New EU member states wishing to adopt the euro must stick to the entry criteria and make sure they are in a good position by the date of their entry, the Austrian EU Presidency has warned, echoing a similar statement by the European Commission last week.

Addressing the economic and monetary affairs committee of the European Parliament, Austria's Finance Minister Karl-Heinz Grasser made it clear that the criteria imposed for eurozone accession will be strictly adhered to.

He also expressed doubts about whether Estonia and Lithuania will be able to join the eurozone next January.

These two countries, along with Slovenia, are preparing to become the first of the new member states to adopt the euro. However, it seems their prospects are dimming as they may not be able to conform to the strict criteria.

Mr Grasser told MEPs that it looked like only Slovenia was on track to join the single currency. "Regarding Estonia and Lithuania, as the figures stand, things look bad."

Estonia's current account deficit at the moment stands at about 10 per cent of its GDP, much higher than the three per cent permitted for eurozone entrants. Lithuania also has similar problems while its inflation rate is soaring.

Malta is planning to be able to adopt the euro in January 2008 but inflation may turn out to be a big stumbling block.

According to eurozone rules, a member state must not have an inflation rate higher than 1.5 per cent above the best three performing countries in the eurozone. Last year, Malta's inflation rate was 2.5 per cent. The average rate of the best three performing countries in the eurozone then were Finland, Austria and France at 1.5 per cent.

Sources close to the European Council yesterday told The Times that if Malta wants to become a member of the eurozone in 2008, it has to carefully watch its inflation rate, considered to be the biggest stumbling block on its euro entry course.

"Until now Malta is still within the inflation criteria, however there has been an increase and Malta must look into this seriously. The decision will be taken in April-May 2007 and Malta's inflation level will be seen at that stage."

According to recent statistics published by Eurostat, Malta's inflation rate in the last three months of the year stood at three, 4.3 and 3.4 per cent respectively, showing clear signs that inflation is rising steadily.

The Council sources said that on other main entry criteria, such as deficit control, lower debt levels and low interest rates, Malta is still considered to be on track.

Meanwhile, the German Central Bank, the Bundesbank, warned in a statement against speeding up the expansion of the eurozone.

Without mentioning who of the new member states is prepared to join the eurozone, the Bundesbank warned that rushing eurozone entry would make harder the task of setting an appropriate exchange rate.

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