* Poland ERM-2 entry seen delayed to 2011
* Poland, Estonia to adopt euro in 2013
* Czechs, Hungary, Latvia, Lithuania to adopt euro in 2014
By Jonathan Cable
LONDON, Aug 12 (Reuters) - It will be 2011 at the earliest
before Poland gains membership to the ERM-2 currency grid and
another two years before the eastern European nation ditches its
zloty currency for the euro, a Reuters poll found.
That new expected date for Warsaw to enter the pre-euro
European Exchange Rate Mechanism (ERM2) based on a survey of 31
emerging market experts is one year later than the last Reuters
poll of market analysts in April.
Even that date could be postponed as market volatility, a
weak currency and high government debt prevent them from
joining. Yet the Polish government said just last month it still
wanted to join ERM-2 this year.
"Poland could make 2013 but here a combination of government
commitment and necessary fiscal adjustment put this target in
doubt," said Agata Urbanska, senior emerging markets economist
at ING Financial Markets.
Poland, the European Union's largest ex-communist economy,
has already raised this year's budget deficit to counter the
impact of the global financial crisis and it may rise further
yet, leading the International Monetary Fund to call for action.
Along with other criteria, countries seeking euro membership
must maintain a government deficit below 3 percent of GDP and
the poll found controlling budget deficits and inflation were
the biggest hurdles Poland faced before euro adoption.
Once inside ERM-2, a precursor to euro adoption, a candidate
country must keep its currency within a trading band of +/- 15
percent around a central parity rate, usually for two years,
something which has proved difficult in swinging markets.
"ERM-2 and euro membership will be difficult and more
protracted than the market currently expects," said Nigel
Rendell at RBC in London.
The poll found it would be 2013 before Estonia adopted the
euro and a year later for the Czech Republic, Hungary, Latvia
and Lithuania. Bulgaria and Romania are not expected to ditch
their currencies until 2015.
These are all unchanged from the April poll.
BALTIC BLUES
As the financial turmoil has battered global markets some
policymakers see euro adoption as offering a safer haven than
individual widely fluctuating currencies. But others, like the
Czechs, suggest flexible currencies create a buffer against
economic adjustments from outside and can help buoy growth.
With the crisis shifting the main challenge of convergence
from inflation to budget deficits that have spiked over the past
year, governments will be forced to make spending cuts starting
in around 2011 to meet the Maastricht criteria.
But because convergence for some countries is not seen until
the middle of next decade, countries like Hungary, Bulgaria, and
the Czech Republic may witness two election cycles, opening
potential room for further delays if political elites can not
muster the political will needed to meet the criteria.
Analysts said other risks included uncertainty over the
eventual length of the financial crisis, currency volatility,
and a perception of euro zone enlargement fatigue in the West.
Lithuania had been due to adopt the common currency back in
2007 but was forced to abandon its entry due to high inflation
and analysts said this was one of the major hurdles still facing
the country and was also an issue faced by Bulgaria and Romania.
Latvia, which like Lithuania could see its economy shrink by
almost a fifth this year, has already made savage public sector
pay and benefits cuts.
But it still needs to cut around another $530 million from
its budget next year under an IMF agreement under which it will
try to cut its budget deficit to 8.5 percent of GDP, from an
estimated 10 percent this year.
Romania said on Tuesday it would curb spending by 5.5
billion lei ($1.8 billion) this year to meet its new budget
deficit goal agreed with the IMF, leaving it at 7.3 percent of
GDP, still way above the entry criteria level.
Meanwhile, enlargement fatigue among some EU members has
delayed expected dates for some prospective members.
While Croatia was seen joining the EU in 2012 the poll found
it would be 2016 before Macedonia, Montenegro and Serbia gained
entry, with Bosnia joining in 2019 and Albania in 2020.
Turkey was not seen joining the club until 2020 -- but even
that is in doubt.
"The accession of Turkey is rather uncertain, even in the
long run," said Attila Bartha at Kopint-Tarki in Budapest.
Turkey began membership talks in 2005 but negotiations have
stalled amid disputes over penal reforms, human rights and the
division of Cyprus.
(For poll data click on <EMUPOLL30>)
(Additional reporting by Mike Winfrey in Prague, polling by
Bangalore Polling Unit; Editing by Andy Bruce)
