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Study Notes

Life Inside the Euro Zone - Focus on the Baltic States

A Level, IB
AQA, Edexcel, OCR, IB, Eduqas, WJEC

All three of the Baltic States - Lithuania, Estonia and Latvia - who joined the EU single market in 2004 are now members of the Euro Zone. How have their economies fared within the monetary union?

Read more about the economics of monetary union here

Being inside the Euro Zone means that all three countries must adopt the monetary policy interest rate set by the European Central Bank. For some nations, this loss of monetary policy autonomy (sovereignty) is not offset by sufficient economic benefits. Nations such as Poland, Hungary and the Czech Republic for example remain outside of the Euro in part because they do not meet the convergence criteria required for participation.

How are these three Baltic States faring measured in terms of some of the key objectives of macroeconomic policy?

Their economic growth rates have out-performed the Euro Zone average

And progress has been made in achieving further convergence of living standards with the Euro Zone average.

Consumer price inflation

Unemployment rate (% of the labour force)

The Baltic States all have significantly lower levels of government (national) debt expressed as a share of GDP

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