Five years to euro

New EU members from Central and Eastern Europe generated steady economic growth in the last quarter of 2005 despite a slow pace of reforms and high oil prices, according to the World Bank's EU8 Quarterly Economic Review.

"Growth remains buoyant in the EU8 despite high oil prices, slow recovery in Western Europe, and domestic political uncertainty related to elections. However, slow progress in fiscal consolidation in the Visegrad countries and inflation pressures in the Baltics create uncertainty about euro adoption prospects," stated Thomas Laursen, a World Bank lead economist and main author of the report.

According to the World Bank, Poland, the Czech Republic and Hungary are unlikely to join the euro before 2010, while Slovakia might be set to adopt the single currency in 2009 and Slovenia in 2007. Estonia, Lithuania and Latvia, which aim to take up the euro either in 2007 or 2008, may miss their targets, because of problems with controlling inflation.

The policies supporting the competitiveness of EU8 countries as well as their opening to new FDI inflows will play a key role in sustaining rapid productivity growth, says the report. Measures to enhance the amount and quality of domestic R&D will also be important.

"Medium-term growth prospects in the region are good on the back of strong productivity growth, but higher employment rates and, in some countries, investment rates will be needed to underpin rapid convergence. 2006 will provide the best possible conditions for advancing the outstanding reform agenda in this regard," predicts Laursen.

According to research by the National Bank of Poland supplementing the World Bank report, Polish entrepreneurs assess the current situation positively, and expect further improvement. (Reuters)