Germany: Bundesbank Monthly Report: Financial markets in central and east European countries before accession to the EU

In May of next year, ten countries, including eight from central and eastern Europe, are scheduled to join the European Union. Whereas Malta and Cyprus look back on a long market economy tradition, the central and east European economies underwent a profound restructuring in the 1990s. In the past few years, all eight countries have made significant progress in the areas of bank consolidation and the international integration of their financial markets. Compared to the euro area, however, there are still major structural differences in the financial sectors, which suggests that further adjustment is needed. The degree of integration of the central and east European financial markets with those of the euro area is also below the level of integration witnessed among the markets of existing countries participating in European economic and monetary union. Owing to the major importance of integrated financial markets for implementing a common monetary policy, further progress is necessary in this area before these countries can take the next step and accede to European monetary union. This report analyses the development of the financial markets in the central and east European acceding countries and also takes a look at their integration into the euro area