EU says will be strict about euro entry criteria

All of the EU's 10 new member states, mostly from central and eastern Europe, plan to adopt the single currency by 2010. But many of them still do not mmet the bloc's entry conditions regarding inflation rates or budget deficit levels.

"The Commission intends to make proposals on new euro entries only if the economic convergence criteria are strictly adhered to," Almunia said in a prepared speech.

The criteria are that inflation in the euro zone candidate country cannot be higher than 1.5 percentage points above the average of the best three euro zone members and the budget deficit cannot exceed 3 percent of gross domestic product.

The level of public debt cannot be higher than 60 percent of GDP and the candidate country's currency should remain within a +/-15 percent band around a parity rate for 2 years before entry to show currency stability in the Exchange Rate Mechanism 2.

Yields of long-term bonds issued by the euro zone candidate may not exceed 2 percentage points above the average of the three best performing zone members in terms of price stability.

For a factbox on the critera double click on [ID:nL29634722]

Strong economic growth and rising oil prices are making it difficult to meet the inflation criterion for the Baltic countries, and Malta and Cyprus exceed the public debt criterion.

The largest new EU member states -- Poland, Hungary, the Czech Republic and Slovakia have budget deficits that are too large and, unlike the other countries, have not yet joined the ERM 2 -- the "antechamber" to the euro.

The Commission has already told Lithuania not to count on leniency regarding inflation after Vilnius said it might ask the EU to ease the rules because of the impact of oil prices.

Source: Reuters