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UPDATE 1-Estonia should meet euro needs in 2-3 yrs - Juncker

Published 07/01/2009, 07:40 AM
Updated 07/01/2009, 07:48 AM
TGT
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(Updates with background, quotes)

By Michele Sinner

LUXEMBOURG, July 1 (Reuters) - Eurogroup chief Jean-Claude Juncker voiced doubt on Wednesday whether Estonia would reach its goal of joining the euro zone in 2011, saying the country was likely to meet the entry criteria in two to three years.

"I am hopeful, quite confident that the Estonian government will be in a situation to fulfil the euro accession criteria in two or three years," Juncker told reporters after talks with the Baltic country's prime minister, Andrus Ansip.

A country that meets the criteria on inflation, budget deficit, currency stability and others can in practice adopt the currency the following year or, more likely, two years later.

Estonia's central bank last month questioned the government's target date for euro entry, saying current spending cuts were insufficient to reduce the budget deficit quickly to below 3 percent of gross domestic product, one key criterion.

Like other Baltic republics that joined the European Union in 2004, Estonia faces a severe recession that is eroding government revenues, making it hard to control public finances.

Ansip insisted the 2011 goal remained realistic, saying Estonia would meet the criterion on having sufficiently low inflation this autumn.

The government would focus on fighting the budget deficit, he added.

"We prepared some negative supplementary budgets already and know we are on track. We hope to reach this deficit level criteria also and we can join the euro zone on January 1, 2011," he said.

He said Estonia did not back the calls of some politicians from central and eastern Europe for a relaxation of the euro adoption criteria.

"If you try to make the criteria more flexible that means the euro will not be such a strong currency any more," he said.

Juncker, who chairs meetings of finance ministers from the 16 countries using the euro, also reiterated that the currency area might see a modest recovery from recession next year.

"Over the course of 2010 we will see a modest recovery but the situation still remains very difficult," Juncker said. (Writing by Marcin Grajewski, editing by Dale Hudson)

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