Eurozone Aspirations

"The nine countries assessed are making progress towards convergence, though at different paces," the European Union's executive arm concluded in a report.

The study reviewed progress in the Czech Republic, Estonia, Cyprus, Latvia, Hungary, Malta, Poland, Slovakia and Sweden on meeting the economic and legal criteria necessary to adopt the euro.

"Although the road to the euro is proving more difficult than some may have thought originally, the reward is well worth the effort," said Economic and Monetary Affairs Commissioner Joaquin Almunia.

The euro is the goal

With the exception of Britain and Denmark, which have special eurozone opt-outs, all EU countries are supposed to make the euro their official currency. Sweden, however, voted against adopting the euro is a 2003 referendum and has since not renewed efforts to implement the shared currency.

Slovenia is to test the eurozone waters at the beginning of 2007 by becoming the first to adopt the single currency of the 10 mostly ex-communist countries that joined the European Union in 2004.

Although none of the nine countries under review are reported to have met all of the criteria for joining, the two Mediterranean islands of Cyprus and Malta had a chance of doing so next year.

To be able to adopt the euro, candidates must hold inflation low, keep sound finances that meet EU limits, have a stable exchange rate and long-term interest rates as well as ensure their laws are in line with EU and European Central Bank (ECB) norms.

Tough challenges

However, the inflation and public finances criteria are probably the most difficult to meet for most countries, with Lithuania being refused earlier this year entry to the eurozone with Slovenia because its inflation was too high.

The commission found that the Czech Republic, Cyprus, Poland and Sweden were the only countries reviewed that met the inflation criteria while Estonia, Cyprus, Latvia and Sweden met the public finances, with Malta expected to do so next year.

Only Estonia met the exchange rate criteria although Malta and Cyprus were also expected to make the grade next year while all the countries under review, with the exception of Hungary, had long-term interests rates in line with the requirement.

On legal requirements, Estonia was the only country that had met EU and ECB norms although Cyprus and Malta were pushing through new laws that would help.

Lithuania was not included in the report because it was already reviewed earlier this year along with Slovenia.

Getting "euro" right

Europe's central bank also said on Tuesday that countries aspiring to join the eurozone should get the spelling of the currency right.

The ECB called it was unacceptable that Latvia refers to the "eiro" and that Hungary adds an acute accent to the "o."

"The euro is the single currency of the Member States that have adopted it," the ECB said. "To make this singleness apparent, (EU) law requires a single spelling of the word 'euro' in the nominative singular case in all Community and national legislative provisions."

If Hungary and Latvia do not step into line, they could be barred from joining the euro. But the two countries face bigger challenges meeting eurozone standards on inflation and government borrowing.

The ECB does allow Greece to refer to the euro in its own alphabet, even putting the four Greek letters on its banknotes.