Лъчезар Димитров

Why are groceries in the Balkans sometimes more expensive than in Western Europe? Because in the entire Balkans - there is not a single free floating currency. ALL Balkan currencies are either pegged to the EUR or tightly managed against the EUR. 💶 🇪🇺 Locals think in terms of EUR and not their local currency when it comes to anything more expensive than grocery shopping. It's not like this in Central Europe. Hungarians, Poles and Czechs mainly think in terms of their local currencies. The cost of pegging your currency with the EUR is give up on monetary freedom 👇 1. Your currency becomes artificially strong, which hurts your local producer's export competitiveness whilst encouraging foreign imports. Balkan wages are lower but tradeable goods prices converge to Western levels because the exchange rate is not allowed to depreciate. With this chocolate bar example, on Polish or Czech supermarket shelves, there are much more domestically produced chocolate options than in the Balkans. 2. Can't cut rates to stimulate during recession (or you will face a carry trade attack) 3. Government can't inflate away debt as easily It's very difficult for the Balkans to reverse course now. Romania is the most redeemable case in the region, as the currency is managed rather than pegged. The central bank can still allow the RON to gradually depreciate as they have done over the years, whilst compensating investors with higher yields. It's good that in Poland, Hungary and Czechia - public support for Euro adoption is increasingly low!

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Sydney Sweeney