EU Enlargement and the Eurozone: Convergence or Divergence?

This paper uses cointegration and common trends techniques to investigate empirically the extent to which the 10 new EU countries are ready to join the Eurozone. Using France and Germany as a benchmark, we investigate the prospects of a successful Eurozone participation based on the rate of convergence of the nominal Maastricht criteria. Further, we assess the rate of convergence among some real variables of these countries. The results indicate that the 10 new EU countries are partially ready to join the Eurozone, and need further adjustments in their government policies in order to achieve that target in the future.