BRUSSELS/VILNIUS: Lithuania meets all the criteria for joining the euro, the European Commission said yesterday, clearing the way for the Baltic state to become the 19th member of the single currency from the start of next year.
To adopt the euro, a country has to have government debt no higher than 60 percent of gross domestic product, a budget deficit below three percent of GDP, low inflation and interest rates and its own currency has to be stable against the euro.
Of the 28 countries in the European Union, only Britain and Denmark do not have to strive to adopt the euro because they have negotiated formal opt-outs.
All the others are supposed to switch to the single currency at some point provided they meet the criteria. The Commission assesses such compliance every two years in what it calls a convergence report.
“The 2014 Convergence Report concludes that Lithuania meets the criteria for adopting the euro. As a consequence, the Commission is proposing that Lithuania adopt the euro on 1 January 2015,” the Commission said.
The European Central Bank, which must give its opinion on the readiness of a country to join, also said Vilnius was ready but warned about maintaining low inflation rates. “Maintaining low inflation rates on a sustainable basis in Lithuania will be challenging in the medium term, as it may be difficult to control domestic prices pressures and avoid economic overheating in an environment of fixed exchange rates,” the ECB said.
EU Economic and Monetary Affairs Commissioner Olli Rehn told a news conference that while the ECB and Commission reports differed in nuance the inflation outlook was not worrying.
He said the Commission expected inflation in Lithuania to accelerate to 1.1 percent this year and 1.8-1.9 percent in 2015 from a 12-month average of 0.6 percent measured to April 2014.
“The analysis of fundamentals ... clearly support a positive assessment of the price stability criterion,” Rehn said.
Reuters
