World Bank warning
In a report issued last Thursday, the World Bank predicted that despite the positive effects of relaxing the EU's Growth and Stability Pact, growth across the eight new central European members of the EU will cool significantly.
"The slowdown is projected to be most pronounced in Latvia, Poland, Slovakia and Slovenia, where it could amount to one percentage point relative to 2004," the bank's quarterly report on the region said.
The report noted that the political situation in some of the countries was already dampening reform efforts, with several countries in the region facing early elections and government shake-ups this year or next.
"Government reshuffles and/or prospective early elections in the Czech Republic, Poland and Estonia, as well as regular elections in several other countries looming on the horizon, generally slowed reform momentum across the region," it said.
The report praised the four central European countries known as the Visegrád group (the Czech Republic, Hungary, Poland and Slovakia) for getting EU-related inflation shocks under control.
The report also agreed with earlier assessments that the loosening of the Growth and Stability Pact would allow the four newcomers to meet budget criteria for euro adoption by 2007, and join the eurozone in 2009.
"With the revised Stability and Growth Pact, including the decision to accept pension reform costs ... all Visegrád countries will comply with the key three percent of GDP fiscal deficit criterion for euro adoption by 2007," the report said. However, it warned that the five-year grace period granted to these countries to absorb the costs of pension reform could dent the euro candidates' appetite for fiscal responsibility.
"The revision of the Stability and Growth Pact risks undermining fiscal discipline also in the new member countries," the bank said in its report. (Reuters)
"The slowdown is projected to be most pronounced in Latvia, Poland, Slovakia and Slovenia, where it could amount to one percentage point relative to 2004," the bank's quarterly report on the region said.
The report noted that the political situation in some of the countries was already dampening reform efforts, with several countries in the region facing early elections and government shake-ups this year or next.
"Government reshuffles and/or prospective early elections in the Czech Republic, Poland and Estonia, as well as regular elections in several other countries looming on the horizon, generally slowed reform momentum across the region," it said.
The report praised the four central European countries known as the Visegrád group (the Czech Republic, Hungary, Poland and Slovakia) for getting EU-related inflation shocks under control.
The report also agreed with earlier assessments that the loosening of the Growth and Stability Pact would allow the four newcomers to meet budget criteria for euro adoption by 2007, and join the eurozone in 2009.
"With the revised Stability and Growth Pact, including the decision to accept pension reform costs ... all Visegrád countries will comply with the key three percent of GDP fiscal deficit criterion for euro adoption by 2007," the report said. However, it warned that the five-year grace period granted to these countries to absorb the costs of pension reform could dent the euro candidates' appetite for fiscal responsibility.
"The revision of the Stability and Growth Pact risks undermining fiscal discipline also in the new member countries," the bank said in its report. (Reuters)
