Economics, EU – Baltic States, Financial Services

The paper cited the report as saying the 16-member euro zone could relax entry rules so the states could join as quasi-members without European Central Bank seats, the FT said.

But the European Commission, which recommends if a country can join the euro zone, said the report appeared to be only an internal paper, while ECB member Ewald Nowotny said unilateral adoption was legally impossible and would hurt the euro zone.

"This is not realistic. The membership for the European monetary union has very clear rules and these rules have to be followed," Nowotny told Reuters in an interview.

"From an economic point of view, it would not be a good signal (for) the confidence ... towards the euro."

The paper said the report had been prepared to support an unsuccessful push by the IMF, the World Bank and the European Bank for Reconstruction and Development to support a region-wide anti-crisis strategy for the European Union and Eastern Europe, writes LETA.

"For countries in the EU, euroisation offers the largest benefits in terms of resolving the foreign currency debt overhang (accumulation), removing uncertainty and restoring confidence," said the report.

"Without euroisation, addressing the foreign debt currency overhang would require massive domestic retrenchment in some countries, against growing political resistance."

As reported, IMF wants crisis-hit EU nations in central and eastern Europe to adopt the euro without formally joining the eurozone, the FT said yesterday citing a confidential report.

Struggling countries in the region, hit hard by the global financial crisis, should join the eurozone as "quasi-members" without seats on the governing council of the European Central Bank, according to the report obtained by the Financial Times.

"For countries in the EU, 'euroisation' offers the largest benefits in terms of resolving the foreign currency debt overhang (accumulation), removing uncertainty and restoring confidence," the IMF report said.

"Without euroisation, addressing the foreign debt currency overhang would require massive domestic retrenchment in some countries, against growing political resistance," it added.