VILNIUS - The prospects of any Baltic country adopting the euro next year look increasingly bleak as new inflationary data is released and EU leaders send out negative signals.
Last week, Karl-Heinz Grasser, the Austrian finance minister, told the European Parliament that the chances for Estonia and Lithuania, the two likeliest candidates for early eurozone membership, were "bad."
"Regarding Estonia and Lithuania, as the figures stand, things look bad," he was quoted as saying.
Annual inflation in Estonia last year amounted to 4.1 percent, while in Lithuania, which in recent years has had the best performance in terms of consumer price index, last year's rise in prices was 3 percent.
The average rate of inflation in the European Union was 2.2 percent.
Latvia has the highest inflation in the Baltics and the EU 's over 7 percent 's and it is unclear when the country will be able to adopt the euro.
According to Maastricht, in the 12 months prior to an official assessment, the average annual inflation of euro-candidate countries must not exceed the average of inflation in the three EU member states with the lowest annual inflation by more than 1.5 percentage points.
The Baltic states are due to receive an assessment sometime in spring-summer this year.
Grasser's is the latest in a chorus of voices warning that no Baltic state is prepared to take up the common currency. Monetary Affairs Commissioner Joaquin Almunia said earlier this month that, according to existing data, the prospects for Estonia and Lithuania did not warrant optimism.
Wolfgang Munchau, a columnist for The Financial Times, argued this week that neither Lithuania nor Estonia should join the eurozone since the countries are too poor.
Pointing out that the two countries may not see the euro in 2007 due to high inflation rates, Munchau argued that growth in consumer prices was a "one-time" technicality and that the real reason the Baltic states shouldn't be allowed to join the zone is simply because they are still too underdeveloped in terms of productivity and wages.
"There exist some perfectly sound economic reasons to dissuade Lithuania and Estonia from entering the euro at this point 's but not this [inflation]," wrote Munchau in his column, which was titled "Monetary union is not for the poor."
"The decision on whether EU countries are allowed to participate in the euro rest on nominal criteria, laid out in the Maastricht treaty of 1993. They were never appropriate then, much less so now. The five criteria relate to inflation, short-term interest rates, public sector deficits, net debts and exchange-rate stability. The reason why they were never an ideal set of membership criteria is because they exclude the so-called 'real' economy 's productivity, jobs and wages," the columnist argued.
"That is a point that neither the European Commission nor the European Central Bank will make in their official reports. In their further economic development, these countries may still require exchange rate flexibility at some point. Meanwhile, the reason why Slovenia is probably ready to join the eurozone next year is precisely because it is much wealthier," Munchau wrote.
The columnist closed out his article by saying that as a result of high rates of productivity growth in Eastern Europe, real economic convergence between older and newer member states is a matter of time. This, he said, would not keep the Lithuanians and Estonians out of the eurozone indefinitely but would delay their membership for several years.
Nevertheless, Baltic leadership seems to be turning a deaf ear to the signals from Brussels. Lithuanian Parliamentary Speaker Arturas Paulauskas said the country should not digest Austria's doubts about Lithuania's accession to the eurozone on Jan. 1, 2007.
"One should heed such remarks and regulate where the government has influence on price processes," he told reporters Jan. 25 in response to Grasser's comments.
Latvian Prime Minister Aigars Kalvitis said the country was planning to introduce the currency in 2008. He told the daily Telegraf that he disagreed with the opinion that Latvia wouldn't be ready for the euro before 2010.
