27th May 2017

Eurozone timetable keeps slipping, report warns

Ten countries from "new" EU member states plus Sweden have received a warning that they should do more to meet the criteria for joining the euro.

While Slovenia is preparing to introduce the euro in January 2007, the European Commission and European Central Bank said in a "convergence report" on Tuesday (5 December) that the pace of the other hopefuls is uneven and their eurozone timetable keeps slipping.

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"The road to the euro is proving more difficult than some may have thought originally, but the reward is well worth the effort," commented EU monetary and economic affairs commissioner Joaquin Almunia.

Of the five key criteria that the countries must meet - regarding budget debt and deficit, inflation, exchange rate stability, long term interest rates and legal provisions in place - Hungary has not fulfilled any while Estonia is the furthest ahead with four of them covered.

But Tallinn still finds it difficult to curb inflation below the allowed eurozone threshold - calculated by adding 1.5 percentage points to the inflation rates of the three lowest inflation EU countries.

Earlier this year, the Baltic country had to withdraw its request for joining the euro next year due to problems with price stability, while Lithuania's application for the same entry date was also rejected for inflation-related reasons.

The EU reference inflation rate was 2.8 percent for the year up to this October, Estonia recorded 4.3 percent. On the other hand, four other euro candidates - the Czech Republic, Poland, Sweden and Cyprus did meet the inflation condition.

Hungary on the far end

Hungary is the worst performer among the eurozone hopefuls, with its original plan to join the monetary union in 2009 further slipping away.

Hungarian officials admitted in late summer that Budapest may only make it in 2011 while financial analysts rather predict 2014, due to various problems - with the extensive budgetary deficit currently the most pressing of them.

On the other hand, Cyprus and Malta - the two candidates that are hoping to follow Slovenia as eurozone entrants in 2008 - are well on track, with Valetta in need of a little more effort on state spending and inflation.

Inflation however could prove a major problem also for Slovakia which is sticking to its 2009 target date, confirmed by a draft 2007 budget to be adopted in the national parliament this week.

Meanwhile the Czech Republic and Poland have not yet agreed on their timetable, with Warsaw's plan to hold a referendum on the euro sparking irritation in Brussels.

"Most new member states ratified their accession treaties through a referendum so they have voted already on the single currency," commented Mr Almunia's spokeswoman on Tuesday, adding that adopting the single currency was "part and parcel" of joining the club.

Sweden lacks the political will

Brussels uses more moderate language towards Sweden, which has the same obligation to join the eurozone as the 2004 EU newcomers.

Only the UK and Denmark have an opt-out from the single currency.

The report said that while meeting the economic criteria, Sweden has not yet joined the so-called ERM II (exchange rate mechanism) or taken legal steps concerning the status of its own central bank vis-a-vis the ECB or other financial institutions.

But the country has put on hold any further action to join the euro following the negative result of a referendum to adopt the euro and ditch the Swedish krona in 2003.

The new centre-right government of Fredrik Reinfeldt has already made clear that it does not intend to take any concrete steps towards entering the single currency, with some pro-European integration MEPs occasionally criticising Brussels for putting no political pressure on the country.

When commenting to journalists on the matter on Tuesday, commissioner Almunia's spokeswoman said that while the EU executive expects all applicants to meet the euro criteria, it is primarily the adoption of macroeconomic policies that matter as they provide for stable economy.

And so, she added, it is not so crucial for Brussels whether Sweden would actually "adopt the euro in two or three years or even later."

Spelling problems

Along with the evaluation of the euro-related criteria, the European Central Bank has also repeated its calls for the proper spelling of the currency in some of the applicant countries.

Frankfurt suggests it is unacceptable that Latvia refers to the "eiro" and that Hungary adds an acute accent to the "o."

"The euro is the single currency of the Member States that have adopted it," the ECB said, adding "To make this singleness apparent, (EU) law requires a single spelling of the word 'euro' in the nominative singular case in all community and national legislative provisions."

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