Difficulties of entering Euro area caused by globalization

Abstract

Global demand in 2008 is to revised number of factors pressed all financial markets and world economies. It is important to understand what could be c10ne in order to adjust the short term monetary) decisions and long term strategies on macro level, and how to manage consumer expectations. Following the recent macro tendencies determined as US economy recession, global finance is distressed by failure of investment and credit risks growth. On the other hand, the influence of Chine's market expansion creates certain restrictions for the world GDP growth, which is forecasted to 3, 8 % in 2008 (down from 4.8 % in 2007). For small countries as Lithuania is essential to manage the convergence process for soft joint the Euro area with positive expectation to attract FDI, improve social aspects according to EU level. There are number of hypothesis complain connection between exchange rates and financial fragility, then what type of exchange rate regime is more effective facing euro area expansion. The paper analyzes different points on exchange rate mechanism modeling with reflection to economy development.