Region's minnows lead the way
A recent Reuters poll shows that Slovenia, Lithuania and Estonia are well on track to adopt the euro in two years' time, but the bigger economies of Poland, Hungary and the Czech Republic are unlikely to be ready before 2010.
The CEE region's invasion of the eurozone will probably happen in four waves between 2007 and 2010, according to median forecasts in the survey of 40 emerging market strategists. Before being allowed to adopt the euro, the 10 countries that entered the EU last May must spend at least two years in the ERM-2 exchange mechanism, which restricts their currencies' movements against the euro.
In mid-2004 Estonia, Lithuania and Slovenia became the first new EU members to enter the ERM-2 and are also expected to be the first adopt the euro - in 2007. Some analysts even thought they could join as soon as next year.
Latvia, Cyprus and Malta joined the ERM-2 last month and were forecast to swap their currencies for the euro in 2008.
However, the bigger countries have found it hard to shed the economic pounds, and keeping their budget deficits within the strict eurozone criteria has proved difficult. The survey showed the Czech Republic, Hungary and Poland joining the ERM-2 only in 2008, and adopting the euro in 2010.
Slovakia was judged to be a bit better prepared, with strategists saying it could start using the single currency in 2009.
"Among the CEE [central and eastern European] countries, Slovakia looks very ambitious in terms of the criteria and also could benefit a lot from early adoption [of the euro]," said Viktor Kotlan at Ceska Sporitelna in Prague.
The median forecasts for when the new EU members will adopt the euro were unchanged from the last Reuters poll in February and strategists said the process would not be delayed if France rejects the EU constitution in a May 29 referendum.
The złoty was seen as entering ERM-2 at zł.4.10 per euro and the Czech crown at CZK30.00 per euro, both little different from current levels. Hungary looks likely to be last in the current crop of euro hopefuls, and may be left behind by Poland and the Czech Republic as its leftist government is reluctant to make serious spending cuts ahead of next year's elections.
"There are serious doubts about [Hungary's] ability and desire to curb fiscal outlays in order to meet the Maastricht budget deficit criterion. There is an almost equal chance their EMU entry will be delayed to 2011," said Roger Monson at CA-IB International Markets in London.
On the positive side, Hungary, among others, may find it easier to meet the eurozone's budget deficit ceiling of three percent after the EU Stability and Growth Pact was revised in March. It now gives countries a five-year grace period to absorb the costs of pension reform. This meant that 11 of the 32 analysts positively revised their predictions for Poland, Slovakia and Hungary's euro debut.
Others said that although they had not changed their forecasts, the revisions to the pact made it more likely that countries like Hungary and Poland would indeed adopt the euro on schedule.
The CEE region's invasion of the eurozone will probably happen in four waves between 2007 and 2010, according to median forecasts in the survey of 40 emerging market strategists. Before being allowed to adopt the euro, the 10 countries that entered the EU last May must spend at least two years in the ERM-2 exchange mechanism, which restricts their currencies' movements against the euro.
In mid-2004 Estonia, Lithuania and Slovenia became the first new EU members to enter the ERM-2 and are also expected to be the first adopt the euro - in 2007. Some analysts even thought they could join as soon as next year.
Latvia, Cyprus and Malta joined the ERM-2 last month and were forecast to swap their currencies for the euro in 2008.
However, the bigger countries have found it hard to shed the economic pounds, and keeping their budget deficits within the strict eurozone criteria has proved difficult. The survey showed the Czech Republic, Hungary and Poland joining the ERM-2 only in 2008, and adopting the euro in 2010.
Slovakia was judged to be a bit better prepared, with strategists saying it could start using the single currency in 2009.
"Among the CEE [central and eastern European] countries, Slovakia looks very ambitious in terms of the criteria and also could benefit a lot from early adoption [of the euro]," said Viktor Kotlan at Ceska Sporitelna in Prague.
The median forecasts for when the new EU members will adopt the euro were unchanged from the last Reuters poll in February and strategists said the process would not be delayed if France rejects the EU constitution in a May 29 referendum.
The złoty was seen as entering ERM-2 at zł.4.10 per euro and the Czech crown at CZK30.00 per euro, both little different from current levels. Hungary looks likely to be last in the current crop of euro hopefuls, and may be left behind by Poland and the Czech Republic as its leftist government is reluctant to make serious spending cuts ahead of next year's elections.
"There are serious doubts about [Hungary's] ability and desire to curb fiscal outlays in order to meet the Maastricht budget deficit criterion. There is an almost equal chance their EMU entry will be delayed to 2011," said Roger Monson at CA-IB International Markets in London.
On the positive side, Hungary, among others, may find it easier to meet the eurozone's budget deficit ceiling of three percent after the EU Stability and Growth Pact was revised in March. It now gives countries a five-year grace period to absorb the costs of pension reform. This meant that 11 of the 32 analysts positively revised their predictions for Poland, Slovakia and Hungary's euro debut.
Others said that although they had not changed their forecasts, the revisions to the pact made it more likely that countries like Hungary and Poland would indeed adopt the euro on schedule.
