* Euro scepticism high after recent Greek developments
* Other states seen having to wait longer for euro entry
* Estonia seen getting positive euro evaluation on May 12
By Marius Zaharia
BUCHAREST, May 6 (Reuters) - The crisis raging in the euro
zone's fringe could delay European Union newcomers' entry into
the single currency for years, but is not likely to derail their
obligation to join.
Deadly riots in Greece, a spike in bond yields in southern
European states and arguments across the bloc over whether
budget offenders deserve aid has clouded preparations for
countries whose EU membership pacts require that they adopt the
euro.
One side is simple maths. Huge budget deficits and bigger
public debt piles accrued during the global recession mean most
candidates will not meet the Maastricht criteria for four or
five more years.
Of the eight candidates only Estonia is ready. Its 2011 euro
bid is expected to get a go-ahead from the EU executive on May
12. But other candidates are questioning whether locking
themselves into developed Europe's policy straightjacket,
surrendering their own interest rates and flexible currencies,
is a good idea for now.
On the other side, intensifying speculation over whether the
euro zone can itself hold together as its weakest members
struggle has fuelled resistance among policymakers to admitting
another country capable of a Greece-style fiscal meltdown.
"For obvious reasons the central authorities in Brussels and
Frankfurt will become less keen on further euro zone expansion,"
said Neil Shearing of Capital Economics in London.
"But there is also a reason to say if you were the Czech
Republic or Poland and you look at the recent events in Greece
you think you're probably going to be better off on your own."
A Reuters poll shows economists see most candidates -- the
Czech Republic, Poland, Hungary, Romania, Bulgaria and Latvia --
joining in 2015 at the earliest and Lithuania a year earlier.
[]
The results were little changed from the last poll, although
for the first time a handful of analysts pushed forecasts a long
way back for some countries, including predictions that Romania
and Bulgaria could join in 2018 or later and the Czechs in 2019.
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For a Factbox on euro entry, click: []
For a Reuters poll, click []
For graphic on EMU poll,
http://link.reuters.com/qan82k
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QUESTIONS
That outlook has been gaining ground among some policymakers
across the EU's former-communist East.
"I can guarantee you that the demand for new members in the
euro zone ... is falling," Czech central bank Vice Governor
Mojmir Hampl said last week.
"The discussion has three levels: firstly whether we should
enter; secondly whether we can enter, whether we are meeting the
Maastricht criteria; and thirdly whether anybody wants us."
Poland's government has also said it is impossible to see a
new euro entry target for the time being and that 2015 would be
the earliest possible date. On Thursday Central Bank Deputy
Governor Witold Kozinski attributed part of the delay to Greece.
"Certainly Poland's euro adoption will be delayed," he told
Polish television. "However, it will happen."
Hungary's Prime Minister-designate Viktor Orban has said the
country should not rush into setting a date.
Bulgaria suffered a blow to convergence hopes last month
after it said it had hidden the truth about the size of its 2009
budget deficit in Greek-style misreporting and scrapped plans to
apply to enter the pre-euro ERM-2 waiting room this year.
There is also the example of Slovakia. After it joined in
2009 businesses cheered that currency risk had been banished.
But when the crisis hit, its neighbours let their currencies
slide against the euro by 20-30 percent and some producers moved
to Hungary or Poland, favouring their cheaper labour costs.
Now Slovaks complain Prague and Budapest are cheaper in many
ways than Bratislava and ask why their country, with living
standards at 70 percent of Greece's, should send aid to Athens.
Another advantage of the euro, low borrowing costs, is no
longer a sure thing. On Thursday, Greece's 10-year bond yields
hit 9.235 percent; Portugal's were 5.592. That compared to 3.899
percent for the Czechs, and 5.81 percent for Poland.
Those levels also show investors have largely abandoned more
than a decade of trades based on the idea that non-euro EU
member bond yields would converge with the euro zone's because
most of that has happened. Now they mostly target assets
according to each country's economic fundamentals.
EYEING ESTONIA
All of the countries that joined the EU in 2004 and 2007 are
required to take on the euro, but no deadline is specified, and
doubts over the zone's future could, in an extreme scenario,
lead to some countries delaying adoption indefinitely.
That could potentially lead to a Sweden- or Denmark-like
situation. They are not obliged to adopt the euro and
policymakers have put any plan of doing so on hold, at least
until they see a reason for it and public support rises.
Analysts said the European Commission's Estonia report could
show a shift on willingness to accept new members, and European
Monetary Affairs Commissioner Olli Rehn said on Wednesday
Tallinn's bid was "certainly not a done deal yet".
A final green light, if it comes, is expected on July 13.
"We think that they will accept them, but they will give
some signal, a kind of a change will occur," said Barclays
Capital's Daniel Hewitt.
Besides winning back confidence from euro zone politicians,
the main challenge is cutting budget deficits that, in the cases
of Poland, Romania and the Czech Republic, are around twice the
required level of 3 percent of GDP.
Debt levels among candidates are far lower than in euro
members Greece or Italy, but a weak growth outlook in the next
few years may complicate efforts in some countries to adhere to
the euro zone's 60 percent of gross domestic product ceiling.
Elisabeth Gruie, an economist at BNP Paribas, is not waiting
for the Estonia report and says the euro zone will shut its
doors to the larger aspirants for a while after Estonia gets in.
"With problems afflicting the euro zone policymakers will
certainly move to a zero-tolerance attitude," she said.
"We saw all countries joining around 2015. This is not
possible any longer. It is not going to happen."
(Additional reporting by Jana Mlcochova; Editing by Michael
Winfrey)
