Single currency on the back burner

Poland and Hungary have not scored well in a recent market survey on different EU countries' suitability to enter the eurozone.

A Reuters quarterly poll on the opinions of 35 emerging-market strategists shows that they believe other recent EU entrants are on track to adopt the euro as planned, but that Poland and Hungary will not fulfill the convergence criteria on time and will have to wait until 2012 before being allowed to enter the eurozone.

The survey found that the Czech Republic and Slovakia remain unchanged from the last poll  with the Czech Republic predicted to join the eurozone in 2010 and Slovakia a year earlier. However, the Czech's entry is by no means assured as it has failed to curb its budget deficit in line with eurozone regulations. According to Cristina Casalinho at Banco BPI in Lisbon: "[Poland, Hungary and the Czech Republic] are now more willing to endorse social policies, tax cuts - in the case of Czech Republic - or to put the emphasis on big public investments than to go for structural reforms."

Poland had signed up to join the eurozone in 2010 but its recent change in government has thrown that timetable into disarray. The new government has dropped the target date and has so far failed to set a new one.

"The new government are clearly less enthusiastic over the EMU project," said Tim Ash at Bear Stearns. "Their priority appears to be growth rather than deflation. We think that this will mean an even longer delay before joining EMU."

Out of the 32 strategists that took part in the survey, 18 said that they had changed their opinions on when Central and Eastern European countries would join the eurozone upon the change in government in Poland. A further 11 said they had not changed their prognosis but saw a risk of delay. The remainder had either not changed their opinions or had done so before the elections.

Jeff Gable at Barclays Capital in London said: "The [new Polish] government has made it clear that euro entry this [parliamentary] term is not a priority. Without a strong political push to meaningful fiscal reform ... 2013 becomes the default, as compared with 2009 before September." (Reuters)