Eastern Europe stumbling on market reforms, IMF says

Slowing market reforms and skepticism about adopting the euro pose „considerable dangers” for Eastern Europe's emerging economies, the International Monetary Fund said Wednesday.

While the Baltic nations and Slovakia are mostly well positioned to join the 13-nation European currency, other new European Union member countries must increase efforts to qualify, the International Monetary Fund said. „The recent slowing pace of reform among the new members since they entered the EU thus raises concern,” the Washington-based institution said in a semiannual report on the world economy.

It urged governments to ease labor-market rules and lower payroll taxes for social programs. Both contribute to high jobless rates, still above 10% in Poland and Slovakia, the IMF said. Another priority is to control government spending, the report said.

Doubts whether people can stomach painful economic adjustments needed „to live comfortably within a currency union” have surfaced particularly in Czech Republic, Hungary and Poland, the IMF economists noted. „While such misgivings are understandable ... considerable dangers would also arise from trying to make do with a slow track of sluggish reforms and hesitant steps toward currency union,” the report said. Even the Baltics and Slovakia may struggle to meet the inflation criteria for euro membership, the IMF said. Of the 10 ex-communist European nations that have joined the EU since 2004, only Slovenia has qualified for the euro. The former Yugoslav republic adopted the common currency on January 1.

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