Euro adoption in CESEE: How do financial literacy and trust in institutions affect people’s attitudes?

We investigate how financial literacy and trust in institutions affect attitudes (expectations and preferences) regarding euro adoption in ten countries of Central, Eastern and Southeastern Europe (CESEE). Using recent evidence from the OeNB Euro Survey, we show that attitudes on euro adoption vary widely across and within countries. In our country sample, on average, 18% of the surveyed individuals would prefer a faster accession to the euro area than they expect, while another 18% would prefer a later euro introduction than they expect. The share of those whose expectations match their preferences is 22% in the overall country sample. 19%, on average, do not expect or wish euro area accession to take place at all. Finally, 23% indicate that they have not formed attitudes on the introduction of the euro in their respective countries. Computing an overall index of attitudes toward euro adoption, we show that financially literate individuals are more likely to form definite expectations and preferences and tend to prefer euro adoption to take place earlier than they expect. We further show that trust has a similar impact on the overall attitude toward euro adoption – with both trust in national and European institutions having a positive and significant impact on forming more accurately aligned expectations and preferences as well as on preferring the euro to be adopted sooner rather than later.