Brussels, 17/06/2014 (Agence Europe) - At their meeting in Luxembourg on Thursday 19 June, eurozone finance ministers are expected to endorse Lithuania's joining the euro on 1 January 2015.
A high-ranking European official said on Monday 16 June that there was “a high degree of consensus” among member states about Lithuania's joining the euro and the eurozone's endorsement would be automatically rubberstamped by the Ecofin Council on Friday, which would then send a letter to the European summit of 26 and 27 June explaining why Lithuania is ready to become the 19th member of the eurozone on 1 January.
The European Commission and European Central Bank have published reports stating that Lithuania meets the euro convergence requirements (see EUROPE 11094). Over the twelve months ending on 30 April 2014, average inflation in Lithuania was 0.6%, well below the reference value of 1.7%. The country's deficit stood at 2.1% in 2013 and is expected to remain unchanged in 2014. Vilnius' public debt is 39.4% of GDP, well below the 60% cut-off point. The Lithuanian currency, the litas, has hovered around the key exchange rate against the euro for the past two years in the exchange rate mechanism and average long-term Lithuanian bond rates have been 3.6% since April 2014 (well below the 6.2% reference value).
After the expected go-ahead from the European summit, the European Commission will publish the definitive exchange rate for the litas and the euro at the start of July.
The Eurogroup will discuss the economic situation in the eurozone during a debate on the IMF's latest report attended by IMF Director General Christine Lagarde. A high-ranking official said that the eurozone and IMF were on the same page about the need for varying intensity of growth-friendly budget consolidation.
Stability and growth pact. The ministers will also discuss stability and reform programmes in the eurozone nations based on the country-specific recommendations unveiled by the European Commission earlier this month (see EUROPE 11092) and implementation of structural adjustment programmes in countries in receipt of financial aid.
Portugal exited its aid programme last month and the official quoted above did not expect any great problems with the government waiting for the country's constitutional court rulings on a number of appeals against the budget before unveiling new measures to reduce public spending in 2014 (see EUROPE 11100) as long as it is no more than two or three months. Given the spate of court rulings against budget measures, the government is currently considering submitting budget plans to the court in advance to avoid future court cases.
The structural adjustment programme in Cyprus in return for financial aid remains on track and the Eurogroup is expected to endorse the results of the fourth monitoring mission, thus paving the way for the disbursement early next month of €600 million of aid.
Greece. The ministers will welcome the new Greek finance minister, Gikas Hardouvelis, who will unveil the Greek government's economic priorities, but will leave the meeting empty-handed because agreement is not expected on disbursement of the next batch of aid (of €1 billion). Six milestones have been attached as strings for disbursement and some measures expected last month have not yet been fully implemented. The above quoted official says that the milestones due for May would be achieved by the end of June and six other milestones, for which the deadline is 30 June, will need to be reached before a second aid instalment (of another €1 billion) is forthcoming: disbursement is “contingent upon the fulfilment of 12 milestones, that will determine the rhythm of disbursement”, and both instalments could be paid out in July. Troika experts are due to be in Athens next month.
The same high official said that the experts on the Euro Working Group quizzed their Greek counterpart about the sudden departure of secretary general for public revenue Haris Theoharis (see EUROPE 11101) and had stressed that the process to find a successor had to be open and transparent.
The question of easing the Greek debt burden will be discussed against the backdrop of the next troika mission.
ESM. The European stability mechanism will hold its AGM on Thursday. The Eurogroup agreement on guidelines for direct bank recapitalisation from the ESM makes no mention of retroactive measures to ease the debt burden of eurozone countries that had to bail out their banks before the eurozone bank supervisory system was set up. (MB and EL)