EU commissioner advises introducing euro 'when ready'

  • 2006-10-04
  • By Arturas Racas
VILNIUS - Lithuania, alongside other new European Member countries hoping to switch to the euro, should not expect the EU to change its euro adoption criteria, said Joaqin Almunia, the European Commission member responsible for economic and monetary affairs.

"Compliance with euro adoption criteria is clearly in the interest of both prospective and existing members of the euro area," Almunia announced at the conference "Lithuania and the Euro" held in Vilnius on Oct. 2.
"Do not expect changes. The interpretation of the criteria will continue to be the same," he added.
In May, the European Commission released a report saying that Lithuania had missed its inflation target by a tenth of a percentage point, thereby squashing the Baltic state's hopes to join in 2007.

The less optimistic Latvia and Estonia, which joined the EU with Lithuania in 2004, had already postponed euro adoption until after 2007.
Lithuanian politicians decried the commission's decision, calling for more flexibility in evaluating new EU members. But their cries have gone mostly unheard.

"Our experience since 1999 shows that countries having joined the euro with, for instance, a higher inflation than the others, lose competitiveness year after year. The conclusion is obvious: for your own sake, join when you are ready, not before," Almunia stressed.
Yet his message also had a silver lining.

The EC member added that postponement was only a temporary setback, and expressed confidence that euro zone enlargement would continue despite tough criteria for entry. According to Almunia, two new EU members could join the euro zone now, another two in 2009 or 2010.

"Once you are in, there is no way out. The euro is like an old Catholic wedding: like it or not, happy or not, you are married for ever," the EU Commissioner said.
Lithuanian Finance Minister Zigmantas Balcytis, for one, seems to agree with Almunia.
Although the government planned to announce a new target date for euro adoption in September, Balcytis recently said that a concrete date would not be settled on until later.

"We now think the most favorable date for joining the euro zone is a period starting from 2010," Balcytis said.
He also noted that Lithuania would strive to ensure the long-term sustainability of public finances and welfare of the population during its euro-entry preparation period.
Almunia refused to comment on a possible target date for Lithuania, but outlined the four key issues to be addressed by the government on its road toward euro zone entry: containing inflationary pressure, maintaining fiscal discipline, monitoring of an increasing external deficit and ensuring financial stability.

The EC member suggested that Lithuania adjust its minimum wage so that it falls in line with labor productivity. But economists say this may not be enough.
"Taking into account Lithuania's growth of gas prices, and the likely growth of energy prices after the closure of the Ignalina nuclear power plant in 2009, it is quite possible that Lithuania will not meet inflation criteria in 2010 and euro entry will be postponed for another few years," Gitanas Nauseda, chief economist at Lithuania's largest commercial bank SEB Vilniaus Bankas, warned.