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New EU members face tough euro test

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#1    Talon


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Posted 21 October 2004 - 09:02 PM

New EU members face tough euro test
by Manuela Saragosa
BBC Europe Business Reporter  

The European Union's ten newest members will have to make more of an effort to get their economies into shape if they plan to join Europe's single currency this decade.

So says the European Central Bank (ECB) in a report out on Wednesday.

Its views are supported by a separate report from the European Commission which said that Poland and Hungary have failed all five of the economic tests they need to pass to join the euro.

Ambitious targets

The ten mostly former Communist states joined the European Union (EU) earlier this year, and set themselves ambitious targets to join the single currency in the process.

All of them want to adopt the euro either before or in 2010.

But Wednesday's report cards by both the Commission and the ECB have poured cold water on the hopes of six of the newcomers: Poland, Hungary, the Czech Republic, Slovakia, Cyprus and Malta.

Brussels and the ECB said the six still had a long way to go to meet the economic criteria for euro entry. They needed to demonstrate lasting progress in reining in government spending and debt levels.

Joaquin Almunia, the Monetary Affairs Commissioner, said all ten countries had put in huge efforts to satisfy the criteria for EU membership.

But that sort of commitment shouldn't slacken now:

"Progress with fiscal consolidation has generally been too slow and a majority of countries have yet to achieve a situation which, in a broader view, might be judged as sustainable in the medium term," Mr Almunia said.

Fast track

Latvia, Estonia and Lithuania fared better according to the Commission.

Along with Slovenia, they're on the fast track to euro entry.

Some have already linked their national currencies to the single currency, joining the Exchange Rate Mechanism in June this year. None, however, expect to join the euro before 2007.

Meanwhile, the ECB's president Jean-Claude Trichet admitted that several euro zone members weren't setting a good example, hinting at double standards in adhering to the economic fundamentals that underpin the single currency.

Euro zone countries are supposed to keep to strict limits on spending and debt. About half of them are seen to be flouting those rules.

Asked whether several euro zone members were sending a bad signal, Mr Trichet answered: "It is absolutely obvious."

Story from BBC NEWS:

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