May 6 (Reuters) - The European Commission will issue a
report on May 12 that analysts expect will approve Estonia's bid
to adopt the single currency in 2011.
But the crisis in the euro zone's periphery could delay the
entry of the rest of the European Union's newcomers into the
second half of the decade. Some politicians have raised doubts
over whether it makes sense to join the bloc quickly.
There is also increasing scrutiny among euro zone
politicians who, although expected to grudgingly let in Estonia
because it meets the euro's Maastricht treaty, are loathe to
admit another country capable of a Greece-style fiscal meltdown.
Following is a summary of where each country stands with its
euro adoption plans.
For ANALYSIS please double click on ....... []
For Reuters Poll........................... []
POLAND
Poland's centre-right government had to abandon its 2012
target date for euro adoption after the global financial crisis
hammered the economy and tax receipts and drove up its budget
deficit to more than twice the 3 percent of gross domestic
product ceiling allowed under the EU's Maastricht Treaty.
Warsaw has not set a new entry target date. Officials and
analysts say 2015 is now the earliest that Poland can hope to
swap zlotys for euros.
Poland's general government budget deficit is expected to
stand at 7.3 percent of GDP this year, according to the European
Commission, declining to 7 percent in 2011. Most analysts are
sceptical of government plans to reduce the deficit to below 3
percent by 2012.
Poland still meets the Maastricht public debt requirement of
below 60 percent of GDP, though it is slowly rising towards that
level due to slower growth and higher public spending.
Under Poland's own rules, breaching the 55 percent and 60
percent levels would trigger deep spending cuts that could hurt
the government ahead of 2011 national elections.
Inflation stood at 2.6 percent in March and is expected to
fall further in coming months.
Poland faces an additional challenge to its euro adoption
plans on the political front, with the main opposition Law and
Justice party opposing government efforts in parliament to make
a necessary amendment to the constitution.
CZECH REPUBLIC
The country holds a May 28-29 election to vote in a
successor to a caretaker cabinet that has led the country for
the past year.
The leftist Social Democrats, ahead in the polls but not
likely to win an outright majority, have said they plan to cut
the budget deficit to below the EU-prescribed 3 percent of
economic output by 2013 to be ready to adopt the currency by
2015-16. []
The main rightist party, the Civic Democrats, has refrained
from setting a firm date, but has said it wants the country to
be ready for membership by 2015. []
In February, the interim cabinet approved a plan that paved
the way for euro adoption by 2016 or 2017. []
Czech central bank Vice Governor Mojmir Hampl said this week
the willingness to accept new euro zone member states was
falling and an opinion poll showed 55 percent of Czechs were
against adopting the euro, versus 47 percent a year ago.
At present, a budget deficit forecast at 5.3 percent of GDP
this year remains the biggest economic obstacle to the Czechs'
joining the euro zone.
HUNGARY
Hungary wants to join the euro "as soon as possible" but it
meets none of the criteria due to years of lax fiscal policies
between 2002 and 2006 and a lack of sufficient reforms.
Before the financial crisis struck, markets put Hungary's
euro entry at 2013-2014 at the earliest; now it is seen in 2015
<HUEMUDATE1>.
Hungary has no official target date for euro adoption, but
the incoming centre-right government plans to set a target date
by the end of 2011. []
Overspending in the past decade forced the ruling Socialists
to abandon euro entry target dates. Thanks to fiscal measures
taken under an International Monetary Fund-led bailout by the
Socialist government, Hungary has kept its budget deficit in
check in the past years.
But the Fidesz party, which won elections in April, has said
the 2010 budget deficit could hit 7-8 percent of GDP, eclipsing
the 3.8 percent agreed with the IMF. [] It plans to
renegotiate commitments to the IMF to cut the deficit to 3
percent of GDP next year.
Viktor Orban, the next prime minister, has said that his
government would seek tax cuts to steer the economy back to
growth, and measures to reduce debt. []
ROMANIA
Romania targets 2014 as a deadline for admission to the euro
zone, which would allow the country to use the common currency
starting 2015. It plans to join the ERM-2 mechanism in 2012.
It is struggling to bring the budget deficit below the
ceiling of 3 percent by 2012 from over 7 percent last year and
is still fighting inflation, even though demand has fallen as a
result of the global financial crisis.
It has pledged to slash the deficit to 5.9 percent of GDP
this year as part of a 20 billion euro IMF-led bailout, but a
source said this week it could push that target higher.
Some analysts say the interest rate criteria would also be
difficult to achieve if inflation picks up when the economy
recovers. Most economists say the 2014/2015 entry target is
unrealistic.
BULGARIA
Bulgaria has no target date for euro zone entry but was
aiming to apply this year to enter the pre-euro ERM-2 waiting
room before revealing a hidden budget deficit in April, which
hit the credibility of the EU's poorest nation and revived
concerns about fiscal transparency in the region.
Since then the country's finance minister has insisted
Bulgaria is pushing ahead with efforts to join the euro and
could still apply to ERM-2 this year, though most economists say
this is not a realistic possibility.
Its lev currency is pegged to the euro.
BALTIC STATES
The former-Soviet republics of Latvia, Lithuania and Estonia
had to put off their original euro adoption goals of 2007 or
2008 after their economies overheated in the wake of EU entry
and inflation soared.
The plans were then further hit by the economic crisis,
which pushed up budget deficits and dragged them into deep
recessions.
Throughout the overheating and subsequent hard landing they
kept their currencies pegged to the euro. Estonia now hopes to
adopt the single currency in 2011 after it used financial
reserves built up during the booms years as a buffer, allowing
it to keep its public sector deficit under 3 percent of GDP.
Inflation is also looking tame. The other two Baltic states
are aiming for euro adoption in 2014, but this depends on
further cuts to spending and tax rises to reduce public sector
deficits.
Latvia, which had to resort to international aid to keep its
budget afloat, approved severe spending cuts in 2009 and 2010
equal to about 10 percent of GDP.
It will have to take more measures to reduce its public
sector deficit to 3 percent of GDP by 2012 ahead of hoped for
euro adoption in 2014.
(Reporting by CEE bureaus; compiled by Michael Winfrey)
