Will They, Won’t They?

While Latvia is still arguing with the EU Commission over the spelling of eiro (or is it euro), the FT today asks the much more pertinent question: will the other baltic states even be able to join? On the backs of the energy hike Estonia and Lithuania are struggling to comply with the entry conditions, especially those on inflation. Slovenia is, however, expected to join on target on 1 January 2007.

Estonia, Lithuania and Slovenia set themselves the target of being in the first wave of new euro members next January and of complying with most of the rules, including public debt levels, interest rates and budget deficits.

Estonia, however, is struggling to meet the inflation criterion, which is likely to be set at about 3 per cent this year, 1.5 per cent above the average inflation rates of the three countries with the lowest inflation….. Like in other former Soviet-bloc countries, energy has a bigger weighting in Estonia’s consumer price index because the country uses power less efficiently than the EU’s older members.

“We feel that it’s a shame that just when we need to qualify for euro entry, the world oil prices go up,” said Kylike Sillaste, adviser to the prime minister….

Joaquin Almunia, the EU’s monetary affairs commissioner, has said he will apply strictly the entry standards for the candidate countries, although the ultimate decision on enlarging the eurozone lies with member states.

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About Edward Hugh

Edward 'the bonobo is a Catalan economist of British extraction. After being born, brought-up and educated in the United Kingdom, Edward subsequently settled in Barcelona where he has now lived for over 15 years. As a consequence Edward considers himself to be "Catalan by adoption". He has also to some extent been "adopted by Catalonia", since throughout the current economic crisis he has been a constant voice on TV, radio and in the press arguing in favor of the need for some kind of internal devaluation if Spain wants to stay inside the Euro. By inclination he is a macro economist, but his obsession with trying to understand the economic impact of demographic changes has often taken him far from home, off and away from the more tranquil and placid pastures of the dismal science, into the bracken and thicket of demography, anthropology, biology, sociology and systems theory. All of which has lead him to ask himself whether Thomas Wolfe was not in fact right when he asserted that the fact of the matter is "you can never go home again".