Merkel wants Czechs and Poles to join the euro: report

PRAGUE Sat Dec 11, 2010 9:31am EST

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PRAGUE (Reuters) - German Chancellor Angela Merkel told Czech and Polish prime ministers that she would welcome their countries into the eurozone, daily Lidove Noviny reported on Saturday, citing unnamed sources.

By inviting the two central European countries, Merkel wants to boost the position of fiscally disciplined and economically strong countries within the bloc, the paper said.

The paper said Germany's stance on how to heal the bloc's debt crisis was supported only by the Netherlands, Austria, Finland and Slovakia.

This leaves it in a minority against France, Spain, Italy, Portugal, Belgium, Greece and Ireland who oppose sanctions for excessive debt and reject orderly bankruptcy.

Any new country that entered the bloc would also be obliged to contribute to its aid mechanism, booting its cash reserves, the paper said.

The paper said Merkel asked the Czech Prime Minister Petr Necas to enter the bloc during his official visit to Germany in September.

Before this, she had a meeting with Poland's Prime Minister Donald Tusk and also asked him to apply for the euro, the paper said, without indicating sources of the information.

In a separate interview for the same newspaper, Necas declined to confirm or deny whether Merkel told him she would welcome if Czechs joined the euro.

"I do not know why (I should) say more than what we had said at a press conference then," he said when asked the question.

The Czechs have been cautious about adopting the euro. They are reluctant to set a euro entry target date, saying the costs of switching to the single currency are too high.

At the moment, Czechs, like nearly all euro zone present members, do not meet the fiscal entry criterion, calling for the total fiscal gap below 3 percent of GDP.

The government plans to narrow the overall public sector deficit to 4.6 percent next year from this year's expected 5.1 percent and has a long-term plan of a balanced budget in 2016.

But Czech public debt, another entry criterion and the euro zone's periphery countries achilles heel, is at some 37 percent of output, comfortably below the bloc's-prescribed 60 percent threshold, and about a half of the EU 27 average.

Necas' cabinet had said it would not set any euro adoption date and in the Lidove Noviny interview Necas, who took office after a May general election, reiterated he saw no reason to apply for membership in the club.

Poland was the only country in the 27-strong EU to avoid recession during the peak of the global economic crisis.

(Reporting by Jana Mlcochova)

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