LONDON, April 16 (Reuters) - Fitch's sovereign ratings in
eastern Europe do not factor in any expectation the European
Union will allow fast-track euro adoption, but a change in that
policy would likely lead to upgrades, Fitch said on Thursday.
The economic crisis has caused policymakers in some
countries in the EU's eastern wing to speed up their efforts to
join the single currency, seeing it as a potential shield
against turmoil.
In the face of extreme currency volatility, Poland and
Hungary lobbied for leeway on adopting the euro earlier this
year but both the bloc's executive Commission and the European
Central Bank say strict euro requirements can not be relaxed.
"Fitch does not expect a relaxation of EU policy on joining
the euro area," Fitch said in a statement.
Before joining the euro zone, countries must keep currencies
pegged to the euro in the ERM-2 antechamber where it has to stay
in a plus/minus 15 percent band around a central parity.
Analysts say that could pose problems since investors began
ditching assets across central and Eastern Europe last year,
forcing the Polish zloty and other currencies down double digit
percentages against the euro.
Poland's government had said earlier this year it wanted to
join the ERM2 in the first half of the year and to swap its
zlotys for euros in 2012. It has since backed away from that
target.
Fitch said it expected EU authorities to remain resistant to
"premature" euro adoption for fear that a country might find
itself unable to bear the costs of adjustment.
That, Fitch said, could potentially cause a country to leave
the euro "triggering contagion to other countries within the
single currency".
Edward Parker, head of emerging Europe sovereigns at Fitch,
said: "If there were an unexpected relaxation of EU policy that
opened the way for early euro adoption, then Fitch would expect
to respond by taking some positive rating actions on the
countries concerned."
Overall, Fitch said euro adoption would be positive for the
region because it would eliminate the risks of potential balance
of payments and currency crises.
"The agency's long-standing position is that euro adoption
can lead to one- or two-notch upgrades of foreign currency
Issuer Default ratings," Fitch said.
Euro candidates must also meet criteria on long-term
interest rates, inflation, foreign debt and budget deficits.
The latter two could pose problems for some countries,
because the economic crisis has caused budget revenues to fall
and public borrowing to rise.
Fitch said it forecast the next countries to enter the
single currency zone would be Estonia, Lithuania and Poland in
2014; the Czech Republic, Hungary and Latvia in 2014 and
Bulgaria and Romania a year later.
"Timetables for all countries are uncertain, and both later
and early dates are possible," Fitch said.
According to a Reuters poll of analysts taken in January, no
country will adopt the euro before 2013.
(Reporting by Carolyn Cohn; Writing by Michael Winfrey;
Editing by Andy Bruce)
