PRAGUE, June 18 (Reuters) - Slovakia's entry into the euro
zone last January will probably be followed by a long pause in
the bloc's enlargement as the global economic crisis has made
meeting the entry requirements a tough task.
Following is a summary of where each country stands with its
euro adoption plans (ranked by size of gross domestic product).
For ANALYSIS please double click on ....... []
POLAND
Poland's centre-right government has set 2012 as the target
date for euro adoption. But this week a senior ruling party
official conceded that this was no longer realistic due to the
scale of a slowdown in the EU's largest ex-communist economy.
Financial markets have already discounted the possibility of
euro adoption in 2012.
Poland's general government budget deficit will hit 6.6
percent of GDP this year, according to the European Commission,
well above the Maastricht Treaty ceiling of 3 percent. The
government expects a deficit in 2009 of 4.6 percent.
Poland also fails to meet the Maastricht criterion on
inflation, which was 3.6 percent year-on-year in May, well above
the central bank 2.5 percent target. But Poland comfortably
meets the Maastricht public debt requirement of below 60 percent
of GDP.
CZECH REPUBLIC
The country is run by an interim cabinet that does not see
euro entry possible before the second half of the next decade,
and an election in October is unlikely to bring a shift. Neither
of the two main political parties is keen on the euro now.
The rightist Civic Democrats, which led the last government,
have said they want the euro but only at a time when the economy
has converged enough with the euro zone to make entry
beneficial.
The leftist Social Democrats wanted a fast switch to the
common currency but now say the crisis makes entry a secondary
issue and the government needs to spend to boost growth.
The country will not be able to squeeze the overall public
gap below the euro-prescribed 3 percent of GDP at least until
2012 and has not joined the compulsory two-year membership in
the ERM-2 exchange rate mechanism. It can meet the government
debt, inflation, and interest rate criteria.
ROMANIA
Romania targets 2014 as a deadline for admission in the euro
zone, which would allow the country to use the common currency
starting 2015. It plans to join the ERM-2 mechanism in 2012.
These plans have not been changed by recent macroeconomic
developments.
The new European Union member is struggling to bring the
budget deficit below Maastricht's ceiling of 3 percent by 2011
from over 5 percent last year and is still fighting inflation,
even though demand has fallen as a result of the global cash
squeeze.
Some analysts say the interest rate criteria would also be
difficult to achieve if inflation picks up when the economy
recovers. Many economists see a delay of at least a year as
Romania struggles to meet the criteria.
HUNGARY
Hungary wants to join the euro "as soon as possible" but it
meets none of the criteria due to years of lax fiscal policies
between 2002 and 2006 and an absence of sufficient reforms.
Before the financial crisis struck, markets put Hungary's euro
entry at 2013-2014 at the earliest, now it is seen in 2014
<HUEMUDATE1>. Hungary has no official target date for euro
adoption.
Thanks to fiscal measures taken under an IMF-led bailout by
the Socialist government, Hungary is expected to keep its budget
deficit in check. But the deficit target for this year has been
raised to 3.9 percent and next year's target is 3.8 percent,
which means Hungary will not meet the budget deficit criterion
of euro zone entry. Inflation is also seen rising this year.
The new government of Prime Minister Gordon Bajnai has said
the main task was to implement its economic programme to fight a
deep recession, and it would not be reasonable now to set a euro
target date.
The leader of the main centre-right opposition party Fidesz,
which is widely expected to win next year's parliamentary
elections, has said that euro adoption was unlikely by 2014.
BULGARIA
Days before a July 5 parliamentary election in Bulgaria, all
major political parties say they want to accelerate the Balkan
country's entry in ERM-2. Some set 2010 as the target date.
Double-digit inflation in the last two years, which is
likely to fall around 3 percent at end-2009, and Bulgaria's huge
current account deficit has hindered Sofia's ERM-2 aspirations.
The Socialist-led government's failure to tame chronic
corruption and organised crime has also hurt Sofia's chances.
The country has no target date for euro zone entry.
BALTIC STATES
The ex-Soviet republics of Latvia, Lithuania and Estonia had
to put off their ambitious euro adoption plans when the current
economic crisis hit their economies and dragged them into deep
recessions. All three remain extremely vulnerable and are
struggling to resurrect growth while controlling finances.
Latvia has resorted to international aid to keep its budget
afloat and approved severe spending cuts in mid-June but stuck
with its currency peg within ERM 2 to keep euro adoption plans
on track.
Lithuania has already passed painful budget cuts to control
its deficit but despite plans for more cuts, its deficit will be
between 5-7 percent of GDP this year, above the euro adoption
rules.
Estonia has passed significant spending cuts this year but
the central bank said in mid June that it needs more cuts to
keep the deficit under 3 percent in 2009 and 2010.
Estonia plans to adopt the euro on Jan. 1, 2011 while Latvia
aims for 2013. Lithuania has set no target date but the
government aims to meet all the Maastricht criteria by 2011
which could allow for euro adoption in 2012 or 2013.
(Reporting by CEE bureaus)
