In 2004, ten Eastern European states joined the European Union at once: Cyprus, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovakia, and Slovenia. All of them expressed a desire to join the eurozone as well, and Slovenia and Lithuania even submitted applications. However, as Gazeta.Ru notes, switching from a national currency to the euro is not so simple. According to the 1991 Maastricht Treaty on the Establishment of the European Union, candidates must meet a number of requirements, including those regarding the size of the trade deficit, government debt, interest rates, and the stability of the national currency. There are also restrictions on inflation. As a benchmark, the average inflation rate in the three EU countries with the lowest inflationary growth is calculated. Accordingly, inflation in applicant countries must be within 1.5 percentage points of this indicator. At the beginning of the year, the maximum inflation level for candidate countries was 2.6%, so only Slovenia fit into the required 'corridor', where price growth was only 2.4%. In Lithuania, according to Eurostat, inflation at the beginning of the year reached 3.4%, which was 0.1-0.2 percentage points above the required norms.
At a meeting of the European Commission in Strasbourg, euro officials chose to follow formal criteria – they approved eurozone membership only for Slovenia. Now the European Parliament and EU countries, which will set the exchange rate, must consider the recommendation to 'accept'. Under favorable circumstances, EU finance ministers could determine the ratio between the euro and the Slovenian tolar as early as July 11, 2006.
The Central Bank of Slovenia, for its part, will have to distribute 155 million euro coins and 42 million euro banknotes across the country by January 1, 2007.
"Slovenia meets all the criteria for entering the EU; this is primarily the merit of a policy oriented towards stability, as well as the reforms that have been carried out. This determined the commission's decision to propose introducing the euro in Slovenia from January 1, 2007," said Joaquín Almunia, a member of the EU Commission for Economic and Monetary Affairs. "This is a matter of prestige." "I am proud that Slovenia will become the first country (among the new EU members) to switch to the euro," says Franjo Bobinac, head of Slovenia's largest company, Gorenje.
The government, for its part, hopes that the introduction of the euro will spur the development of the tourism business and increase the influx of foreign investors.
Lithuania, which had also applied to join the eurozone from January 1, 2007, was refused admission by the European Commission, even despite the fact that the country meets the remaining four economic criteria. But Lithuania is not giving up. "I am confident that, despite today's decision by the European Commission, we must continue to seek a comprehensive and equal assessment of the country, taking into account Lithuania's rapid economic progress," Lithuanian President Valdas Adamkus said following the meeting in Brussels. He also called on the government and other authorities to 'self-critically' assess whether everything had really been done for the transition to the euro from next year. The government should pursue a strict budgetary policy and not succumb to the temptation to take short-term measures that would increase the state's debts, he noted.
The government, nevertheless, believes that Lithuania was refused admission for political reasons. Prices in Lithuania were rising too fast and exceeded the maximum level by 0.1%. "We can say that we did everything possible to achieve eurozone membership at the beginning of 2007," Lithuanian Finance Minister Zigmantas Balčytis said in response to Adamkus's call. Moreover, "our economy shows the best results in the EU. The problems with Lithuania's entry into the eurozone can only be explained by the EU's reluctance to expand the eurozone," the minister adds.