro: Czech Republic, Hungary, Poland and Romania

Although the euro has become the main currency in most EU countries, some states have retained their own currencies. This allows them to regulate their economies and maintain independent monetary policies tailored to their national needs. In today’s Strifor review, let’s look at how the national currencies of the Czech Republic, Denmark, Hungary, Poland and Romania help these countries maintain domestic financial strategies and how this affects their economies.

Why haven’t all countries adopted the euro?

The euro, as a single currency, was introduced in 1999 to enhance economic integration between European Union (EU) countries. However, some of the EU member countries do not use the euro as their national currency for various reasons. First, in order to adopt the euro, countries must meet the Maastricht criteria, which include:

• Low inflation: Inflation should not exceed by 1.5% the average of the three lowest-inflation EU countries.
• Budget deficit: Should not exceed 3% of GDP.
• Public debt: The country’s debt burden should not exceed 60% of GDP.
• Stability of the national currency: Participation in the exchange rate mechanism (ERM II) for at least two years without significant fluctuations.

Second, some countries consider the abandonment of the euro as an important element in preserving their economic sovereignty. Having their own currency allows them to regulate the exchange rate independently, which helps them to adapt to economic challenges. 

Third, some countries retain distrust in the eurozone after crises. The eurozone debt crisis of the 2010s (especially the situation with Greece) exacerbated questions about the risks associated with the use of the euro. At the time, eurozone membership limited the country’s ability to recover from the crisis. Greece could not devalue its currency and had to agree to austerity measures.

In addition, the euro changeover requires major institutional and technical changes:

• Changing the banking system, automatic teller machines, and accounting programs.
• Transferring savings and contracts into the new currency.

These processes are time-consuming and costly, which becomes another constraint.

Examples of EC countries that do not use the euro

🇨🇿 Czech Republic — Czech Crown (CZK)

The Czech Republic has deliberately postponed the transition to the euro, preferring the Czech krona as a means to flexibly manage inflation and stimulate exports. Although the country complies with EU rules and is ready for the euro, the majority of the population and authorities prefer to keep their currency for the sake of economic independence.

The Czech Republic has officially committed itself to switching to the euro upon accession to the EU, but in practice this decision has been delayed due to political, economic and social reasons:

• Maintaining control over monetary policy: the Czech National Bank (Česká národní banka) actively regulates the exchange rate of the Czech crown (CZK), which allows it to adapt to external economic shocks.
• Public skepticism: Polls show that most Czechs oppose the euro, fearing rising prices and loss of national control over the economy.
• Lack of urgency: The Czech economy is stable and the krone is widely used domestically and provides export competitiveness.

The Czech Republic learned lessons from the Greek crisis, believing that switching to the euro could limit its ability to cope with economic difficulties.

🇸🇪 Sweden — Swedish krona (SEK)

Sweden is also one of the EU countries that is theoretically obliged to switch to the euro, but in practice does not.

• Referendum 2003: 56% of Swedes voted against the introduction of the euro, and the public’s position has remained unchanged ever since.
• Ignoring ERM II: Sweden is formally supposed to join the European Exchange Rate Mechanism (ERM II) but deliberately fails to do so, delaying the process.
• Krona stability: The Swedish krona (SEK) provides the country with monetary policy flexibility, especially in times of global economic turmoil.
• Public Discontent: Citizens fear rising prices, loss of control over the economy, and the problems seen in eurozone countries during the financial crisis.

In 2008, the global financial crisis hit the euro area harder than Sweden, which strengthened confidence in maintaining the krona as the optimal economic policy instrument.

🇩🇰 Denmark — Danish Krone (DKK)

Denmark is a unique case. Unlike most countries that are obliged to adopt the euro upon joining the EU, Denmark has been granted a special exception (opt-out) and has retained the Danish krone. However, the country participates in the ERM II exchange rate mechanism, which allows the Danish krone to fluctuate within 2.25% of the euro. This gives Denmark the benefits of euro stability while maintaining its own currency.

Denmark is one of the few EU countries that has a formal right not to introduce the euro (opt-out). This right was enshrined in the Maastricht Treaty.

• Referendum 2000: In the referendum 53% of Danes voted against the euro changeover.
• Stability policy: The Danish krone (DKK) is tightly pegged to the euro through the European Exchange Rate Mechanism II (ERM II), but retains its independence.
• National Identity: The Danes consider their currency a symbol of sovereignty.

Denmark avoids the euro in order to maintain flexibility and economic stability while benefiting from a close link to the eurozone.

🇭🇺 Hungary — Hungarian Forint (HUF)

Hungary continues to utilize the Hungarian Forint, which provides the country with flexibility to manage its economy. In the face of inflation and economic changes, the HUF allows Hungary to respond quickly to internal and external challenges. In recent years, the government has focused on stimulating national exports, which is supported by the ability to adjust the forint exchange rate.

Hungary, an EU member since 2004, has also committed to switching to the euro, but the process has been slowed down for a number of reasons:

• High inflation: Hungary does not meet the Maastricht criteria for price stability.
• Political approach: Viktor Orbán’s government is deliberately avoiding the euro, arguing that it would limit the country’s sovereignty.
• Dependence on the national currency: The Hungarian forint (HUF) provides flexibility in crisis situations by allowing the currency to be devalued to boost exports.

In 2022, the forint devalued due to the energy crisis, but the country was able to use this as a tool to support exporters.

🇵🇱 Poland — Polish zloty (PLN)

Poland, like the Czech Republic, meets many of the criteria for euro adoption, but retains the Polish zloty to maintain export competitiveness and economic flexibility. Poland aims to strengthen its own banking sector and the resilience of its financial system, largely made possible by its independent monetary policy.

Poland is considered one of the largest EU economies not using the euro. The main reasons for rejection:

• Control over the national economy: the Polish zloty (PLN) allows independent monetary policy, which gives flexibility in times of crisis.
• Population skepticism: Polish citizens fear that switching to the euro will increase prices while keeping wages low.
• Political aspects: The ruling Law and Justice party opposes the euro, considering it a threat to Poland’s sovereignty.

During the COVID-19 pandemic, Poland used the zloty to stabilize the economy, implementing measures that would not have been possible with the euro.

🇷🇴 Romania — Romanian Leu (RON)

Romania also uses its own currency, the Romanian Leu, to regulate monetary policy and support the domestic market. Although the country plans to switch to the euro, many experts and politicians believe that the economy needs to be strengthened further to ensure that integration takes place with minimal risks. An independent currency allows inflation to be managed and investment to be encouraged domestically.

• Romania intends to join the eurozone, but so far faces many obstacles:
• Economic instability: High inflation, a large budget deficit and a weak banking system are not adequate.
• Living Standards Gap: The introduction of the euro could make goods more expensive, which would be particularly painful for low-income populations.
• Prioritize domestic reforms: The authorities are focusing on strengthening the economy before discussing euro changeover.

Despite the official desire to adopt the euro, Romania faces economic challenges, including the need to stabilize the financial system.

Bulgaria is also among the EU countries that do not use the euro. The remaining 20 EU countries use the euro as their national currency.

To summarize

Despite the economic and political advantages of using a single currency, the transition to the euro remains a contentious issue. Countries that have abandoned the euro prefer to retain control of their monetary policy and avoid the risks associated with eurozone membership. However, as global challenges and EU integration grow, the issue of euro zone expansion continues to be a hot topic, and each country evaluates its participation through the lens of national interests and perspectives.

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