EU entrants should join euro - report

EU newcomers should step up efforts to join the euro zone as their progress on cutting inflation and high budget deficits is patchy, the European Commission and the European Central Bank (ECB) said today.

In reports on the new entrants' fitness to adopt the euro, the European Union executive and the ECB confirmed Cyprus and Malta were ahead of the pack.

High budget gaps were a problem for countries including Hungary, Poland and the Czech Republic, the reports said.

The ECB said: "Compared with the situation described in the convergence report prepared in 2004, many of the countries under review have made progress with economic convergence, but in some countries there have also been setbacks . . . Further fiscal consolidation is required in most of the countries."

High price growth remains a major challenge for the small and fast-growing Baltic republics of Estonia and Latvia, and, to a lesser degree, for Malta and Slovakia, the reports said.

They did not forecast how quickly the countries might join the euro, but they suggested Cyprus and Malta could meet their goals of adopting the currency in 2008.

Hungary is the only euro candidate that meets none of the criteria. The country is undertaking an austerity programme after its budget deficit soared to the highest level in the 25-nation EU