Euro hopefuls ‘must do more’

By Leen Van Parys

MORE work is needed, was the verdict of both the European Commission and the European Central Bank (ECB) when they published reports on Wednesday (20 October) assessing the progress of the EU's new member states towards joining the euro.

The first wave is only expected to join the eurozone in 2007 or 2008 at the earliest. European Central Bank President Jean-Claude Trichet, said: “There is no pre-set timetable for the enlargement of the euro area,” adding that the new EU states had to achieve “a high degree of sustainable economic and legal convergence”.

The European Monetary Affairs Commissioner Joaquín Almunia said: “The road to euro membership requires further efforts.”

Theoretically, the first countries can only join after June 2006, once they have participated in the exchange rate mechanism of the European monetary system for at least two years. So far, only Estonia, Lithuania and Slovenia have joined ERM II and linked their national currency to the euro.

None of the countries meets the criteria of legal compatibility, requiring full independence of national central banks and their full integration into the European system of central banks. Although all countries have advanced in adapting their statutes, most of them still have legal provisions thwarting full bank independence, the ECB said.

Four new member states - the Czech Republic, Estonia, Cyprus and Lithuania - have inflation rates below the reference value of 2.4% in August 2004. The three Baltic States and Slovenia meet the criterion on the government budgetary position: not exceeding a government deficit rate of 3% of gross domestic product (GDP) and a government debt level of below 60% of GDP.

Lithuania proved to be the best performer, meeting three of the five criteria. Poland and Hungary are not yet meeting any of them. “The adoption of the euro is not the central issue for Hungary,” said Hungarian Finance Minister Tibor Draskovics.

Poland's Finance Minister Miroslaw Gronicki said that was it was “realistic” to fulfil the criteria by the end of 2007. Poland's parliament will send Brussels a revised version of its convergence road-map, detailing how it will meet the fiscal and public debt criteria.

• Leen Van Parys is a freelance journalist based in Brussels.

The European Commission and the European Central Bank published reports assessing the progress of the EU's new Member States towards joining the euro, 20 October 2004. The reports came to the conclusion that at that time no further Member State was prepared to join the Eurozone before 2007 or 2008 at the earliest.