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EU: At The Earliest Eastern Europe To Adopt Euro In 2008

  • Roland Eggleston

German banking experts are saying that none of the 10 Central and East European states that are candidates for membership in the European Union is likely to be able to introduce the common EU currency, the euro, before 2008. RFE/RL correspondent Roland Eggleston provides the details from Munich.

Munich, 29 December 2000 (RFE/RL) -- A report issued this week by the respected research department of the private Deutsche Bank warns that even the target date of 2008 should be understood as speculative. The report says that the prospective new Eastern EU members will have to overcome many hurdles to meet the conditions for introducing the euro.

A spokesman for German's federal bank, the Bundesbank, told our correspondent today that the national bank agreed with the prediction by the Deutsche Bank. But the spokesman emphasized that introduction of the euro currency will not affect EU membership. He pointed out that Britain, Denmark and Sweden have not adopted the euro, but are still full EU members.

The Bundesbank spokesman, who asked not to be identified, said: "There are extra conditions for introducing the EU currency, which several countries may find hard to meet. But this will not hinder their joining the European Union itself and enjoying the full benefits of membership."

The research department of the Deutsche Bank says its prediction that new members of the EU would have to wait until 2008 before joining the euro-zone was based on the membership schedule accepted earlier this month at the EU summit in Nice, France.

The summit agreed that negotiations with the leading candidates for membership can be concluded by the end of 2002 at the earliest. The present 15 EU member-states will then have to ratify the admission of the new members, which could take another 18 months. This would mean that first new Eastern members join the organization in the year 2004 or 2005.

Under the present EU schedule, they would then have to spend two years as members of the euro exchange rate mechanism before being allowed to join the bloc of countries using the euro. The EU insists on this two-year waiting period even though several candidate-states have said they are dissatisfied with it and want to join the euro immediately.

The Deutsche Bank says that at present none of the 12 active candidate countries -- including Cyprus and Malta -- meet the criteria for introducing the euro, but it believes current problems can be overcome. Cyprus had been widely considered to be the most advanced in its preparations for EU membership. But the Deutsche Bank notes that the island nation is now struggling with inflation and other problems. Cyprus' current inflation rate of more than 4 per cent exceeds the limits imposed on the 12 EU members -- including Greece, to join on January 1 -- which are now part of the euro-zone.

The Deutsche Bank report says that three Baltic candidate-states -- Estonia, Latvia and Lithuania -- currently come closer to meeting the euro criteria, thanks to tight monetary policies and rigid exchange rate systems. It finds that Slovenia's relatively high inflation rate and problems with the Czech budget can be resolved in the medium term. But, says the Deutsche Bank, Hungary, Poland, Slovakia and Romania are lagging behind because of inflation and other problems -- even though it expresses optimism that these, too, will be resolved in time.

The retiring president of Hungary's central bank, Gyorgy Suranyi, said a few days ago that Central and East European countries should not rush to join the euro because of the common currency's fixed exchange rates. In an interview with the daily "Frankfurter Allgemeine Zeitung," Suranyi argued that Eastern countries should try to retain exchange rates as a flexible monetary-policy instrument.

Suranyi is one of the few Central European bankers who supports the EU's two-year waiting period before joining the euro. He told the FAZ that he believed a too-rapid entry of new members into the euro-zone could lead to more inflation. He argued that for Hungary to give up its own currency and take on the euro immediately after it joins the EU would make sense only if all members of the euro-zone were prepared to accept higher inflation. That, he added, was not likely.