This simple rule of being able to maintain two policy focuses but not three has potentially important implications for the EU accession candidate countries such as Poland, Hungary, the Czech Republic and Slovakia, particularly during their transition phase between membership of the EU and entry into the Euro. During that period, it is assumed that these countries will be part of an “ERM II” grid, featuring a narrow exchange rate band, whose limits are defended by the commitment of the central bank to intervene.
For example, if in January 2005 Poland becomes a member of the EU and as a result the Polish zloty enters the ERM II grid, Poland must renounce its monetary independence at the same time. If Poland does not, it must either put limits on capital, which would be against both the spirit and the letter of the treaties of Maastricht and Nice, or eventually be forced to relinquish its fixed exchange rate peg. The only way to avoid this is for ERM II to have a very wide band, otherwise at the very least EU accession candidate currencies are (once again) in for an extremely wild — and potentially unpleasant — ride.

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