EU must push new members on reform-EBRD chief

By Jon Boyle

PARIS, Oct 26 (Reuters) - The European Union should ensure recent entrants from Central Europe do not row back on the major reforms undertaken to join the bloc, the head of the European Bank for Reconstruction and Development said on Thursday.

Countries like Poland, Hungary and the Czech Republic -- which joined the EU in 2004 -- must continue to aim for membership of the euro and invest heavily in education if they want to remain competitive, EBRD President Jean Lemierre said.

After 15 years of efforts to ready itself for the EU, Central Europe faced the risk of reform fatigue, he said, noting a third of Poles were now sceptical over the euro.

"Economically things are very good. But in order to be able to cope with the increased competition (that came with EU membership) they have to continue to reform their systems," Lemierre told the French Diplomatic Press Association in Paris.

Rising wages meant Central European economies had to switch from making low value-added goods to high value-added ones, he said, adding that the EU had to earmark money for priorities like social and economic infrastructure, education and research.

"We have to continue to be demanding on these subjects," Lemierre said. "I think we have to express concern when we see fundamental achievements being called into question, for example, on banking supervision. It is clearly a test.

"It is clear that the undertaking as regards the euro is a test. There are some fundamental undertakings which must be respected," he added.

The new states should be encouraged to resist cuts in education and skills training despite pressure on their budgets, as these were key to their economic future.

"Wages are rising in Central Europe and that is a good thing. So they have to shift their range of products to those with a higher value," Lemierre said.

"Above all, the unemployment rate must be reduced...they are growing but cannot manage to cut unemployment," he said.

Polish unemployment is officially put at 15.2 percent, and Lemierre said there was a lot of hidden unemployment in eastern Europe.

The EBRD was set up in 1991 to invest in the economies of eastern Europe and the states of the former Soviet Union to help their transition to market-based economies.

((Reporting by Jon Boyle; Editing by Gerrard Raven; jon.boyle@reuters.com; Reuters Messaging: jon.boyle.reuters.com@reuters.net; +33-1 49 49 53 42))

Keywords: EBRD CENTRALEUROPE