Helge Berger

Currency boards, more so than other exchange rate regimes, have come in and out of fashion. Defined by a fixed exchange rate with full convertibility, central bank liabilities backed with foreign exchange reserves, and a high cost of exiting the regime, currency boards were common in colonial times—until most were cast off as countries gained independence after World War II.

In May 2004 the European Union will undergo the largest expansion in its history when ten countries—Cyprus, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovakia, and Slovenia—become members. The number of new members and their diversity make this "big bang" enlargement particularly challenging. Not only do these countries vary widely in language, culture, and geography, but also their per capita income is less than half that of existing members.